Thanks again to another contributor for sending me this video clip. This, ladies and gentlemen, is why people are broke and have to file for chapter 11 on a personal level. This idiot, along with his trophy wife, seem to be consumed with image. Granted I don't know them, but a picture tells a thousand words - or more. The piece is about lenders now allowing home buyers to stretch mortgages out to 50 years. That's right. 5-0. Fifty. They may as well do away with checking your credit and making sure your mortgage payment will only be a certain percentage of your household income. Five years ago this jackass bought a house for $270,000. He said homes in his neighborhood are now selling for over $500k. Very believable. We more than doubled our first house price when we sold after 8 years. You typically get approved for a mortgage that is 3 times your household income so assuming they put 5-10% down (I wouldn't be surprised if they financed 105%) the household income at the time was roughly $85k. National average is around $45k these days but for some zip codes the average is easily double,triple or quadruple that amount. So, the fact that they are double the national average isn't really that impressive to me. They said they needed to have more money at their disposable DUE TO THEIR 3 YEAR OLD SON. Blaming the kid? Blaming the KID? OK, the video clip of the house was about 10 seconds, but I noticed a few things. Leather furniture in the family room. A nice big 'ole flat screen TV in the background. Did you notice in the backyard they had a hottub with a WATERFALL!!!! In the driveway when they did the first shot, there was a huge late model SUV and a hot rod to the right of it which I couldn't make out either. The second shot showed a white Hummer in front, but in all fairness to them, that may have been the interviewer and the film crew's wheels. Then again, maybe it wasn't. All I'm trying to stress are the choices these folks made. I just know in my bones they aren't saving a dime and out of the money this deal is going to save them in the short term, you just get the feeling they're going to blow it - not use it wisely. Listen, people can spend their money however they want. If you can save 10% of your disposable income - great. If you can save 10% of your gross income - SUPERB! After that, buy a $10,000 waterfall and anything else that will make you feel better as you can afford it! However, if you have to refinance a 30-year mortgage to a 50-year mortgage and blame it on your SON as you're driving around in a $65,000 car and own a $5000 couch....you're a financial idiot. And yes, the guy is assuming he'll sell after 5 years and make a huge profit and continue his pattern of living above his means by buying another house - this is exactly the type of guy who can't control his spending and will end up with nothing when he is 55. It's the game of Life. Ever play it as a kid? If this guy wants to continue his current lifestyle after he retires he needs 80% of that from his investment income. If his current household income is $100k and he never gets another raise, he'll need a nest egg of $1,000,000 to produce $80k annually at 8%. If he/they continue to get raises and the household income ends up at $150, the egg will have to be about $1,600,000. I have a sneaking suspicion if we added up all his 401(k)s and IRAs we wouldn't really be surprised although he may think he's saving enough. Stash it, don't flash it. I'm not counting on SS being there for me and it's worthless anyway even if it is there. SS was not meant to support people who were making 6 figures plus before retiring. The max SS check isn't even going to be a week's pay for that tax bracket. Stash it till it hurts a little. Retire early. Exit the rat race when the rest of the country has 5-10 years left to work. You aren't an idiot if you buy expensive and nice things. You're an idiot if you buy expensive and nice things that you can't really afford. Yes, you can buy a few things you can't really afford to treat yourself here and there - but if you make a pattern out of it and constantly live above your means - you are in a downward spiral and sooner or later - you're gonna crash.
The video clip lives here <----------- Check Out Mr. Stupid
2 comments:
My .02 on one of your comments here. You say that you don't think the guy is going to save any of the $$ that the 50 yr mtg is saving him each month. I agree with that. You think he'll blow it all. I don't agree with that. I don't think he ever had the $$ to save. It was all "on paper" $$ that he's saving. In the end, same bad result...he overbought. And he's definitely living beyond his means. Wouldn't you like to see his credit card balances and credit score?
I bet his credit score is in the mid 500's!! He's one of these idiots that contributes 1% to his 401(k) and he thinks he's doing OK. That being said, props ojn the trophy wife - except she's as stupid as my mouse pad.
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