Here’s an example: I spoke today to a man named Darrell who had racked up a bunch of credit card debt and was considering filing bankruptcy to be rid of it.
We put together Darrell’s budget and found that his truck was costing him $1,000 per month–$450 for the truck payment and another $550 for gas and insurance Meanwhile, the guy’s monthly income was only $2,000. Darrell had been living on credit cards because he didn’t have much money left after paying for his rent and his monster truck. He just didn’t realize it because he never looked at these numbers; he just went along charging everything until he reached the limits on his credit cards. Even if he got rid of the credit card debt through bankruptcy, he still wouldn’t be able to keep up with that truck because there wasn’t enough income. He couldn’t afford it, plain and simple.
“Darrell, half your salary is going to pay for that truck,” I said. “And that’s not including any maintenance for it. Filing bankruptcy isn’t going to let you afford the truck. You need to make another five or six hundred a month at least to afford it. If you don’t make more money, you’re going to keep having problems unless you get rid of it.”
Darrel explained how he really liked the truck, and didn’t want to give it up.
“Well, can you live in it?” I asked him.
He chuckled and replied, no he could not.
“Well, can you move back in with your parents?”
Darrell didn’t want to do that either.
And that’s another thing about numbers. Because they don’t lie, they show you the reality of your situation. Then it’s up to an individual person to decide if they want to face that reality. But either way, the reality of those numbers will confront the person eventually.
Just ask the guys who were running Enron.