This story may seem dramatic, but I tell it as a cautionary tale of how easy it is to fall into debt and live a lifestyle that isn’t realistic due to the illusion debt creates.
As retirement approaches, the hard truth that you may not be able to live the retirement you hoped for can be tough to accept.
A couple, Tom and Mary, were referred to me once looking to hear good news about their future retirement. Tom was a senior executive with a Fortune 500 company and had been with this company for more than fifteen years. His income was over $300,000 (quite sizable at the time) but he and Mary were very worried and apprehensive about their future.
They had nothing other then Tom’s salary. That’s right—Tom and Mary had virtually nothing other then Tom’s nice income. They had the obvious signs of success including a lavish home in the right part of town but mortgaged to the hilt so they had, virtually, no equity. They leased two cars, a Mercedes for Tom and a Jaguar for Mary.
Their financial goals were clear:
Tom wanted to be able to retire within five years. Susie, their daughter, was getting married in six months and they wanted to have a luxurious wedding for her.
Their son, Tom Jr., would be starting college the next year and they naturally wanted to send him to the best college money could buy. They also had accumulated $80,000 of credit card debt and had no other savings or investments, except for Tom’s modest 401(k) plan.
While I ultimately felt that I wasn’t the right financial advisor for them I did give them this advice – spend less, save more.
Recently, I learned that Tom and Mary were divorced a few years ago. Apparently, Mary began to resent all the time her husband was spending at work. With the children grown and out of the house, she wanted to spend time with her husband in “retirement.”
Things were a bit more complicated.
Tom lost his job, apparently because management had difficulty trusting him to run a multibillion-dollar operation when he couldn’t keep his own personal finances straight. Also, the couple’s children no longer “love” their parents who can’t spoil— I mean help them out—the way they had in the past. The children have had to get jobs and support themselves.
You’ve probably seen the bumper sticker, which says,
“I owe, I owe, so it’s off to work I go.”
The choice is yours. You must take control of your money. If you don’t, it will take control of you and your life and you’re probably not going to be happy under its thumb.
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