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Would You Lend Money To This Family?

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http://www.dallasnews.com/business/columnists/scott-burns/20110806-would-you-lend-money-to-this-family.ece?action=reregister

I have to ask something difficult of you this week. I need you to pretend you are a banker. Then I'd like you to decide whether you would lend money to a family I will describe.

Here are the basic facts: Sam is married, has children and will soon be taking care of his aging parents and possibly his aging in-laws. He believes he is securely employed. He is respected among his peers — although some think he should mind his own business more and their business less.

By most standards he has a nice income, about $100,000 a year. Sam, however, likes to point to his best year. That was four years ago. In 2007, he earned $118,000. He thinks your lending should be based on that amount, or more, because he thinks there is a lot he can do to increase his income.

If you're thinking Sam tends toward optimism, you're right. He generally likes to spend next year's income today. Lots of lenders know him well. So he has a sterling credit history. He also owns a very valuable house. Even when his income is down he can point to the value of his house as collateral.

"I'm good for it," he assures you.

Your problem is that you are one of the new bankers we've started to meet since 2008. Unlike the bankers before then, you actually want to get your money back. So you tend to ask a lot of awkward questions.

Fortunately, Sam doesn't mind. He's never been turned down for credit before, so why shouldn't he be able to borrow more now?

Sam is also a savvy guy when it comes to borrowing money. He has a really neat home mortgage. It's interest-only, so his payments are minimal, particularly since the interest rate is about 3 percent. It's also a flexible mortgage, so he can pretty much borrow more whenever he likes. He doesn't know what the limit is. He never discussed it with his lender because, well, it wasn't an issue.

And that's where you come in. Sam's home mortgage is almost a one-of-a-kind. It literally has no limit. Basically, the limit is whatever you set. And he's a good customer.

The current balance is $448,000. Owing 4.5 times his annual income might seem like a lot, but you have to remember it's an interest-only loan, so his payments are lower than they would be on a typical mortgage.

But that mortgage balance keeps going up. Sam spends more than he earns very consistently. This year he's spending $174,000, or quite a bit more than the $100,000 he's earning. Worse, even if he was hitting home runs, he'd be spending $24,000 more than he's earning.

He also has a rather weird debt. Sam wanted to build a fund to help pay the expenses of his aging parents. So he put money into a kitty for it every year. What his wife and children don't know, however, is that he "borrowed" from the kitty each year. Today, it's full of his handwritten IOUs. He adds another IOU each year to pay interest on the money he has borrowed. Today those IOUs total $211,000.

Where did the money go?

Sam spent some of it on his wife and children. But he doled the bulk of it out to his parents and in-laws because they asked for it, and he couldn't say no.

"It seemed like the right thing to do. This isn't a problem; it is money we owe to ourselves," he says.

Unfortunately, that won't pay the bills. Those IOUs aren't the same as cash or CDs. When he actually needs the money he has promised, he'll have to borrow it, adding it to the borrowing he already does.

And that's about to happen. His aging parents need a lot more medical care. They will also be moving in with him, so he'll be paying for their food, shelter, transportation and other expenses.

So, dear reader-banker, you know the odds are he'll be spending a lot more than he earns for years. That makes you wonder whether your bank will ever get its money back.

Would you lend Sam more money? What limit would you set? Your answer might be helpful to 535 lawmakers in Congress, because Uncle Sam is the borrower. His income, spending and borrowing numbers have a lot more zeros in them, but they are in the same exact proportions as the figures for our friend Sam.

Scott Burns is a nationally syndicated columnist who has been writing about personal finance since 1977. He also is the author or co-author of four books and principal of a Plano-based investment advisory firm.


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2/24/2010 - Packet Delivered to VSC

2/26/2010 - VSC Cashed Filing Fee

3/04/2010 - NOA1 Received!

8/14/2010 - Touched!

10/04/2010 - NOA2 Received!

10/25/2010 - Packet 3 Received!

02/07/2011 - Medical!

03/15/2011 - Interview in Montreal! - Approved!!!

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What I don't understand is we'll PAY people to sit around and reproduce but a hardworking guy like the above can't get a loan.


Русский форум член.

Ensure your beneficiary makes and brings with them to the States a copy of the DS-3025 (vaccination form)

If the government is going to force me to exercise my "right" to health care, then they better start requiring people to exercise their Right to Bear Arms. - "Where's my public option rifle?"

