Get away from the edge

Posted: Aug 02, 2006 12:01 AM

Unfortunately living on the edge is an acceptable way of life for way too many people, especially those who own their own home. (That generally is a figure of speech as most people and the bank own their own home.) Why do they live so close to oblivion or at least utter chaos? There are many reasons but the one that concerns me the most is that a great many people do not realize where they are: on the edge. Their life has always kept them at least close to the edge if not right on it and anything outside of this is considered abnormal. Talk about getting things upside down!

Those aforementioned citizens can hopefully figure out their proximity to disaster but the following have an entirely different agenda. They fall in several different categories.

The first are those who have a great first mortgage, and in some cases the only mortgage on their house, and terrible to unbelievable additional debt in the form of home equity lines of credit, credit cards, bank loans, auto loans etc. The next group are those who have some of the above and haven't a clue what to do to change their situation. The last group have most of the above, know what they have but feel if they do anything to disrupt their house of cards everything will come tumbling down.

Let's start with the first group; those who took advantage of the low rates of a couple of years ago and are as proud as punch. The problem lies in the fact that they may have a 4% or 5% loan on their first mortgage but when you take the interest on the other loans and average them out their life's annual percentage rate is in the high 6% range to the 8% range or higher. Credit cards now run as high as 33.3%. A percentage of these home owners refuse to give up their low interest rate mortgages even if they can lower the overall interest rate, shorten their amortization and lower their monthly payment. I know it seems like I am making this up but it is true. Akin to a great engine and a shoddy set of tires!

The next group spend a great deal of time shopping individual interest rates and never visualize the entire debt structure. These people are the ones who transfer credit card balances and never close the old card (they come in handy in a pinch) and end up growing their debt exponentially. You can't borrow your way out of debt but you can improve your financial position with an overall plan for all of your debt.

The last bunch simply "shut their eyes and swing". An old baseball saying that doesn't work well playing baseball either. Nothing is more perilous than no plan at all.

You get all the laws working against you including Murphy's.

When it is all said and done two things are needed: recognize where fit in above, if you are on the edge and set your plan to change it by facing the entire problem. It takes some guts and a little determination and probably some help. You will find however, that life in the center is much more fun, rewarding, relaxing, enjoyable and so on and so forth that it is worth the effort.

Good luck!