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How can a guy get a break? Why is everything so difficult and so uncertain? Picture yourself a home seller of a property you purchased in April 2006 for $450,000. Say you borrowed 80% of that price on an adjustable rate mortgage figuring you would stay in that home for about three to four years, then move up or move on. You made every payment on time, but didn’t stretch out and pay any extra principal. You will have paid about 44 payments by now, and if it’s on a 30 year amortization, you will not have paid it down very much. And since you bought it, lots of things have been happening to tell you maybe it’s not worth as much as what you paid for it. But you were OK staying on and making payments and felt things would turn around so when your adjustable rate was about to reset, say in April 2010, you would sell it if you had to and at least break even. Anyone working in real estate sales or lending right now knows where this paragraph is headed. I’ll work out the numbers later in this letter.
So really, what does it take to get lucky anymore? You work hard and even started saving as much as you were able to; even more so now that your job has been cut back to 30 hours. But saving is not easy because you have payments; like that one year old car that you bought with 60 scheduled installments. Even the new hot tub out on the back patio was financed. The mortgage you can handle, of course, but you know the monthly is going to reset in a couple months and you are not sure of what the new amount will be, but you are determined not to lose your home over a matter of keeping up with the monthly payment. If you have to give up a few extras you enjoy, you are ready to. But some things are hard to judge; are they necessary? What about health insurance? Cable TV and the internet access at home? What about your membership at the gym and your personal trainer and your $4.50 latte fix on your way in to work and your NetFlix and the phone bill. Can you give up the land line and just use your cell phone? And lunches out everyday? And meeting the guys for a beer every Tuesday at the local brewpub? What do you hold onto and what do you give up?
Let’s be realistic: anything you are consuming and enjoying these days maybe should be on a pay-as-you-go plan. Nothing gets charged to the credit card unless it’s an emergency. Anything you buy, you will try to use your debit card, so at least you aren’t getting further into debt. But where will this end up? Is there progress toward more savings and a happy and healthy future? Or does it feel like a downhill slide into becoming more dependant on others and the need to constantly tighten your belt? At what exact age are you too old to move back in with your folks? Or convince them to move in with you and help with the bills? What would that do to your lifestyle? Are you going to ski this weekend? Can you meet me for lunch at Rio Chama? Somewhere, sometime, things have to change. Can you do all the necessary things to stay afloat and stay current without looking like a homeless person? Start cooking more and even clipping coupons. You might start looking around for what you can get rid of if you have a garage sale. What consignment stores are good for taking stuff to and getting a decent return on what they can sell? You wonder if they have anything in your size you could wear to work and not be too ashamed of. And the gas bill just arrived yesterday and you now remember the shock of seeing it way above $200, so you go to the thermostat and turn down the heat. At least you have a thermostat, and heat. You are on the grid and using all the modern utilities and are not about to give those up, are you? Well, maybe phone and cable are expendable. You find a bucket to collect water in as you start your showers while the water is still cold.
Did someone say buy GOLD?