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:thumbs:

--------

http://www.dallasnew...tion=reregister

I have to ask something difficult of you this week. I need you to pretend you are a banker. Then I'd like you to decide whether you would lend money to a family I will describe.

Here are the basic facts: Sam is married, has children and will soon be taking care of his aging parents and possibly his aging in-laws. He believes he is securely employed. He is respected among his peers — although some think he should mind his own business more and their business less.

By most standards he has a nice income, about $100,000 a year. Sam, however, likes to point to his best year. That was four years ago. In 2007, he earned $118,000. He thinks your lending should be based on that amount, or more, because he thinks there is a lot he can do to increase his income.

If you're thinking Sam tends toward optimism, you're right. He generally likes to spend next year's income today. Lots of lenders know him well. So he has a sterling credit history. He also owns a very valuable house. Even when his income is down he can point to the value of his house as collateral.

"I'm good for it," he assures you.

Your problem is that you are one of the new bankers we've started to meet since 2008. Unlike the bankers before then, you actually want to get your money back. So you tend to ask a lot of awkward questions.

Fortunately, Sam doesn't mind. He's never been turned down for credit before, so why shouldn't he be able to borrow more now?

Sam is also a savvy guy when it comes to borrowing money. He has a really neat home mortgage. It's interest-only, so his payments are minimal, particularly since the interest rate is about 3 percent. It's also a flexible mortgage, so he can pretty much borrow more whenever he likes. He doesn't know what the limit is. He never discussed it with his lender because, well, it wasn't an issue.

And that's where you come in. Sam's home mortgage is almost a one-of-a-kind. It literally has no limit. Basically, the limit is whatever you set. And he's a good customer.

The current balance is $448,000. Owing 4.5 times his annual income might seem like a lot, but you have to remember it's an interest-only loan, so his payments are lower than they would be on a typical mortgage.

But that mortgage balance keeps going up. Sam spends more than he earns very consistently. This year he's spending $174,000, or quite a bit more than the $100,000 he's earning. Worse, even if he was hitting home runs, he'd be spending $24,000 more than he's earning.

He also has a rather weird debt. Sam wanted to build a fund to help pay the expenses of his aging parents. So he put money into a kitty for it every year. What his wife and children don't know, however, is that he "borrowed" from the kitty each year. Today, it's full of his handwritten IOUs. He adds another IOU each year to pay interest on the money he has borrowed. Today those IOUs total $211,000.

Where did the money go?

Sam spent some of it on his wife and children. But he doled the bulk of it out to his parents and in-laws because they asked for it, and he couldn't say no.

"It seemed like the right thing to do. This isn't a problem; it is money we owe to ourselves," he says.

Unfortunately, that won't pay the bills. Those IOUs aren't the same as cash or CDs. When he actually needs the money he has promised, he'll have to borrow it, adding it to the borrowing he already does.

And that's about to happen. His aging parents need a lot more medical care. They will also be moving in with him, so he'll be paying for their food, shelter, transportation and other expenses.

So, dear reader-banker, you know the odds are he'll be spending a lot more than he earns for years. That makes you wonder whether your bank will ever get its money back.

Would you lend Sam more money? What limit would you set? Your answer might be helpful to 535 lawmakers in Congress, because Uncle Sam is the borrower. His income, spending and borrowing numbers have a lot more zeros in them, but they are in the same exact proportions as the figures for our friend Sam.

Scott Burns is a nationally syndicated columnist who has been writing about personal finance since 1977. He also is the author or co-author of four books and principal of a Plano-based investment advisory firm.

That's cute. You forgot one thing, Sam doesn't collect from his buddies who owe him, he keeps on forgiving them or letting them carpool with him without asking them to help pay for the gas or maintenance to his car even though his buddies are much more successful than Sam. Sam feels obligated to his buddies and they take advantage of him. Any time he brings up the subject they make him feel bad, so Sam doesn't push the subject since he feels he needs them even if they are taking advantage of him.


IR5

2007-07-27 – Case complete at NVC waiting on the world or at least MTL.

2007-12-19 - INTERVIEW AT MTL, SPLIT DECISION.

