Reader Chris sent me a link to an LA Times article about a guy who is drowning in debt.
Nathan Drake, who lives in California, is in a very dire financial situation:
All of it added up. Drake carries $29,000 in debt on six credit cards. He owes an additional $16,000 at his bank. And he has borrowed $9,000 from his 401(k) retirement plan, which is worth $14,000 and was his only unencumbered asset.
Each month, he spends nearly $2,000 more than he earns. Any financial mishap and he’s further in the hole. Recently, Jodi (his wife) needed a root canal, forcing him to put $900 more on plastic.
[Via LA Times article]
Things are so bad that he is considering bankruptcy. As part of sharing his financial story with the paper, Drake was counciled by a certified financial planner, Linda Barlow. Barlow recognized that Drake was in a terrible situation, but she knows that if Drake worked at it, he could pay off the debts himself and be out of debt in about three years.
How?
Cut his spending and earn more income! Because Drake was spending nearly $2,000 more a month than he earned, he was constantly adding more debt. That is a recipe for disaster. Barlow gave some suggestions relevant to Drake’s situation in the article and he appears to be on board with her advice:
“There’s a lot of work to be done,” he said, “but the pieces are falling into place.”
[Via LA Times article]
It sounds like Barlow will be checking up on Drake in 6 months. I hope the LA Times gives a follow-up to Drake’s story. I believe he can turn it around if he listends to Barlow’s advice.
Thanks, Chris for sending me the article! 
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Posted: January 27th, 2008 at 12:38 pm
“As for the boat, Drake won’t sell. Because he and Jodi stay at his uncle’s house when they go boating, Drake insists it’s a cheap getaway.”
This guy continues to live in a fantasy world. There is NO chance that he’ll be out of debt in three years. He needs to face up to his obligations, but it seems clear to me that he’s not ready to commit to the work required to get out of debt.
Posted: January 27th, 2008 at 1:03 pm
I agree with DM. This guy is not facing reality. He’s spending $2,000 more per month than he makes….he probably thinks bankruptcy will just delete his debts so he can start from scratch and start ringing up another huge tab.
Posted: January 27th, 2008 at 1:23 pm
Clearly this guy is too irresponsible to handle credit. It’s guys like him that causes the high interest rates. One thing that makes me wonder is why the credit card companies don’t close off the credit line rather than just raising the interest rates for everyone else to cover people who think it is okay to declare bankruptcy just to cover their excess expenditure.
Posted: January 27th, 2008 at 6:48 pm
It’s not a cheap getaway if it’s something that’s keeping him from paying off his debts. But then again, spending $2k more than he earns each month isn’t helping either.
He can get out of debt, the question is whether he’s willing to rethink his lifestyle.
Posted: January 28th, 2008 at 12:25 am
While I agree that spending more than you bring home has a direct impact on personal debt, we only have so much time in the grand scheme. If you want more of something you have to find a way to make it happen. His income won’t go anywhere unless he finds a job that will pay him more. The debt he has won’t go away quickly until stops going deeper and pays more of it off. As for the boat, he should be free to keep it or sell it, which is his choice. Some people buy too much house and don’t realize that is what could be playing a factor in the amount of time it takes to pay off debt. I did notice the article focused only on him and not so much on her. Does she have any debt or other means to help him with his? I will look forward to the follow up story.
Posted: January 28th, 2008 at 4:25 am
As to whom is to blame, I had an interesting conversation with a friend who has just moved over here. Her adult son (26) responsible and debtfree just found out that he’s considered a major debt risk because he’s DEBT FREE. The only credit he can get a a secured credit card, the kind losers and deadbeats have to take. The credit card industry preys on peoples financial illetiracy.
I wrote “what should he do” post at my blog.
Posted: January 28th, 2008 at 8:44 am
I agree he probably can’t afford a boat, but realistically I think unloading it would be very difficult. He may have paid $2300 in but I doubt he could get that much out after depreciation and I suspect the market for 1/3rd of a small, used boat isn’t that great.
I’d dump that truck though. $566/mo? Yikes. I think I’ll go give my tiny, fuel-efficient, paid-for car a pat on the hood.*
*In the interest of full disclosure, I also have a full-size truck, but it’s almost old enough to vote, minimally insured (it made my overall insurance bill go down!), and definitely is not my daily driver. It cost $800 cash.
