Profiling debt through some personal debt and bankruptcy stories.
I agree with the analogy that shedding one’s debt is so much like shedding pounds: the more pounds you carry, the tougher it is to lose weight!
We often gain weight without even noticing. Similarly, it doesn’t take much for debt to creep up on us to the point that it becomes overwhelming and almost insurmountable. But this shouldn’t be a surprise, when credit is so easy to come by.
From my meanderings throughout the web, I’ve encountered a few bloggers who’ve faced some significant debt and who’ve decided to detail their stories through their blogs.
Real People With Heavy Debt
The most recognizable blogger I know whose made a notorious name for himself by falling into serious debt is Casey Serin. He secured $2.2 million dollars worth of real estate debt and discussed it ad naseum at his former blog, IAmFacingForeclosure.com. Last I heard, he had foreclosed on all his properties and had sold off his website. Since then, he’s reestablished an internet presence at some new sites, though I’m not quite sure what his level of involvement happens to be. Intrigued I was by his story that I wrote about him in a series of posts:
- Bad Money Moves and the End of Casey Serin
- Blogging Does Not Cause Marriage Problems, Lack Of Financial Sense Does
- Get A Job, Says Wife Then His Money Blog Closes Down
I’ve recently come across another debt blog that sports this eye-catching title: “how I got into this 1/4 million dollar debt mess”. It’s written by someone who describes himself as a “geek in debt”. Checking out his site, I found out that Debt Kid has over $300,000 in “bad debt”, not including student loans; and more interesting is his incredible revelation that he needs to pay approximately $9,000 a month or over $100,000 a year to cover his minimum payments. So how did he get to this point? He made some bad investment moves and lost money with stock plays, options and foreign currency trading over the last three years. Debt Kid has declared bankruptcy, but vows to turn things around while sharing his feelings over his situation via his blog.
Unfortunately, because of their heavy debt, these bloggers have ended up facing bankruptcy. This got me to reflect more deeply about the subject of heavy debt. These bloggers’ stories have caught my attention because of the size of their debt and how they got to that point. But what is scary about debt is not its absolute size or the number it represents, but how it comes to exist and how insidious it becomes when it gets established.
In reality, debt doesn’t even have to be heavy to be frightening: a few thousand dollars of debt can be a bad thing to someone who has $10 in their bank account, especially if it grows unmanaged. So imagine what it’s like when your loans add up to many hundreds of thousands of dollars. Your feelings about this will depend on how well you think you can pay off your debt or how comfortable you are with handling it. In other words, massive loans are made much more terrible when there is no clear plan to wrestle it under control. But by putting together your own debt plan or by seeking professional help on the matter, you are taking steps to make your debt much less formidable.
How we incur debt affects our attitude towards it. If it happens unexpectedly, like those unwanted pounds that creep up on us, we are often alarmed. The fact is, something unexpected like this can blindside us and become a financial problem. But if we tackle debt head on with a clearly formulated strategy on how to pay it down, we can become less afraid of it.
Handling debt, just like losing weight, is a mental thing: the more prepared we are to deal with it, the better the outcome.
My Thoughts On Dealing With Big Debts
Many stories along these lines revolve around where I live, which is a high cost-of-living area. To own a home in Silicon Valley, it is not surprising to carry more than one loan to finance a home purchase. Some of my friends took on jumbo loans, others have primary and secondary loans to afford fairly modest homes for their families.
I also know a young engineer with a great job who decided to take the huge leap to buy — if you can believe it — a $1.5 million house in the most expensive part of the Bay Area. He’s in debt up to his eyeballs, but it doesn’t appear to faze him. On the outset, it seems like a crazy thing to do, but apparently, he’s got quite a number of contingency plans in case he is unable to fulfill his financial obligations.
#1 He currently has a well-paying job, which he relies on for that income stream.
#2 If he loses his job, he feels fairly well-connected and therefore confident enough that he’ll find a similar job rather quickly. He is proactive about networking in order to keep those prospects fresh and leads open.
#3 He took out a type of mortgage loan that wouldn’t adjust too soon, in order to allow him leeway to bypass any kind of real estate slump in the near term.
#4 As a last resort, he’ll probably get tenants for his home (if he hasn’t already) since he’s a single guy. With a three bedroom house, he’ll probably be able to fill up those rooms quickly, given our hot rental market at the moment.
Yes, he did stretch to afford his dream home, but while this fellow has heavy debt, he’s gotten his ducks lined up in a row in order to keep himself solvent. I thought at first he was extremely foolish for doing this given the risks he took on, but with the well thought out plan, I figured this may not be as crazy as I first assumed. [I hope his risk-taking pays off.]
Like this guy, I believe we can all look at conquering debt by having our own ducks in a row: resourcefulness, attitude, will power, determination, planning and strategy. If we can get all these lined up, there’s no debt we’d consider “heavy” and no debt we can’t vanquish.
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