financialcounselor

Why a High Income Alone won’t keep you out of Financial Hardship

In Uncategorized on June 11, 2012 at 11:21 pm

COUPLE EARNS $250,000 PER YEAR, BUT STILL CAN’T AFFORD TO HEAT THEIR HOME

A lotta my clients will say to me, ‘If only I made more money, I’d be OK.’
Whenever I am hear this from someone, I tell the story of a couple who were my clients and who were in very dire of financial straits. This couple had major problems. Yet their monthly income was $21,000. And that’s after taxes, in case any of you were wondering.
Now you might be thinking: “If I made twenty grand a month, I’d be set. I wouldn’t have a financial worry in the world, and my life would be great.” Well, maybe it would, and maybe it wouldn’t. I’m sure this couple thought that way at one point too.
What happened was these people had made a number of bad financial decisions. I mean, you couldn’t count them all on both hands, that’s how many bad choices they’d made to leave them in a position that $21,000 per month was not enough money for them.
See, the wife owned a business that did contract work for the government. And the government required her to maintain a good credit history, or else her business wouldn’t be given any more jobs, and that’d mean she would kiss her $200,000 a year salary good-bye for good.
This couple had taken on a lot of personal debt, and when the economy went into the toilet, both she and her husband saw their work slow down. They’d only lost a small fraction of their income, but this couple had such high debt payments, they couldn’t keep up after that. Even when they were making $25,000 a month, they were spending every dollar they made. So now, the wife is telling me how they can’t afford to go out and eat, or see a movie or anything. She’s saying the same things as people who make minimum wage.
Anyway, because she had to maintain good credit, they could not get rid of their debts, because doing so would have hurt her credit. They were stuck with the mansion, the Mercedes leases, the money-losing rental property, and everything else. They were between a rock and a boulder. They even had to dress in layers at home because their mansion cost too much to heat properly. Does this sound like people who make over a quarter million dollars a year?
So keep this in mind if you think a big income will keep you out of money problems. Only good financial decisions will do that.

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