Posted: January 28th, 2008 at 9:16 am
I don’t feel sorry for this dude because he deserves debtor’s prison. Spending 2k more than he makes a month means the dude is expecting to go bankrupt and is just stealing the money in the mean time. He’s not trying to live within his means - he doesn’t care.
Posted: January 28th, 2008 at 9:22 am
JimmyDaGeek has a point, but we don’t know the guy’s whole story. Could be that he was laid off, or faced a medical problem that initially got him into debt. If this truly just lifestyle debt then I don’t have much pity for him.
Posted: January 28th, 2008 at 2:19 pm
Some interesting posts here, I think I’m glad I’m not that guy, having to face this crowd. I’m guessing none of the harsher posters has ever made any kind of mistake like this, thus the stone-throwing.
The guy made some seriously poor choices, I agree. And he may not be willing to make all the efforts that obviously everyone else would do to get themselves out of whatever hole they’ve put themselves in. All I can say is that I’ve made some of the same mistakes mentioned in the article, and now I’m doing what I can to repair the damage. Thank goodness I haven’t had people wanting to send me to debtor’s prison or calling me a loser for trying to rebuild my credit with a secured card. Well, maybe I have, but since I’m dealing with the problem myself rather than submitting my finances to a public review, they haven’t been able to burn me in effigy as appears to be happening here.
I did appreciate Rob Madrid’s post on his site regarding this story… some good suggestions that I may even try for myself, just to make sure the husband and I continue to move forward realistically. Constructive criticism is so much more useful than character assassination. But that’s just my point of view.
Posted: January 28th, 2008 at 3:32 pm
Wren, mistakes are one thing: him buying the boat was a mistake, and I can sympathize with that. Him rushing into his first marriage is a mistake, and I can sympathize with that.
Continuing to spend $300 each month on dining out long after he was deeply in debt goes far beyond a mistake, though. That’s almost pathological.
Posted: January 28th, 2008 at 5:14 pm
Indeed, I agree with that. But I think it’s something that lots of people don’t want to admit to, even though they’ve done it themselves. Keeping up with the Joneses is something of a disease in the US, and too many of us fall prey to it.
The article does state that, of late, he has cut out his eating out by cooking at home, he moved to cut down his commute expenses, and his wife will be going to work in Canada and sending a good portion of her wages to him, to help combat the debt. So he’s working on reining himself in. And pathological or not, which is really how a lot of us get into debt in the first place (barring unforeseen medical or other life expenses that can not be avoided), I have a problem with people roasting others over open flames of self-righteousness. That was really my main issue. I know the road he took, at least some of it, I’ve been there myself. It took a lot of work to dig out. I think it would have been harder if there had been people, well-meaning or otherwise, responding as some have here.
I appreciate Tricia’s optimism, however… I think he can make it. He’s taken the first steps, and given a bit of time and much effort on his part, he will make it.
Posted: January 28th, 2008 at 11:09 pm
I wasn’t happy to read that he was going to keep the truck. I, like dcsmith, have a small car and I love the gas mileage on that thing. Before that, though, we did have a gas guzzling truck and back then gas prices weren’t over $3.00/gallon.
I always keep in mind, though, that you don’t always hear the entire story. I saw a show the other day about nature documentaries. One of them was about wolves and it made you believe they were in the wild when they were not. They were in a preserve and not “wild.” The media can do wonders when it comes to tweaking things a little.
I do give the guy some benefit of the doubt here. It’s my nature to do it. Who’s to say that when he starts paying off his debt he gets bitten by the “debt reduction” bug and gets a bit addicted to it? Maybe then he’s ready to ditch the last few budget-busters he has. Some people can jump right into debt reduction - others may need some transition time.
That’s why I hope there is a follow-up.
Posted: January 29th, 2008 at 3:52 am
I agree, it would be interesting to hear how he’s doing in a few months. Please keep us posted.
Posted: January 30th, 2008 at 8:11 am
I don’t think that I could do this. Debt just scares me and spending so much more than you make is crazy.
For me, when money is tight. I spent tight.
Keep us posted
Posted: October 22nd, 2008 at 9:23 am
I am currently sending out more money than my husband and I make a month. Let me tell you it is not because we spend on foolish things. We don’t buy anything for us or our kids that is not a necessity. Our doctor bills and daycare are killing us. We never had any trouble until gas prices went up and we were paying $4.00 a gallon. Then we used our creit cards to buy gas to get to work and then it just snow-balled from there. And anyone who makes minimum wage, how do they make it. Something has got to be done or we are going to see a great depression.