Is a Big Fish Sinking Your Financial Boat?
February 01, 2013The photo accompanying this article is pretty striking. Fish sinks boat! Marlin 1, Boat 0. It reminds me of a newspaper article I saw many years ago titled “Deer Shoots Man” that talked about a hunter who leaned his rifle against a tree while taking a quick bio-break, and as he walked away, a deer ran past the tree causing his gun to fall and fire a shot directly into his gluteus maximus.
These kinds of things can be seen on Animal Planet or on some funny video shows. And they make me laugh if I know that no one was seriously injured in the process. I happened to read the article about this fishing boat losing to the fish right before I met with someone to talk about his debt situation. Like Captain Ahab who chased Moby Dick or the fisherman above who lost his boat to a marlin, the man I talked to about his debt situation had taken on a task a bit bigger than he could manage and it was sinking his financial ship. Sadly, he had no intention of giving up the fight…
He and his wife bought a house near the top of the market a few years ago and then saw the value plummet. During the financial downturn, his wife became unemployed but has since found a new job which pays about 50-60% of her prior salary. He has also seen his income drop a little bit since 2007. They have also seen their mortgage rates, which were adjustable, move slightly upward after the low initial teaser rate expired. Their mortgage has gone up, their income has gone down and the value of their home is significantly below their purchase price.
The combination of all of these factors means that their mortgage payment is now about 60% of their take home pay. This leaves very little for utilities, gas, food and daycare. They love their home, but it is driving them toward bankruptcy.
In order to pay the mortgage on time (and I give them credit for never missing a payment and for believing that they took on the debt so it’s their responsibility to pay for it), they have had to draw down their savings accounts to nearly $0 and have recently begun to put groceries on a credit card,which they aren’t paying off at the end of the month. It’s creating a terrible downward spiral.
We talked about mortgage modification and short sales as well as trying to maintain the current course of action and what the outcome of each would look like. I am not sure which direction he and his wife will take, but their home is the marlin in the photo above. It is sinking their boat. Quickly!
But like the fishermen in great literature, it’s often hard to give up the quest. It can become a blind spot as emotion takes over, leaving logic and reason behind. This is especially true after investing a lot of time, money, and effort into something like a home.
Do you have any big fish that could sink your financial boat? What are your blind spots? (I guess if you knew, they wouldn’t be blind spots, huh?) If you are struggling with your budget, with trying to get ahead, now might be a great time to talk with an unbiased financial professional to talk about your options. Don’t let your big fish sink you…