Painful Finance 101
Debt ....the evil that sometimes tears up families. Destroys marriages. Can cause crazy amounts of stress. I can tell you it caused me some issues early on in my adult life. I went through periods where I had my act together, and a few runs of far from it, carrying too much debt. Been in a situation where I did consolidation loans, only to fall back into the same trap of more debt. Crazy.
Back around '05 I guess, I had an epiphany... I was out of the military, making good money, had lots of toys... but the job was high stress and my position was at risk. I realized then that if I found myself out of work, I would be in a bad situation. Basically, in Deep Shit. My boat; owed on it. My car; owed on it. My house, owed on it. Credit cards; too much of a balance on them. Savings account; what savings? I knew right then and there, something had to change. I'd heard about Dave Ramsey; now it was time to do something about it. Got the book, read it. Wife and I had long in-depth conversations on the subject. Implemented changes then that changed our lives. Still, it took years and years to get things moving forward. Knowledge is one thing; doing something with it is another?
This past weekend I had a conversation with someone that hit home on this whole subject. The reason I'm writing this. Money/Finances is one of those taboo subjects we rarely talk about. Hell, I have them with no less than just several people in my life, besides my wife. Four people ; three close friends and my dad. We talk about investments, 401ks, IRAs, Pay Plans, etc. But ... just those four. I've tried to help many along the way. Except for my Dad (whom I used to push back on ... shame on me), I've never had a mentor in this area. Well, I did have one boss back in '02 time frame that gave me some great advice, but we didn't discuss our portfolios etc. Wait... portfolio? I didn't really have one then! But, you get the point. Over the years since I drank the Dave Ramsey Kool-aid, I've tried to give a level of advice to many along the way, but most don't want to hear it. Hell, most won't even buy the book for $14, much less read it. It's not the only tool out there, but for many it's a great start. But... most push back sadly. Back to the conversation I had a few days ago .....
I became aware that this person and his wife, are basically having a life changing experience reducing their debt. Hell, apparently reducing 'everything' cleaning the closets, etc ... Literally .. cleaning house. But I learned they were going to walk away from their debt, period. Not sell everything off and pay off the loans, but walk away from it and let the banks have the collateral. Take the hit on their credit. They've got a recently purchased home so let everything else go, start paying cash and worry about their credit later. I tried to provide some advice but got shutdown. They are headed down this path. Have to admit, I was in 'shock' and still am. I don't get it. Now, I don't know the whole story of course but I still can't wrap my head around it. I'm pretty sure there was a previous bankruptcy in the mix so maybe that keeps someone from doing another? Maybe someone leverages the "COVID" craziness to fix their credit in the future? But this brings home the ... whole ... reduction of debt point I'm trying to make. That I've tried to make for years. Pay off the credit cards. Pay off the 'toys'. Drive a vehicle one can afford. And pay off their home mortgage soon as possible.
Of course, they aren't the only ones. Over the years, we all come across these type of scenarios. Such as ....
Situation #2. Couple leaving paycheck to paycheck in the prime of their life with no attempt at an honest budget. Leaving beyond one's means via toys n' trips. But, always short on funds. Just getting by. No attempt to grasp and follow the seven steps of Dave Ramsey. As I look at this, I don't see an end in sight and it's hard to watch.
Situation #3. Couple doing well financially but seems like everything goes on credit cards. Strapped with other situations that strains one's credit worthiness potentially. Aware of the Dave Ramsey concept, but refuse to embrace it due to the 'pain' it will cause in the short run. Instead, dealing with the cost of living on a monthly basis. If they would just buckle down, in a year or two, could be 'living the dream' financially. But, choose not to.
Situation #4. Couple living the 'dream', but upside down on multiple vehicles. Pouring funds into their vehicles. Digging a deeper hole annually? One can only wonder what the overall outcome will be.
Situation #5. Couple living paycheck to paycheck, late on payments. Pretending the situation doesn't exists. No savings. No retirement savings. Nothing Nada. But always seems to have toys. Pours additional money into the toys. But no vision. No plan. Frustrating to watch.
Hey I ain't innocent. I can look in a mirror. If I took a snapshot of my world fifteen years ago it'd be ..
Situation #6: Couple living beyond their means owing on most assets to include home. No long term savings. No emergency savings. Minimal investment towards retirement. Multiple credit cards with excessive balances. Too many 'toys' that are financed. Broken record and keeps repeating mistakes. Not looking promising.
Then .. I woke the f' up . I remember it was like it was yesterday. I was concerned about my job. Standing in my driveway looking at my 'stuff' around me and honestly ... a lil 'nervous.' We stopped buying crap on credit. Paid off everything that was financed. Moving forward, never purchased anything we couldn't afford to pay cash for. Started saving for the future. Now, as I write this, I wish someone would have kicked me in the ass over twenty years ago to point me the right direction. But, eventually most of us get there. Sometimes, those travels are more painful for some than others. Sadly, for some.... they'll never really get there.. so to speak. All the info is right in front of us all. Crazy amounts of info available in books, on the 'net. ... right there to be leveraged. Me, I'll continue to push and prod folks the correct direction .. but damned it's hard to watch sometimes.
Solution? Well.. I'm a broken record.. but here it goes
Click here> Dave Ramsey's 7 Baby Steps! <Click here
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Some Notes/Facts. Have to admit, I thought some of the numbers would be worse. Higher.
A quick search shows this: "Our researchers found the median debt per American household to be $2,300, while the average debt stands at $5,700. Combined data from the U.S. Census Bureau and the Federal Reserve allowed us to dive deeper into credit card debt in the United States, and look beyond the face value of those two figures.
-Average American Household Debt: $5,700. Average for balance-carrying households: $9,333
-Total Outstanding U.S. Consumer Debt: $3.9 trillion. Total revolving debt: $1.03 trillion
-41.2% of all households carry some sort of credit card debt.
-Households with the lowest net worth (zero or negative) hold an average of $10,308 in credit card debt.
-The Northeast and West Coast hold the highest average credit card debt – both averaging over $8,000."
":While the average American has $90,460 in debt, this includes all types of consumer debt products, from credit cards to personal loans, mortgages and student debt."
"In the year 2000, over half of the households in America had credit card debt. By contrast, in 2001, that figure fell to 38% - over 12 percentage points lower. Over this time, average credit card debt rose from $5,048 to $7,697. This means the average American today holds 52% more debt today than they did a decade ago. " Of course, for every person that pays off their credit card monthly, there is one that ... maybe owes 15-20k on them? So the average debt doesn't really tell.. the whole story?
Don't do it!
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