Hey folks! I just got back from vacation at Walt Disney World. My wife and I decided to go for our 5th Anniversary without our 22-month old boy. We wanted to be a little selfish and experience it for ourselves before we took him down a few years later. Boy, am I glad we did! There's a lot to accomplish in those parks and I can't imagine doing as much as we did with our boy in tow. Now that we've experienced it, I can't wait to bring him down. I know it will be a much more rewarding experience for all of us with him there.
With my vacation, I wasn't able to contribute to my blog, but I will offer you another article from my column with the Scranton Post:
In case you haven't noticed, the American Consumer has been pressed to their very limit. More specifically, we've been pushed to our credit limits. We have very little left to borrow but there is an ever-present, pressing need for more credit. We are at the breaking point and it's scary to think about what happens from here. We are teetering on the edge of a proverbial cliff, looking down and waiting for someone else to decide our fate.
How did we get here? We all start off on solid ground. We are born without debt. When we do start making income, we bring in plenty to cover these debts. Very quickly we watch as our incomes and expenses both increase. The trouble is that your bills jump by leaps and bounds while your income increases... not so much.
Sure, there are exceptions, but not as many as you think. You may think that rich people are immune to the credit crisis that we're trying to survive through. Well, I've worked with Doctors and Lawyers that have had just as many problems as anybody else. It turns out that the only way to earn more money is to go into more debt. How ironic? After you've taken all the student loans necessary to make it through post-grad studies, and after borrowing money to start up your new practice, the prestigious income that comes with a professional occupation doesn't mean so much after all. Especially when there's so much competition in these professional occupations.
So what hope does that give everyone else? How are we supposed to pay our bills with our income dwindling in comparison to our expenses? I was inspired to write this column based on personal experience in the last five days. Serious plumbing issues presented themselves to me recently. This happened in my previous home, which I'm now renting out. Reality can hit you like a punch in the gut. You never know when something serious can suddenly happen and when it does it takes the wind right out of your lungs.
When confronted with an immediate fear the first thing that happens is that you focus on it like a laser beam. I put everything else on hold. The next thing you do is begin to imagine a new reality based on the worst scenario. For me, that was having a family of eight suddenly not having any working plumbing in their home. Would I have to pay for hotel rooms? I had no idea. How much could I spend on a plumber before finding the problem? I imagined having to dig a trench through my yard and to the street. I imagined having to get the permits to close down the street, dig it up, and fix it when we were done. Then, my thoughts turned to money.
What would you do if you suddenly needed thousands of dollars? Do you have it stashed in bank accounts? Do you have it in an available equity line? Would you have to refinance to get access to it? If you don't own a house you have to look at credit cards and rich family members for answers. This is the event that can push you off the cliff. Scary, huh? Luckily, I dodged a bullet when the good people at Roto-Rooter came by within 24 hours to blast the pipe clean. But this life experience forced me to realize how close to the edge we live.
So what can we do? We have to plan ahead to live in this economy. If you plan to buy a home, start putting money away right now. This money isn't just for the closing costs. It's for security in case you come across an event like this that throws you for a loop. If you can get six months of mortgage payments sitting in your bank account for security, you're in great shape. Too many people jump into the process with just enough money to get by. By doing this, you are inviting yourself to become another statistic. So many have foreclosed on homes they love because they ran into a sudden, drastic change in their lives. They weren't prepared.
Not everybody can simply put thousands away. One way to protect yourself, albeit dangerous, is to make sure you have available credit at all times. Never use more than 50% of your available credit lines. Just make a list of all your cards and cut the limits in half. Refer to that list at all times and eventually you'll forget that the other 50% is there for you in case of emergency. Go ahead and increase your credit limits to accommodate if your credit card company will allow you. Just know that if you don't protect your credit, that emergency fund can be gone in an instant. Your creditors reserve the right to cancel your access to your cards at anytime without much notice. Be careful!
So, the best way to take control of your life is to prepare to be pushed off the edge. That way you won't have to live in worry. Go ahead and let life throw that twist at you. Dare it to push you because you know all along that you've got a comfy safety net waiting for you below.
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