|
Why People Struggle to Get Ahead |
|
This article was received in a newsletter from Greg Daniels with NOLA Lending. He is a great lender who I highly recommend. Thought you might enjoy the read.
Ever find yourself asking why you can never seem to "get ahead" financially? It happens to most of us at some point in our lives. Some are able to figure out how to pull themselves out of a financial hole, while others never do. But why is that? What's the distinction? As I touched on in last month's newsletter, it's largely about habits. I don't want to beat a dead horse here but it's one's habits that are the key to financial success. Not only in my daily life, but especially in my career, I've observed that those who struggle the most financially usually have a habit of making poor life choices in general. The good news is that habits can change. Here's an example of someone I knew who made life harder for herself than was necessary. She was a friend of mine and a single mom to one child. She was living with her boyfriend for a year or two but they broke up and he moved out. She chose to stay in the home they were renting. The problem with that is that she couldn't afford the rent by herself. She also had two large dogs that she couldn't afford to feed. Shortly after her boyfriend moved out one of the dogs got pregnant and had a litter of puppies. She couldn't afford the vet care. She couldn't afford the puppies in addition to the two large dogs she already couldn't afford. She struggled to get rid of the puppies, all while they caused extensive damage to the home she was renting. She finally found the puppies homes. The months passed and she was in serious financial trouble. Rent was well past due every month. She was on the verge of an eviction. She allowed a sibling from out of state to move in with her but he remained jobless, and instead of helping with rent and other costs, he instead drained her even more financially because her monthly utility expenses went up along with her grocery bill and having to buy him cigarettes. Then guess what, her dog got pregnant again. That's right, more puppies for whom she couldn't afford or find homes. And caused further damage to her place. A short time later she met a guy. He moved in. And, feeling left out I guess, she got pregnant. Her baby daddy was a deadbeat, however, so he was no help financially and, in fact, ended up in jail, leaving her in an even more dire situation. I lost touch with her but last I knew she moved back to her home state and moved in with her parents. Now, who am I to tell anyone how to live their life, but if I were asked for guidance or advice, I would have suggested to her that she get a roommate immediately after her ex-boyfriend moved out. Not ideal, of course, but desperate times call for desperate measures. And sometimes, that means doing what you have to do even though it might not be what you want to do. I would have also suggested she re-home her two large dogs. They were outside dogs anyway so it's not like they were keeping her warm in bed at night. Of course, by re-homing the dogs she could have avoided both dog pregnancies and the costs involved in that along with the destruction of the home she was renting. It would also have been to her advantage to immediately evict her squatting sibling. Tough love, oh well. Unless she was certain he was going to help her situation then she should have never allowed him to move in in the first place. If asked, I would have also suggested she practice safe sex to avoid, oh I don't know, getting pregnant --Well, let me back up, she should have first chosen a better partner. If she was going to get pregnant then at least it would have been with someone who could provide for her, her daughter, and the baby. There was much more to her series of unfortunate life choices, but that's exactly what they were ...choices. Or, dare I say, habits as she seemed to have a habit of choosing poorly. As a mortgage professional, I get a very in-depth look into people's finances. I see everything: job history, income, credit score, credit history, every liability owed including the payments, housing expense, alimony, child support, bank balances, retirement account values, any real estate owned, their feelings about the Kardashian family's contribution to the dumbing down of society, etc. Okay, maybe not so much about the Kardashian's because that's irrefutable. But I'd argue that I know more about someone financially than any other financial professional - more than a CPA, more than a Financial Planner. What I can tell you is universally lacking among the clients I speak with is that very few have an adequate cash cushion. The first step in improving your financial situation and minimizing the risk of falling onto tough times is to develop a cash cushion. If you're reading this and you're young, then do it early on before you get that sweet arm tat or the expensive Louis Vuitton hand bag. For everyone else who is already on unstable financial footing, do it when you get a tax refund or birthday money or sell something on Facebook Marketplace or when you donate blood plasma. Whatever windfall you get, SAVE IT. Why is that important? Because shi--life happens as they say. You can't escape it. You're not immune. Everyone needs a cash cushion. This is money on-hand and easily accessible for life's unplanned emergencies. Things like home repairs, car repairs, new tires, speeding tickets, vet visits, hospital visits, braces for the kids, broken cell phones, etc. All the things we don't expect or look forward to but that we inevitably face at some point. Without a cash cushion here's what happens... Those unavoidable life events still happen. But without a cash cushion to fall back on then those expenses get put on a credit card. And because finances are tight then just the minimum payment is made on the card each month. Before you know it some other unplanned, costly life event happens. Let's say it's a speeding ticket. The cost of the speeding ticket gets added to the existing credit card balance. Then your water heater goes out. That, too, gets put on the card, and so on and so on. You can see how this becomes a perpetual cycle: Money is tight > Unexpected costly life event happens > It gets paid for on a credit card > Credit card balance grows > Monthly credit card payment increases > Money gets even tighter > Another costly life event happens > It goes on a credit card ...And the cycle continues. That's why so many people can never seem to 'get ahead.' But their habits don't change. This is getting lengthy so in conclusion, I realize many see me as just another lender taking applications and doling out the lowest rate as though getting a mortgage is like choosing a drink from a vending machine. That's unfortunate because I'm passionate about wealth creation and helping people improve their financial situation. Do you really want to change your life? Ask me about the 4-Step Cash Flow Strategy or ask me how to use your mortgage as a tool to create an extra one million dollars (or way more) at retirement. Bottom line, if you don't already have one then develop a cash cushion ASAP. Then, I would encourage you to discuss with me before making any big financial decisions regarding your mortgage or equity. Having an advisor in your corner that you can trust can make a big difference in how quickly you can pay off debt or reach your financial goals. As I've said for years - that's what I'm here for.
Reach out to Greg if you are looking for a mortgage or would like to discuss financial issues.
|