Wednesday, March 19, 2008

Being Broke, But Not Realizing It

I'm back from my unannounced blogging break!

Let’s take a look at this made-up family, since it’s typical of what American families are like:

They live in a nice home, with a mortgage of $150,000
Two vehicles, with at least one car loan balance of $15,000
Student loans carrying a balance of $40,000
Best Buy card with a balance $1000
Lowe’s card with a balance of $1000
Gap card with a balance of $500
Discover card with a balance of $4000
Some other little debts here and there
Minimal savings

Regardless of what their income is, this family is dead broke. They just don’t realize it. In my opinion, this is one of the worst financial positions a couple can be in. If you’re broke and you have a plan to fix the financial mistakes you’ve made, you’re miles ahead of the couple who don’t know they are broke and they keep spending and spending and spending.

What are the chances the above couple knows how they are going to send their kids to college? What kind of stress is being placed on their marriage and family, due to bills always coming in the mail? And don’t even think about retirement – there is zero chance that couple will be able to retire at a decent age.

Unless, of course, they quit spending, start saving, getting rid of their debts, and quit acting like they are wealthy. Acting wealthy only gets you a bunch of stuff and a bunch of debt. If you can get yourself on a plan, one day you can actually BE wealthy.