Photo: Carl Richards
Like most writers, Carl Richards speaks from experience. The financial planner and renown “napkin guy,” whose playful sketches illustrate the ins and outs of managing money and are frequently featured on New York Times’ Bucks blog, lost his home years ago and tells his story in the Times this morning.Things started out innocently enough: Richards, who then had pristine credit, had secured a great job with a steady income and wanted to upgrade his lifestyle. Soon he secured a loan for $575,000 to buy a home in Las Vegas, then refinanced his mortgage with World Bank (later swallowed by Wells Fargo) with a pick-a-pay loan that added to his balance every month, rather than subtracting from it.
He fell behind on the payments, and as his spending spiralled out of control, Richards found himself forced to make the toughest decision of his life: walk away from his mortgage or sell it via short-sale. He chose the short-sale and never looked back.
Here, Richards describes the shame he and his wife felt when comparing themselves to “better off” neighbours:
“It was extravagant, but it seemed modest compared to what some of our neighbours were doing. Our house was the smallest model in the neighbourhood … and we drove a Chevy and a VW. Cori and I and some of our friends had a lot of conversations comparing our spending habits to those around us. How can so-and-so afford a boat? How are people buying new trucks and four-wheelers and 5,000-square-foot homes? Do they know something we don’t know?”
Keeping up with the Joneses got Richards where he was. But BS-ing yourself is a terrible idea, and as Richards will tell you, it won’t help you save.