2007-12-24-Mom's I-551 arrives, Pop's still in purgatory (AP)

2008-03-11-AP all done, Pop is approved!!!!

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You're the kind of guy who wants the entire financial system to collapse so chances are you have no money to lend.

:secret: the entire financial system has collapsed. It's dangling by a tiny thread that the only thing left to do is grab the scissors and cut that thread before it tears on its own.


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The Great Canadian to Texas Transfer Timeline:

2/22/2010 - I-129F Packet Mailed

2/24/2010 - Packet Delivered to VSC

2/26/2010 - VSC Cashed Filing Fee

3/04/2010 - NOA1 Received!

8/14/2010 - Touched!

10/04/2010 - NOA2 Received!

10/25/2010 - Packet 3 Received!

02/07/2011 - Medical!

03/15/2011 - Interview in Montreal! - Approved!!!

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That's cute. You forgot one thing, Sam doesn't collect from his buddies who owe him, he keeps on forgiving them or letting them carpool with him without asking them to help pay for the gas or maintenance to his car even though his buddies are much more successful than Sam. Sam feels obligated to his buddies and they take advantage of him. Any time he brings up the subject they make him feel bad, so Sam doesn't push the subject since he feels he needs them even if they are taking advantage of him.

Sam's buddies are the welfare couch potatos? :unsure:

I didn't know couch potatos were successful....


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The Great Canadian to Texas Transfer Timeline:

2/22/2010 - I-129F Packet Mailed

2/24/2010 - Packet Delivered to VSC

2/26/2010 - VSC Cashed Filing Fee

3/04/2010 - NOA1 Received!

8/14/2010 - Touched!

10/04/2010 - NOA2 Received!

10/25/2010 - Packet 3 Received!

02/07/2011 - Medical!

03/15/2011 - Interview in Montreal! - Approved!!!

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Sam's buddies are the welfare couch potatos? :unsure:

I didn't know couch potatos were successful....

Nice spelling of 'potatos', Mr. Quayle. I love how you selectively read parts of my post, this isn't the Constitution. I KNOW that you can't handle the truth. Now get back to work, there's a rich guy somewhere who needs a new jet.


IR5

2007-07-27 – Case complete at NVC waiting on the world or at least MTL.

2007-12-19 - INTERVIEW AT MTL, SPLIT DECISION.

2007-12-24-Mom's I-551 arrives, Pop's still in purgatory (AP)

2008-03-11-AP all done, Pop is approved!!!!

tumblr_lme0c1CoS21qe0eclo1_r6_500.gif

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Nice spelling of 'potatos', Mr. Quayle. I love how you selectively read parts of my post, this isn't the Constitution. I KNOW that you can't handle the truth. Now get back to work, there's a rich guy somewhere who needs a new jet.

awww, are you jealous someone makes more money than you? Are you upset about that?

It's a shame the fact that you'll never pay in your lifetime what they pay a year in taxes. A damn shame really.

The next time you want to use a 'federal' service, just remember it wasn't YOU who paid for that service, it was them.

The SHOCK that they'd keep a few more dollars. *gasp*


nfrsig.jpg

The Great Canadian to Texas Transfer Timeline:

2/22/2010 - I-129F Packet Mailed

2/24/2010 - Packet Delivered to VSC

2/26/2010 - VSC Cashed Filing Fee

3/04/2010 - NOA1 Received!

8/14/2010 - Touched!

10/04/2010 - NOA2 Received!

10/25/2010 - Packet 3 Received!

02/07/2011 - Medical!

03/15/2011 - Interview in Montreal! - Approved!!!

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But that mortgage balance keeps going up. Sam spends more than he earns very consistently. This year he's spending $174,000, or quite a bit more than the $100,000 he's earning. Worse, even if he was hitting home runs, he'd be spending $24,000 more than he's earning.

You don't see this as a problem?

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awww, are you jealous someone makes more money than you? Are you upset about that?

It's a shame the fact that you'll never pay in your lifetime what they pay a year in taxes. A damn shame really.

The next time you want to use a 'federal' service, just remember it wasn't YOU who paid for that service, it was them.

