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Wed. Jun. 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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3 Responses to “Life is a Choice *”

  1. CastoCreations says:

    It’s a story that repeats itself over and over again. People do not think ahead or they think that they’ll always have the government to bail them out. It’s as sad as it is pathetic. I refuse to live a lifestyle that will make my life miserable in the future.

  2. That’s a pretty strong post D4L. Many people choose to live outside their means for the fun of it. Well, life catches them sooner or later ;-(

  3. Richard says:

    I’ve been an attorney working in private bank trust departments for almost 20 years. I’ve seen how people with money acquired it and how they retained it. They are smart enough to know that you can never acquire money by spending it. They would sooner die than go into debt to buy consumer goods. They’ll go into debt but only to purchase property likely to appreciate.

    These are the people who, instead of buying iphone after iphone and ipad after ipad, bought the stock of Apple when it was selling for about $7 early in 2003. Today, July 1, 2010, it sells around $260.

    People with money don’t care about consumer goods, cars, big-screen TV’s or anything else that the masses “must have”. They know all this stuff is junk and that to buy it simply wastes money better deployed otherwise. In short, people with money got and kept it not by buying things but by buying the stocks of companies that sell things to other people…you for example.

    I’ll leave you with this unsettling thought. Suppose you’d had $15,000 in October 1980 and that you’d been of a mind to “invest it”. You might have been lured to purchase jewelry, say a diamond ring, on the utterly untrue but long spread lie that diamonds are rare. Any jewelry store would have been happy to lure you in with a lot of special lighting over plush counters served by shills who are trained in how to try to induce you to put reason on hold and think romantically about how happy you would be if only you had a $15,000 diamond ring. They’d tell you it would be “AN INVESTMENT”. God help you if you fell for the scam. The ring you’d have bought on Friday, October 10th, 1980 for $15,000 would have been worth about $3,000 on Saturday, October 11th if you’d tried to sell it. It might not be worth even that today.

    On Friday, October 10th, 1980, stock of Johnson & Johnson traded around $83 per share; you could have bought 180 shares for $15,000. That investment, a REAL INVESTMENT, would today, July 1, 2010, be worth over $500,000. After 48:1 stock splits, you would have over 8,600 shares of Johnson & Johnson paying annual cash dividends of almost $19,000.

    You can be young in this country and be without money but this is no country in which to be old and without money. If you have no money, you have no power. If you want to end up parking cars for a high school kid who owns a parking lot, keep doing what you’ve been doing. Keep buying “diamond rings”. If you want to have some say about where and how you live and on what terms, leave the consumer goods on the shelves and buy the stocks of companies that sell things to other people. Just make sure you’re not the “other person”..

    Good luck.