Foreclosure From The Great Recession

Over the past two work weeks, I helped financially counsel a fellow officer whose residual financial issues from the Great Recession stood to impact his career.  There we were, almost 10 years from the start of the downturn, looking at foreclosure documents starting in 2009.  He’d only settled the foreclosure within the last year, and the DoD wanted answers.  In some ways, I could hardly believe it.  In other ways, it was a sobering reminder about the lasting impact that event will have on American society for years, possibly generations, to come.

It also proved an interesting glimpse into another financial way a life.  I found a life almost alien to mine because decades ago my fellow officer chose to build wealth through rental properties.  Despite my personal negative history with a 2004 property purchase (as related previously on this blog), I hold no ill will for those who choose property investment as a method for building wealth.  If it works for them, that’s great.  However, my comrade-in-arms had specifically chosen a highly leveraged method for acquiring rental properties.  As I questioned him on the simple details that he should’ve known from using this strategy, I quickly realized he lacked the acumen for it.

My feelings, exactly.

My fears were not allayed when we looked into his family’s monthly budget.  Or should I say a lack thereof?  For someone who chose a wealth building strategy whose success hinged on an ability to pay multiple mortgages on multiple rental properties monthly; he had almost zero awareness of where his family’s money went each month.  Without trying to judge, it absolutely floored me.  As the (five) readers of this blog will attest, I am big proponent of tracking your money no matter what, but even more so in a case like this.

In truth, I felt bad for him.  My co-worker is not a bad person.  He’s one of the kindest, most-willing to give, people I’ve ever met in the military.   However, he  was floundering both financially and personally.  Needless to say, many of our conversations centered around a need for a lifestyle change on a personal, and familial, level.

My co-worker’s feelings, exactly.

Despite all of this, when my comrade added up assets and liabilities, his net worth was almost equal to mine.  When added to his pending pension, that is no small amount.  In many ways it felt like Tweedle Dee and Tweedle Dum were sitting next to each other.  Me, as I’ve related on this blog, who bungled his way through wealth accumulation based mostly on equities (of which there are more stories to come); and my co-worker who had done the same through real estate.

The only major difference (and I remind myself of this humbly), is that my comrade’s financial route led through the dangers of losing their career.  Mine did not.  Again, not judging, but I prefer my method.  It suits my personality and lets me sleep at night.  Other people have a different tolerance for risk than me.  To each their own.  Just make sure you got the cash when the heater and refrigerator break at two separate rental properties in the same week.  If you don’t, you’re playing in the wrong league.

Please inform your employer that my co-worker will have the money by the end of the week.

Lessons Learned

So what’s my point?  I don’t know exactly.  I wrote this in hopes that I might figure out what I should take away from this glimpse into another person’s financial life.  Originally, I typed this as a Facebook post for the Group that I run as a companion to this site (called Golden Albatross / Golden Handcuffs).  When I saw the length though, I decided to transfer it over to the blog instead.  No use wasting some possibly insightful thoughts on the transient forum that is the Book of Face.

I believe one point worth mentioning from this episode goes back to the Warren Buffet quote I used in a previous blog post.  It was the quote about not needing to make too many correct financial decisions in life, as long as you don’t make too many wrong ones.  The saying seems true in my workmate’s case; although they cut that line fairly close.  It is definitely true in my case, for which I am thankful.

I think another item worth pointing out, again, is that you’ve got to have a plan for your money.  Walking through life, acquiring property after property, without understanding the amount of work (and savings) it takes to create wealth as a landlord is a bad plan.  Scratch that.  It is not even a plan.

Admittedly, as life changes, so do plans.  However, if you already have a financial plan, you at least have a clear understanding of the underlying financial issues when it comes time to change that plan.  My co-worker did not possess that understanding.  It almost cost him his career.

Hopefully what my co-worker understood this to be.

In the end, I think my workmate will be OK, if he chooses to change his family’s spending habits, and sell some properties.  Actually, they will be more than OK if they make those changes.  Despite the foreclosure, they got lucky; but only because the all encompassing military bureaucracy forced an intervention.  Had he been a civilian, right now he’d either be floundering, or shelling out a lot of money to a good CPA and a Shrink.  I sincerely hope my co-worker grasps the lifeline the military threw him and pulls with all his might.  That is a choice he’ll have to make on his own though.  As much as I would love to, I can’t do it for him.