Crazy Friend Update
A few years ago, I wrote an article about my crazy friend. He's a mess with money. Longtime readers might remember this friend, but if not, I'll summarize their financial situation. The family's annual household income was about $270,000. That's a great income, except their annual household expenses were around $360,000. That means, each year, they spent $90,000 MORE than they made. How did they pull off this feat? Well, debt, of course! At that time, they had accumulated $3.2M of debt....with no signs of slowing down.
This family had a lot of options on the table to right the ship (i.e. close the income gap and hopefully start paying off their debt):
Increase their annual income.
Trim expenses to prioritize the items that add the most value to their lives.
Actually stick to their budget.
Make sacrifices.
Live with more humility.
Today, I bring you an update. A lot has changed for this family, financially and otherwise. Curious if they were able to right the ship? Well, here goes! Their annual income increased from $270,000 to $490,000.....huge win! Unfortunately, they somehow managed to increase their annual household expenses from $360,000 to $670,000.....yikes! The net impact of these decisions is a negative $180,000 per year.....oh boy! As you can probably guess, this has led to a disastrous situation on the debt front. If $3.2M of debt wasn't bad enough before, it's now more than $3.6M.
What do you think? Is there any way out of this mess? What would it take for this family to get their crap together and finally face the consequences of their continued indiscretions? Do they need a proverbial slap in the face?
I typically don't name names, but today I will. Want to know who this family is? It's the U.S. government. It's the country we call home. I took the actual numbers and adjusted them to contextually make sense through the lens of a normal family. The ratios are the same. Their $490,000 household income is $4.9 trillion. The $670,000 of household expenses is $6.7 trillion. This results in an annual shortfall of $180,000, or $1.8 trillion. Lastly, the $3.6M of debt is $36 trillion!
It's so easy to gloss over these massive numbers. It's hard to wrap our heads around them. We can't even make contextual sense of a billion, never mind a trillion. But through this lens of a family making nearly a half million dollars per year, failing to meet its monthly needs, and racking up more than $3M of debt along the way......it sounds insane!
Financial irresponsibility is all around us. Nobody is telling us to do it right and get it right. We have wholesale cultural permission to act impulsively, get what we want now, and kick the can of consequences down the road for another day. I think you deserve better than that. That's no way to live. Fortunately, you don't have to. A better reality exists, but it's on the other side of a lot of intentionality, humility, and discipline.
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