Money Nightmares: Homeless, Hungry & a Disappearing 401k

This is the first post I’ll be dedicating to someone. Gavin who writes on his blog about how much he spends needs a little motivation to reign in his expenses. Fortunately for him, (and unfortunately for the subjects of my stories) I have a lot of tales about people whose spending habits have set them back dramatically. I should also add that these stories, that at times feature some people in my close circle of friends or family, are what inspire me to keep track of my money. I grew up witnessing first hand how fiscal irresponsibility ruin lives. Hopefully they will have the same effect on you: scared straight.

We have a family friend in her 60s, whose life has been in a downward spiral for nearly 15 years as a result of her bad money management practices. As I write this post, she still faces financial hardships and continues to make bad decisions. The point of this post, or any other post I may write about money nightmares, is not to humiliate those who struggle, but to highlight the long term consequences of small, but cumulative, bad decisions. The story I am about to tell is redacted for details in an attempt to protect the identity of those involved. However, any information I provide regarding the major purchases are factual.

This family friend is a wife and a mother. She was always the type to shop at Barney’s, Saks, Neiman Marcus and other high end stores. She somehow managed to make it work on a combined household income of approximately $60,000. It certainly helped that her children were a little older and were gainfully employed, not relying on her for their most basic needs. I never knew her to have financial troubles until one seemingly routine event started a domino effect that sent her spiraling out of control. After driving her car for a number of years, she decided it was time for a new one. However, rather than getting something comparable in price and quality, she and her husband decided to get a more luxurious upgrade costing 3 times more than her original car. As if it wasn’t bad enough to triple your transportation cost without a raise that is directly proportional to the expense, they decided they needed a second car. So they went from one moderately priced car, to one very expensive car plus another moderately priced car. Within a year of the major car purchase, they also opted to buy a bigger house, despite the fact that they were empty nesters. Unfortunately, the husband got into an accident and was only collecting 60% of his income. With both incomes, they were barely breaking even, but when the husband spent months with almost half of his pay, things started to go south really quickly. The first setback was losing one of the vehicles when it was repossessed. The second set back was a short sale of their house. Finally, after moving to a more affordable apartment, the husband went back to work, but playing catch up on their bills hindered their ability to keep the second vehicle. They lost that car through an other repo as well.

You would think that with this much trouble, the bad luck would end there. But it didn’t. They bought another new car, more moderately priced this time, because they needed it. Where they live, it’s very hard to get around on public transportation. However, she got laid off when her company downsized and found herself quickly out of a job. She was unemployed for nearly 2 years before she was able to find work in her field again. They struggled to pay the bills and eventually had to go stay with a family friend after she paid hefty fees to tap into her 401k and saw her retirement funds dwindle down to $0 (she was not yet 60). The husband’s income just couldn’t cover all their expenses plus housing. But when she found work and they were able to move to their own apartment, to celebrate, they went on a European vacation. A month after she came back from vacation, the car they were driving at that time was repo’d. That’s about 3 lost cars in less than 10 years. But there’s more!  She said she was a fighter and wouldn’t let that deter her. She fully furnished her apartment with brand new everything. Meanwhile, there were days she couldn’t afford to eat. She recently got a raise and decided to fall into the trap of lifestyle inflation (see link for info). We met up for dinner and she announced that she would celebrate her raise by going in the market for a fancy SUV. Of course, there’s the trip she has planned for later this year, but we won’t even discuss that. That’s a very small expense relative to how much a new car will cost her in monthly payments and insurance.

Sure, she could have found better use for that money like repairing her damaged credit, replenishing her 401k, going grocery shopping so she can start eating 3 times a day again, but I guess none of her priorities lie there. So here she is, in debt, living paycheck to paycheck, no chance of ever retiring unless she becomes completely government dependent, but she’s looking for more things to buy. I have known her for a very long time and I know her story does not end there. So I know I will have more horrors to report.

As I write this, I can’t wrap my head around it all. I know that if I didn’t experience it first hand, I would not believe that any functional adult could be this short sighted. But it’s a reality and these people are in my circle Most of of those who are avid blog readers and willfully blow our meager paychecks o intrinsically worthless things tend to be Gen X/Millennials. We are so far removed from our golden age that we can’t even begin to understand the hole we are digging for ourselves with the decisions we make. I hope this inspires you to change. If not, I have other stories.

How’s that for a terrifying Halloween?

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5 Comments

    1. Good to see you and thanks for your comment!

      You’re right but did you note that she’s 60 and not from “this generation”? That makes it 1000x more disappointing. Because this is who sets the example for us. Fortunately for me, being the risk adverse person I am, I saw her an example of what NOT to do, rather than a role model of how I should live.

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      1. I did see that she was 60 and didn’t flinch as my in law’s are identical to this woman. According to my in law’s after years of watching the pennies they haven’t got any further and they won’t be in the richest corpses in the graveyard – However, leaving their son with a mountain of debt doesn’t bother them – selfish really!

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