The SHOCK that they'd keep a few more dollars. *gasp*

Why would I be upset? I'm not the one who's going to look like a fool when he figures out that subsidizing millionaires and billionaires is what's been going on all these years. Do you hear laughter? It's the laughter of the wealthy who see those of your ilk as their mouthpieces promulgating the big lie about how the wealthy are paying for everything. Using your logic, if the government is running out of money then the wealthy just have to pay more since they are paying for everything.


IR5

2007-07-27 – Case complete at NVC waiting on the world or at least MTL.

2007-12-19 - INTERVIEW AT MTL, SPLIT DECISION.

2007-12-24-Mom's I-551 arrives, Pop's still in purgatory (AP)

2008-03-11-AP all done, Pop is approved!!!!

tumblr_lme0c1CoS21qe0eclo1_r6_500.gif

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Why would I be upset? I'm not the one who's going to look like a fool when he figures out that subsidizing millionaires and billionaires is what's been going on all these years. Do you hear laughter? It's the laughter of the wealthy who see those of your ilk as their mouthpieces promulgating the big lie about how the wealthy are paying for everything. Using your logic, if the government is running out of money then the wealthy just have to pay more since they are paying for everything.

Top 10% pay 70% of the tax bill.

Bottom 50% pay less than 3% of the tax bill.

http://www.taxfoundation.org/news/show/250.html#Data

Now shut up with your delusions.


nfrsig.jpg

The Great Canadian to Texas Transfer Timeline:

2/22/2010 - I-129F Packet Mailed

2/24/2010 - Packet Delivered to VSC

2/26/2010 - VSC Cashed Filing Fee

3/04/2010 - NOA1 Received!

8/14/2010 - Touched!

10/04/2010 - NOA2 Received!

10/25/2010 - Packet 3 Received!

02/07/2011 - Medical!

03/15/2011 - Interview in Montreal! - Approved!!!

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I like this version better:

Imagine your house is burning. You call the fire department but your call isn't answered because every fire fighter in town is debating whether there will be enough water to fight fires over the next ten years, even though water is plentiful right now. (Yes, there's a long-term problem.) One faction won't even allow the fire trucks out of the garage unless everyone agrees to cut water use. An agency that rates fire departments has just issued a downgrade, causing everyone to hoard water.

While all this squabbling continues, your house burns to the ground and the fire has now spread to your neighbors' homes. But because everyone is preoccupied with the wrong question (the long-term water supply) and the wrong solution (saving water now), there's no response. In the end, the town comes up with a plan for the water supply over the next decade, but it's irrelevant because the whole town has been turned to ashes.

http://www.huffingtonpost.com/robert-reich/double-dip-recession-economy-credit-downgrade-_b_921014.html


There is no room in this country for hyphenated Americanism. When I refer to hyphenated Americans, I do not refer to naturalized Americans. Some of the very best Americans I have ever known were naturalized Americans, Americans born abroad. But a hyphenated American is not an American at all . . . . The one absolutely certain way of bringing this nation to ruin, of preventing all possibility of its continuing to be a nation at all, would be to permit it to become a tangle of squabbling nationalities, an intricate knot of German-Americans, Irish-Americans, English-Americans, French-Americans, Scandinavian-Americans or Italian-Americans, each preserving its separate nationality, each at heart feeling more sympathy with Europeans of that nationality, than with the other citizens of the American Republic . . . . There is no such thing as a hyphenated American who is a good American. The only man who is a good American is the man who is an American and nothing else.

President Teddy Roosevelt on Columbus Day 1915

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Top 10% pay 70% of the tax bill.

Bottom 50% pay less than 3% of the tax bill.

http://www.taxfounda...w/250.html#Data

Now shut up with your delusions.

It sounds like someone's perception of reality is being challenged, hence the sudden anger. The truth hurts doesn't it?

Well, I'd ask Sam why he agreed to accept a lower salary several times while knowing good and well that he actually needed the income.

In addition what is he was owed by his freeloading friends who are gainfully employed and can afford to pay but weasel out of paying him even if they use him to their advantage.

Edited by IR5FORMUMSIE

IR5

2007-07-27 – Case complete at NVC waiting on the world or at least MTL.

2007-12-19 - INTERVIEW AT MTL, SPLIT DECISION.

2007-12-24-Mom's I-551 arrives, Pop's still in purgatory (AP)

2008-03-11-AP all done, Pop is approved!!!!

tumblr_lme0c1CoS21qe0eclo1_r6_500.gif

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