Monday, December 28, 2009

Friend On A Financial Path to Disaster

I have a mature friend who is turning 60 next year who frustrates me since she seems to be on the path to financial destruction. I've kept my mouth shut since I'm no paragon of financial responsibility. But it's been hard.

fail owned pwned pictures

Here's her story:

This all started a couple of years ago. My friend (let's call her "Tina") and I often discussed our financial problems caused by our high debt loads. Tina is a spendthrift and she often quickly racks up $40,000 in credit card debts. Her solution often meant refinancing her modest home she got in her divorce about eleven years ago. In her divorce, she took on the existing mortgage from her ex that was worth about $72,000. In 2002, she refinanced her home for $136,750 and took out a second mortgage worth $20,000. In 2003, she refinanced her home yet again for $141,750. Because this was a easy solution and she didn't make any lifestyle changes, she often got herself right back into horrendous credit card debt.

Around that time, Tina broke up with her longtime boyfriend and literally went on the prowl. She met another mature man similar in age at a bar (let's call him "Bubba"). Bubba is an American who spent the past 25 years in another country south of the equator. Over the past 20 years, he worked as a developer/general contractor, got married, got divorced, had children in this foreign country. Of course, during this time, he never paid a cent of U.S. taxes while living abroad. (I'll get to this later.)

Everything about Bubba rang alarms in my head. First off, he lied to Tina about still being in a relationship when they first hooked up. Once things got hot and steamy, Bubba confessed and broke it off with his live-in girlfriend. Tina forgave him saying, "He was in a bad relationship and I helped him see the light."

Tina and Bubba courted long-distance for a few months, after which Bubba announced he was moving back to the U.S. My second alarm went off. I told Tina that she probably shouldn't let Bubba move in with her immediately. She brushed off my concerns and said, "We're older and we don't have much time left where we're both able-bodied and healthy. I want to spend as much time with him as possible. He's moving in." I also questioned how he could just pick up and leave his kids? "The kids are all adults." Tina didn't think it was strange that Bubba would be so willing to move back to the U.S. since, (a) he's an American and (b) he has family living here.

Once Bubba moved to the U.S., Tina started involving Bubba in everything she did. Girl's night out? Bubba tagged along. Lunch with former co-workers during the work week? Bubba was invited. Bubba had all the time in the world, since he was unemployed. But to give Bubba some credit, at least he does the cooking for Tina. He also helped doing some remodeling work in the yard.

A few months ago, Bubba got a job working at CVS. But I've now learned that he's no longer working there due to back problems. I also learned that Tina not only gave Bubba free shelter, but she also added him to her workplace health insurance as a "domestic partner." (Who knew in California, unmarried Seniors qualify as a "domestic partners"?) He underwent couple of expensive surgeries (ear drum repair and hernia) and he needs another one for his herniated disc.

Tina claimed to me that Bubba was financially secure. But she apparently confessed to others (who are less critical of Bubba) that he had deep financial problems in the foreign country due to bad real estate deals. I suspect this was probably the reason why he was so eager to move back to the U.S.

The bottom line - - Bubba contributes nothing financially to Tina's household.

During the past couple of years, Tina's spending went out of control. She bought a new SUV that she's financed on an 8-year term. She also decided to construct an addition to her home for which Bubba was supposed to be the general contractor. But since he's unlicensed in the U.S., Tina ended up hiring a GC. She also refinanced her home yet again to pay for the remodeling work. I don't know what she refinanced her home for, but she admitted she'll be paying her mortgage until she's in her 90's. (Keep in mind that her original mortgage amount was $72,000. By 2003, her mortgage more than doubled to $162k. I suspect that she's probably up to about $185,000 now. Her home is currently worth about $293,000.)

Additionally, I'm not sure how much Tina's 401k took a beating last year, but I'm quite certain that she did not have a conservative asset allocation. About a couple of years ago, she claimed her 401k was worth $250,000. Assuming it's probably near $250,000 today, I don't think she has enough saved to support both herself and Bubba in retirement. Even while working, she can't support herself and Bubba since she's (again) racked up credit card debts.

Did I also mention Tina has an adult daughter living at home who is also not working? God knows when the daughter will move out in this recession.

Oh yeah. Remember how Bubba never paid a cent of U.S, taxes during the past 25+ years while living abroad? I doubt he qualifies for Social Security or Medicare.

Everyone seems happy for Tina that she's found the "love of her life" in Bubba. I'm not suggesting that she dump Bubba since he seems to make her happy. But I can't help wonder whether she's seeing into the future what I'm seeing. And it ain't pretty.


Ms. MoneyChat said...

wow! i would be so frustrated if Tina was my friend. in all of my frustration, i would remain silent unless i was asked for my opinion. if the situation was reversed and i was tina, i'd want my friend(s) to have a "intervention." sticky, sticky, sticky.

Miss M said...

Sadly at this point I doubt Tina will ever fix her financial problems. She has had a lifetime to figure it out and her remaining earning years are dwindling quickly. Hey at least she's not family! Also I bet Bubba moves on before too long, once the finances hit the skids he'll be out looking for another lonely woman with a bigger bank account. His kind are common.

Anonymous said...

That was a good read, thank you. I started reading it and then thought "this is going to be a good one" so got a cup of inexpensive instant coffee to drink while I read it.

I always enjoy stories of people heading towards financial oblivion - when it's of their own making. It's 100% entertainment for me. Sometime I laugh out loud, a genuine snort of a laugh "Oh my, how did they get themselves into this mess" I say in mock wonder.

Anyway, looking forward to an update on this story in a year or so. Or whenever you get the latest. Chances are you'll get no more hard data. Spendthrifts generally don't feel comfortable sharing information about their financial meltdown with the frugal. They seek out other financial disasters who are more sympathetic and can offer up their own sorry tales in exchange. The last thing a spendthrift wants to hear is "Yeah, sorry to hear about that, anyhoo, my networth increased by $70,000 last year"

And on that note, congratulations on the growth of your net worth. $70,000 over a year is a fantastic effort.

jpkittie said...


Anonymous said...

Deep down she probably knows what a mess she's in but it's easier to ignore it and hope for the best.

Well-Heeled said...

Hey there, delurkin! :)

I included this post in my link roundup:

paranoidasteroid said...

She knows her finances are in a bad state. But you telling her about it will only make her resent you. It might also be the only this to jolt her out of her denial.