Whenever I hear about people losing their homes, or massive personal debt, I think of a guy that I used to work with. Around the mid 90's he bought a 2,500 sq ft home on 3 acres in the Hayward hills of California for $250,000. It was a fixer upper, but still a steal of a price.
He cleaned up the house, new paint and carpets, but nothing major. The value of the house started to increase quite a bit. Sometimes as much as $100,000 in a single year. He would refinance his loan one year and take out a second the next year. He said that a home was never supposed to be paid for anyway and that he'd be crazy not to take advantage of the equity that he had into it. He and his wife spent it on trips and partying. New computers, tv's and gifts. They really liked to show off and even splurged to pay for strangers on a helicopter tour in hawaii.
When the cash ran out, the struggled to survive. Sometimes they had to borrow money just to buy gasoline to get to work. His mom would have to help out with the mortgage payment and when things broke in the house, they were left broken.
This cycle went of for awhile until the money they took out was used to cover the personal loans they had and help with the mortgage payment. Somehow they were still able to refinace the house when the payment was more then they could make from their jobs!!!
Their million dollar home is now worth half that, but they owe half a million more then what it might sell for. Some of us sold out houses at or near the peak. I did and moved to Texas. He never had that option and I often wonder if he still has the house and who's making the payments.
To add to that, his credit card collecton was legandary. They were both famous for getting new cards to pay for the old cards, or go on short trips. A cruise or long weekend at Lake Tahoe, or hunting trip to Utah. Lots of drinking and showing off that he would tell us about, and we'd just wonder at how he made the payments.
He did start a beef jerky business that did real well. He was a natural salesman and had people coming up to him buying every thing he had. It was good beef jerky too!!! He paid for it from his credit card and then made minimum payments on the card. Another indication of big spending and no common sense. He got to the point that he was trying to borrow cash from his family and then co-workers to get more beef jerky since his credit cards were maxed out. He couldn't get the cash and wasn't able to get anymore beef jerky to sell.
When I left, he had his horses taken away from him, though I'm not sure of the real reason. He said it was too much money to feed them, but his wife had told somebody that he bought them on a payment deal and after making payments for a few years, quit because he didn't have any more cash.
People like him are big influences in my life. I never want to be in that sort of situation and have struggled, sacrificed and waited for the things I want so that I can afford them. I'm debt free right now except for a small credit card debt that I used recently and will pay off shortlly. I'm looking at buying a new cargo van, but don't want to go into debt to buy it, so I'll hold off for awhile longer. Not sure about what I want exactly, so there's no rush anyway.
I bought gas for my truck Saturday morning at $3.79 a gallon and when we left for a wedding a few hours later, it had gone up to $3.89!!!!! It hurts, but so far, we're just paying it and going on with our normal lives.
Eddie
