Are You On a Crash Course to Disaster?

One of the more interesting stories I’ve seen recently in the world of sports is about a guy named Rob Konrad, a former NFL player, who fell off his boat and swam 9 miles to shore.  It took him about 16 hours, he had hypothermia, and he couldn’t walk but at least he survived the ordeal. Along the way, he was circled by a shark and had to fight waves, wind and the dark in order to make it home safely. 

I saw an interview on television where he talked about it, and he said that he had to play some mental games with himself to keep himself going. The driving force that kept him going was the love he had for his wife and daughters. He wanted to get back to shore so that he could see them again. His words “I wasn’t dying that night” were pretty powerful.  It was a story of great perseverance and having a very clearly articulated goal.

Not that long ago, I met with someone who was in a very difficult financial situation. It wasn’t nearly as “immediate life or death” as Rob Konrad’s situation, but I could see that her financial stress level was incredibly high. Her body language, posture, mannerisms, everything looked like someone who was carrying the weight of the world on her shoulders.

When she told me her story, I understood why she felt the way she felt. She had just gone through a divorce, was getting no support from her ex, and was raising two kids on her own while trying to pay all of the bills of the house that took both incomes to support. All of this was on just her income alone. It was not manageable.

We looked at her income and her expenses, and she was in the red by over $1,000/month.  She had been doing this for over a year and her savings account that once had $25,000 was very close to going below $5,000 and she had no idea how to “stop the bleeding.” She felt trapped, paralyzed and helpless. It was visible just by looking at her.

We looked at her account on mint.com to see where her money was going and where she could make changes. The stress had completely taken away her ability to step back, take an analytical view of her situation and view her situation with anything resembling hope. All she could see was that the burden of sustaining her prior lifestyle, which required two full time incomes, was now hers to maintain.

She wanted no changes to her lifestyle or the lifestyle of her children. That was her sole focus and it was the source of the stress that looked like it was killing her. We talked about the stress level and how it was giving her headaches, making her cranky with her coworkers and kids.

She was on a crash course with disaster (her words). My job was to give her an alternative viewpoint and change the angle at which she was seeing her financial life. I felt much more like a therapist or counselor than a financial planner during that initial meeting.

We looked at her financial life and a few things jumped out at me. Her car payment was around $600/month and her mortgage was close to $3,000/month. She hated debt, as did her ex, and because of that they had a 15 year mortgage (she was 5 years into it and had equity built up) and her car was on a 3 year loan (she was halfway through the loan).

Sure, she would have everything paid off in short order but if she has a heart attack or stroke along the way, was it really worth it? We looked at the website bankrate.com for auto refinance rates. She could refinance her car payment for an additional 3 years and cut her payment down to $200/month.

We looked at a mortgage refinance to a 20-year mortgage (still paid off prior to her projected retirement date). Because of the principal that she had paid down in the first 5 years of her current mortgage, she had enough equity to refinance and eliminate PMI.  The longer term, elimination of PMI and smaller balance on the loan was going to save her nearly $700/month.

Combining the two ideas, she was at a breakeven monthly budget. When she saw that, I could see stress wash away almost instantly. She was going to look at both options and talk with her dad who still was a significant influence in her financial life, and together they were going to make some decisions.

I saw her several weeks later and she moved forward with both restructurings. During the initial conversation, I asked if she was certain that the current house was where she wanted to live for a long time and she wasn’t sure. In our secondconversation, she said that after the stress washed away (she walked into the secondmeeting with a smile and a bounce in her step and talked about how much more like herself she had felt since being able to find a different path financially), she decided that she wanted a fresh start in a house that had no connection to her ex and that after the current school year, she was going to strongly consider selling the house (5 bedrooms and 4 bathrooms…a LOT to clean!) and moving into something smaller for her and the girls.

The payment would even be further reduced, the taxes would be lower, the cost to heat/cool it would be lower and she could have breathing room in her budget to actually have fun – something that had been in short supply in her life since the divorce. She joked that her blood pressure was lower (not sure she was completely joking on that one!), she hadn’t had a headache in weeks and her urge to take her coworkers’ heads off had greatly diminished.  (Very happy she wasn’t a medieval ruler).

Her kids were much happier to be around her and commented that she actually smiled recently. It’s funny how she couldn’t see that, but everyone around her did. Her moods, health, body language, posture and relationships were all suffering because of the stress she placed on herself to maintain, in exact form, the lifestyle she had during her marriage.

When she was able to tweak the way she saw that just a little bit, her life – in all areas – felt much more like “living” than “surviving.” The financial/physical wellness connection was never more apparent to me than in my meetings with her. Her new sole focus was to remain happy, smile every day and live a life that was open to possibility.

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