What a Financial Trainwreck Can Teach Us

Six Mistakes to Learn From

Donna Freedman,

A married couple recently confessed to some horrifying money blunders in an interview on the WealthSimple website. In their mid-40s and the parents of three kids, the pseudonymous Kate and Tom bring in $160,000 a year through their day jobs in insurance, with additional funds whenever Tom moonlights as a bartender for private parties.

Yet they have always spent more than they earned, and cannot seem to learn from previous mistakes. A few examples:

After wiping out their credit card balances a decade ago, they charged them back up even higher.

They have postponed paying back Kate’s law-school loans, which are now up to either $120,000 or $140,000 (she isn’t sure – and incidentally, she has never practiced law).

They spend “insane amounts” of money on groceries at places like Whole Foods (where one of their kids likes to snack on $15 sushi).

They bought their son a tux at prom time, because they couldn’t afford the rental fee but hadn’t yet maxed out the Nordstrom card.

Clearly this couple is a financial trainwreck. But they have something to teach us, if we’re willing to listen.

It’s easy to scorn the protagonists as entitled or clueless. You’d never be that foolish. You’d never go into debt, get yourself out, and then go back in. You’d never borrow from family members, or cash in a 401(k), or use a credit card to put your kids in private school.

Maybe you wouldn’t. Or maybe scorning other people’s mistakes keeps you from having to look too hard at your own behaviors.

If you’ve absolutely got a lock on your dollars, good for you. But keep in mind that all across the country, otherwise intelligent and rational people are spending more than they earn.

Losing Sight of What Matters

Some debtors have little choice. For example, someone going through a serious health issue or a protracted divorce can’t just check out of the ICU early or stop paying for legal representation.

To continue reading, please go to the original article here:

https://www.thesimpledollar.com/financial-wellness/what-a-financial-train-wreck-can-teach-us/