A Sad Story
“Forget about tomorrow, let’s live for today.”
That quote above is the creed of Bob and Bianca Borrow. The Borrows think that today is a day worth celebrating! Their infamous “Why worry about investing or retirement? We’ll figure that out later!” – is a personal favorite of theirs.
Despite earning a fat six-figure income, their entire lifestyle is built on a house of cards – credit cards. To the Borrows, paying cash during a purchase is an absurd, hippie concept. “Why pay cash when I have credit?” asks the ever-confused Bob Borrow.
The four person Borrow family owns three new cars – one 7-seat, 7-MPG SUV, one 0-60 in a flash sports car, and a 4×4 truck to pull their new boat. All were financed from the dealership at interest – but hey, they make the payments on time!
The whole family has a closet full of brand new, name brand, high-fashion clothing complete with real gold and diamond jewelry. Because seriously, who wants that fake Cubic Zirconium crap in their necklace?! Not the Borrows!
I’ve got to mention that they live in a beautiful new 5,000 square foot house. Unfortunately, the luxurious hotel home was built with very little money down and the enormous mortgage is stretching them thin – 28 years left thin.
Anything that can be charged to credit cards IS charged to credit cards. To the Borrows, credit cards are basically free money. Just pay 2% of the balance due each month—forever. It’s one of the first (and only) personal finance lessons they learned in college!
Bob and Bianca are dying to take that Hawaii vacation that their friends, the Braggards took and rave about. Unfortunately, the price is just beyond their credit card limits.
Don’t fear! Bianca Borrow has sniffed out a viable new source of financing. As fate would have it, The Borrowed Borrow’s home has appreciated substantially in recent years (thank Ben B. at the Fed for that, Bianca!). So they simply take out a home equity loan and fly to Hawaii.
The dream gets better still! Since the interest on the home equity loan is tax deductible, part of the money spent to take the vacation is courtesy of Uncle Sam. America truly is the land of the free!
Bob is now 41, and has saved only $7,000 in his 401(k). He’s not worried – that big raise is coming soon!
This is the first part of a small series that playfully examines several common financial lifestyles that the Cash Cow Couple has observed. Feel free to provide ideas or thoughts in the comments section.
*Spoiler Alert* The Borrows are headed off a financial cliff. The only wealth they’ve built belongs to the credit card companies and car dealerships. A job loss here, an accident or illness there, and the the high life is finished.
Through a sad turn of events, Bianca develops a chronic illness and requires several expensive medications each month. Without the necessary savings or positive cash flow, Bob is forced to declare bankruptcy and the magic money disappears. Cars are repossessed, the home is foreclosed, and all that fine jewelry is auctioned on Ebay. Friends and neighbors are totally shocked, and remark, “How could this happen? They appeared to be doing so well!”
Doing so well? They stole from tomorrow to pay for today.