Saturday, 21 February 2009

Financially Insane

This is the term that I'm starting to apply to people who have lived way beyond their means.

This past summer, on German TV...I sat and watched this reality show. The show has this guy who is an absolute expert on financial affairs. They bring him in and introduce him to a family in dire straits. The family gets a month of service from him...visiting two or three times each week to educate and help them out of a mess. He revolves around a couple of families but you only see one case per week.

So he came to this family. The guy was mid-30s, and the wife was early 30's. They had a kid. He married this gal about five years ago. From day one, she had this purpose in life of building her own house (it had to be new). Three years ago, he settled into this scheme to buy property and build. By the time he was done....he had a total debt issue of $300k. The house was about 95 percent done, but he'd basically ran out of money and couldn't do the last bit of finishing. The house was livable...no doubt. But things weren't working for them.

You see, as the expert came to figure out. This guy barely brought in $3000 a month after taxes. The wife had quit working when she had the kid, and had zero interest in going back to work. The guy had barely $60k to put down on the property and house when he started. Normally....a bank probably wouldn't have touched him with that type of debt on his back. But there are numerous credit groups now in existence in Germany....so they have two deals. One is "nice"....they get you to buy a hefty insurance requirement for fifteen years, and they loan you a massive amount of money at a decent interest rate. The second is a seven percent interest rate....way above the norm. This guy got into the second deal.

So as the financial expert laid out the issues with the bank, then he came to the car payment, the lifestyle situation, and finally it was apparent.....they were $400 in the hole each month. They were literally borrowing money from the bank to cover food, fuel, or electricity.

The financial expert tried to understand why it had to be a "new house" and not just rent for another ten years to build up a down payment....but the logic wasn't there. Then he tried to understand why they couldn't buy a fixer-upper, and do what they could each year....but the logic was not there. Then he tried to understand the need for the wife not to return to work, but the logic was not there. The husband was too far into debt....to ever get out. The relatives of both were already hit with requests before and helped them in the early stages dig deeper into debt.

So by the end of this one-hour show, it was apparent. This guy would never climb out and never be able to recover. He would have to declare bankruptcy. The wife was furious..."how could you do something this stupid?"

I just sat there. My German is lousy, but the visual effect overwhelmed me. This freak of nature....who was financially insane....had demanded the husband accompany her to this pit, and now she just couldn't accept her part of the responsibility. The outcome? They kinda left things there.....there was no exit that you could see except bankruptcy.

I'm guessing the couple lives in a two-bedroom apartment now. The wife is miserable. The husband likely drinks. And she likely tells him the woes of how things came to be each evening. The chances of her leaving? Zero. This guy is stuck with an idiot each day who can't grasp financial insanity.

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