Have You Made a Big Financial Mistake?

June 24, 2016

Lately, I have been spending more time in the kitchen. One of my sons has become addicted to the Food Network and we have been watching a lot of Chopped lately. We will watch a few episodes and come up with a few dishes that we want to cook, head to the grocery store and then come back and experiment.

Surprisingly, it has produced some very nice results. We’ve eaten some very tasty meals and laughed a lot at our mistakes. It has been a great learning experience for us.

Laughing at mistakes is easy when it’s in the kitchen. When it’s in our financial lives, it’s not as easy. I can scrape some overcooked or horrible tasting food into the trash can and order a pizza. We can’t make such a quick correction if we really botch something up in our financial life.

For instance, I met someone recently who made the mistake of putting her name and her name alone on a lease for a rental house. She and her new boyfriend went from first date to wanting to live together within about 6 weeks. They found a place that fit both their lifestyles and when they went to sign the lease, she discovered that his credit score was very low and that he had a checkered financial past. She was in love so she overlooked those data points and merrily signed the lease for a place that required each of them to pay a bit more than they had been paying on their own.

It was a very beautiful place…or it was until 3 months into the lease, when he decided that he’d opt out of the relationship and into one with someone else. She was left with her name alone on a lease that she couldn’t afford. It was tough just to cover her half of the rent.

Paying the whole amount…impossible. She still had 9 months to go, and the landlord had very inflexible terms. She would be responsible for the rent, even if she moved out, until it was rented to someone else.

It was a terrible lease, but she signed it willingly. She put two months’ rent on a credit card while sorting out the details of her life and her short-lived relationship. Eventually, one of her friends moved in and was able to share the rent, but the credit card bills still lingered.

The rent was a challenge to pay, especially after a few car repairs – which also went on the credit card. When I met her, she had $10,000 on the credit card and was only able to pay the minimum payment. The balance was going nowhere, and she was not patient. She wanted it gone and gone fast.

We put together a plan for her to increase her income since she couldn’t reduce her expenses in any significant way. She was very knowledgeable about wines so she took on a part-time job as a server at a very high end restaurant with an extensive wine list. The upside…she had very few tables on any given night and was able to talk about spectacular wines. She decided that every dime she made from that job was going to be used to pay off the credit cards and when they were paid off, she’d use the money to save for the down payment on a house.

When she checked in with me last, she was halfway through the debt and loving the job at the restaurant. Not only can she talk about great wines, she gets to sample some ridiculously good food and pair it with spectacular wine at the end of her shift.  She figures that by the end of the year, the debt will be paid, and she’ll have enough to put 3 ½% down on a house. If she goes another year beyond that, she might get 10% down.

If you find yourself in a position where you’ve made a critical mistake in your financial life, don’t panic. One of my friends is fond of saying that once you dig a hole for yourself and you’re ready to get out, the first step is to simply put down the shovel.  A great way to do that is to ask for help! And be patient. While it’s not as easy as dumping a plate of food and ordering a pizza, with the right strategy and some effort, you’ll be able to dig yourself out of any jam.

 

A “Financial Meterorite” Doesn’t Necessarily Mean the End of the World

August 10, 2012

My friends have told me for a long time that I just might be one of the nerdiest, geekiest people they know.  I’m starting to believe that they might just have a point.  I was absolutely fascinated earlier this week (who says fascinated anymore?) when I read a story about a massive meteorite crater that was found in the Canadian Arctic.  Somewhere between 130 million and 350 million years ago (when I was a young man according to my children) a meteorite crashed into Earth and left a crater that is 15 miles wide.  15 MILES!!!!  That thing came falling out of the sky at a ridiculous rate of speed and created a huge dent in the Earth’s surface.  There was also one found earlier this summer that was 62 miles wide and 3 billion years old.  The photos of these craters are absolutely amazing.  When you think about how something falling out of the sky, completely unexpected, can have significant disruption to the Earth’s surface, it reminds me of some of the stories I’ve heard from people about how they’ve rebounded from severe “financial meteorites”. Continue reading “A “Financial Meterorite” Doesn’t Necessarily Mean the End of the World”

Financial Planning: New Year, New Goals

December 31, 2010

Year end is a perfect time to take a look back at the progress you made in your financial life in 2010 and set new goals for 2011.  So many New Year’s resolutions fall by the wayside by St. Patrick’s Day.  (Dialing back on the chocolate consumption makes my list EVERY year.  Still, there’s something about dark chocolate that is stronger than my resolve.)  There are some resolutions, though, that are not only good for you but sustainable.  And, maybe a bit more realistic than my dark chocolate resolution too. Continue reading “Financial Planning: New Year, New Goals”