That being said, we are on vacation this week visiting friends and family. One family we visited spends like maniacs and all I can do is sit in awe of their financial stupidity. Other than that, they are wonderfully nice, super intelligent people, but when you look at the financial mess they are in, you seriously wonder how well educated (one is a PhD) people with a stellar income (around $250,000 annually) could make so many financial mistakes. They are hiding from bill collector calls, are in massive debt, and buy stuff continually. As Dave Ramsey says, you can't out earn stupid and he is definitely right. Here's what I have observed during my stay here:
- They eat out nearly every day, often breakfast, lunch, and dinner for the whole family. Yes they are busy but they could rearrange their schedule to fit in simple meal making.
- They bribe their kids with stuff. The kids have a ton of stuff...every Wii game made, racks of DVD movies, expensive electronics, a massive amount of toys that they don't even have time to play with, etc.
- They use credit for paying for everything from gas to food to clothes to...everything else.
- There is only two drivers in the family yet they have three expensive cars (with loans) sitting in the drive way.
- They have debt collectors calling them EVERY day to the point that they are afraid to answer the phone.
- They have a couple of great vacations planned.
- They rave about how great their time share is.
- They classify one of their businesses as a real business yet it never breaks even or makes a profit and is a constant financial drain (in other words, it is a very expensive hobby).
- They feel justified buying anything they want because they work hard for their "great" income. Actually they are working themselves to death to buy a whole lot of junk.
- They don't know how much money they have. Literally when you ask about certain expenses they will say it is "about" x amount, or that they don't know because they have someone else take care of that stuff that they don't understand, etc.
- They keep up appearances by having the things that other people in their profession/social class have...big house, nice pool, very expensive cars, etc.
Anyway, those are the most annoying things. Like I said, I have probably done all of the above at one time or another in my life but after changing my financial life, looking at other people making these sort of mistakes is practically painful. You can't really lecture adults who don't want to hear what you are saying and trying to lead by example seems to fall on deaf ears (I mentioned that I got rid of ALL of my credit cards and now pay cash for purchases large and small and they both said "we can't do that because..." followed by a half dozen excuses that, yes, I myself had given in the past).
If I could help them, here's what I would do:
- Sell everything in their house. Then sell the house and put them into a small house with a small house payment.
- Get rid of the cars and have them each buy a $5000 car with cash.
- Insist that they eat every meal at home (or taken from home), even if it means picking one day a month and doing some production cooking for the freezer.
- Take away all of their credit cards/checks/debit cards and give them a daily allowance. This is the fastest way to learn to live on cash only.
- Pay off their debts so fast it would make their heads spin. Unlike many Americans who would need to take on second and third jobs in order to pay their debts, these people have a huge income. They could ratchet back to living on $50,000 per year and throw $200,000 per year at their debts!
- Ditch the time share, the vacations, the expensive cable packet which gives them every cable channel offered, etc.
- Put an end to bribing kids (or spouses for that matter) with money or things. If you want the kids to do something, you explain what you want and give them consequences if they don't do it instead of pleading with them to do something then giving them a reward every time they make a half-assed effort to do it. Ditto for spouses (sometimes it is easier to give a spouse something to make them happy or compliant instead of creating an environment of good communication).
I think that's all. I'll hop off my soapbox now, stop being so bitchy, and enjoy the rest of my (cash only) vacation.