In case you have any doubt about one of the key reasons some folks are under water, check out part of a question asked of a financial planner and published in the Raleigh News & Observer. (emphasis is mine)
We are expecting about $9,000 in total federal and state tax refunds this year and want to make the best use of this money.
In prior years we have always used our refund to take trips and buy stuff, but this year has to be different. We bought our first home last year and went a bit overboard buying furniture, window treatments, etc., and now have a small balance on our credit card. We also have a major no-interest loan at a furniture store that will come due in May.
We knew our mortgage payments would be similar to our rent but forgot about taxes, insurance and higher utility bills, so we also had to cut back on our retirement savings to make our cash flow work.
The good news is, this couple realizes they’re in a pickle, need to do something different, and are asking for advice rather than walking away from the debt. Let’s hope they make a financial u-turn and get back on track. The bad news is, the “went a bit overboard” and “forgot” about the bills themes are woven through the many stories I’ve read over the past year about folks who are under water.
Yes, most of us have made a boneheaded financial move at some point in our lives, but the problem is, these days too many people expect the public to bail them out, or they blame the bank or store that extended them credit. Absent real fraud in a transaction, which is illegal and not the fault of the buyer, the responsibility for a poor or high-risk financial decision rests with the person looking back at us in the mirror.
