From "The Coming Economic Earthquake", by Larry
"Imagine this scenario if you will: A family of four making $3,000 a month
is spending $4,000 a month and has been doing so for more than five years.
Their total assets consist of a home and two cars -- all mortgaged for more
than their resale value. Their total debt to date is $150,000 in unsecured
liablilities, plus an additional $100,000 they have borrowed from their
retirement account, which must be repaid with interest in the next twenty
years. And one last item: They borrowed their parents' life savings to help
pay the interest on their debt and now are obligated to support them, in
addition to their own current spending.
Let's assume this couple has come to you for advice about what they should do
at this point. How would you counsel them?
Having counseled many couples in the past, I can tell you the options:
Actually, now you find out that they have not come to you for advice but for
a consolidation loan, since you seem to be doing pretty well yourself.
- They can try to generate more income, but essentially this husband is
working at his capacity, so the most he can hope to get is a part-time job
that will generate another couple of hundred a month.
- They can file for bankruptcy protection and just not pay most of their
creditors. Of course this will destroy their reputation and their credit
rating for the indefinite future. In addition, it won't help repayment of
their retirement account or money they have borrowed from their parents.
- They can find someone who will lend them the money to consolidate, they
will need enough extra to make the monthly payments for the next several
years, at which time they are hoping that something miraculous will happen to
pay off the entire debt.
Logically, I hope you would say, 'It seems to me that you need to get
realistic and face the facts: You simply spend too much for your income.
Sell whatever you can, pay down the debt, cut back your spending, and start
paying back what you owe. More money won't help at this point.'
Good advice, I would say. Only the couple in this case is our Government.
The numbers used are smaller than the government's total income and debt but
the ratios are correct."