Wednesday, June 18, 2008

* Life is a Choice

They are now past retirement age, but they will never retire. Their finances are in a shambles. They still take 3 vacations a year, and somehow find a way to stay a few steps ahead of their creditors and the tax man, but the gap is closing quickly. The lucrative jobs they had years ago are not what they once were. Their home equity is depleted, and their house is in desperate need of repair. Their family is growing tired of having to bail them out just before the house is seized and sold by the bank. How did they end up in this position?


For decades I have watched this family make bad decisions - financially and otherwise. I have watched from the sidelines powerless to effect a change in their lives. Since Dividends4Life is financial in nature, I thought it would be useful if I shared some of my observations of how this family lived.

Bill and Jackie (not their real names) were your typical middle class family. Bill worked in construction and earned a decent living, while Jackie stayed at home to raise the kids. Jackie was a fun-loving city girl while Bill was content country boy.

Like most families, the early years were tough - the paycheck covered the expenses with very little left over. Being the fun-loving type Jackie encouraged Bill to join her at the neighborhood bar. From there Bill developed an expensive drinking addiction that has grown over the years. When Bill is at home he constantly has a beer in his hand, and will go through a couple of cases over the weekend. After decades of heavy drinking Bill's speech is slurred and it is difficult for someone who does not know him to understand him.

Soon the trips to the local bar were not enough excitement for Jackie. She talked Bill into vacationing at the beach. At first Bill did not care much for the beach, but like the bar he eventually became addicted to it. Over the years, one yearly beach vacation grew into three. There was a dog track near where they vacationed. It offered another form of excitement for Jackie, and a new addiction for Bill.

Bill started doing side jobs on the weekend in an effort to support the family's lifestyle. The more Bill earned, the more Jackie spent. Soon the weekend side jobs became a permanent part of Bill's life. Jackie began to fret when it rained and Bill couldn't work.

When their kids left, Jackie took a job as a real estate agent. Over the last several years when real estate was hot, Jackie did well and helped to fund their lifestyle. In addition, she has learned a new trick - refinancing her home and withdrawing equity.

Now the economy is slowing there are fewer construction jobs for Bill and no one is buying houses. Bill and Jackie's health is starting to fail. All they have is social security and have found it does not support the lifestyle they have grown accustomed to, so they are both still working.

Many tried to warn Jackie, but she was strong-willed, had all the answers and would listen to no one. She is now running out of answers. Over the years she has learned to finagle her finances, but her margin of error is quickly diminishing. A crash is inevitable.

Life is a choice. You can choose how you live, but you cannot choose the consequences of how you live.


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