To Your (Financial) Health II

by James C. Hess

A fellow I will call ‘Ari’ came to me several years ago, asking for my help and assistance when it came to his financial health. Although he made over one hundred thousand dollars a year he had almost two million dollars in debt, much of it past due or coming due very soon.

My first suggestion to him with regards to addressing his predicament was to get rid of his credit cards, which he did, without argument or hesitation. Because he had previously demonstrated a certain recklessness when it came to credit cards he agreed to cut them up. In front of me. My second suggestion to him and anyone with overwhelming debt is: Organize your finances. Immediately.

It never ceases to amaze me: People can justify buying big tickets items like wide-screen, high-definition televisions and vehicles, but ask them how much they have in assets and liabilities, and almost no one can honestly answer the question.

So the first thing Ari had to do was organize his finances. Because he didn’t know how to do this–I am not kidding–I suggested he keep it simple. I suggested he get two sheets of paper. On one sheet of paper he was to list all the debts he owed, including his house payments. On the other sheet of paper he was to list all the money he had immediately available.

Then he was to compare the totals and see which was bigger. In his case, of course, the debt total was obviously bigger.

Much bigger.

But seeing those numbers in black and white gave Ari a new perspective on his situation and the next question out of his mouth was expected: What should I do? What can I do to resolve this matter?

The answer, I believe, was quite simple and blunt: Go through the list of liabilities, the expenses, and determine which ones you can do without immediately. For example, he had cable television. I told him he didn’t need it, and it had to go immediately.

Almost before I finished talking he was on the telephone, cancelling his cable television subscription. The savings resulting: More than twenty-five hundred dollars a year.

The next unnecessary expenditure to go was his cellular telephone. (Remember: This was when cell phones were first available and were insanely expensive.) I asked Ari how often he actually used the cell phone. Once, maybe twice a month, he replied.

Get rid of it, I told him. Start carrying a dollar’s worth of quarters instead.

The savings: Just over five thousand dollars a year.

Then came the big items. Ari had two full-sized, fully-loaded SUVs he leased.

I had to ask, so I did: Ari, I said. Why do you lease two full-sized, fully-loaded SUVs when there is only one of you?

He shrugged as reply.

I want you to do something for me, I said. I want you to contact the dealership you lease these two gas-guzzling machines from and I want you to find out how much it would cost to break your lease on both of them. Right now.

Ari hesitated, but in the end he did what I asked him to do.

In short: No big deal. He was able to break the leases with a small penalty. A penalty, incidentially, that was far less than what he was paying per month for one SUV.

Now, I instructed. I want you to take the money you spent on the leases, the insurance–full coverage, incidentially–the maintenance, the gas, and I want you to put half of it into the bank. The other half is to be used to purchase an economical vehicle. When you find that vehicle I want you to pay cash for it.

He did. He found what I told him to find in two days.He paid cash for it. In fact, he had cash left over. Cash he was instructed to put into the bank. As soon as possible.

So. With all these changes in his financial affairs Ari’s financial health began making a recovery.

But it wasn’t done. It wasn’t over. It wasn’t resolved. And his financial health remained precariously in the balance.

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