Financial Reference

Sorry for the very long delay in posting. Life got the better of me. Nothing serious, just busy.

During my “sabbatical,” I found some funny examples of personal finance gone bad.

The first example is from a show on HGTV called Dream House. (Here’s a link to the official site and a link to the more informative Rocky Mountain News coverage of the show.) The idea of the show is to show a couple’s adventure toward building their “dream house.” It’s a very simple concept but as you may imagine, the execution rarely goes as smoothly as the couple’s original plans. This season is no exception.

The couple inherited a nice plot of heavily-sloped land in Colorado. They started building before knowing how deep the bedrock was, naively assumed that everything would go as planned, and assumed they would only have a $300-350K mortgage. As happens all too often today, they stretched their budget to afford such a large mortgage.

Then the inevitable happened: the cost projections were flawed, the bedrock was too deep (so it would be more costly to build the foundation), and they got pregnant. They were faced with a house they couldn’t afford, temporarily reduced income (as she was the primary breadwinner), and a large increase in expenses.

What to do when faced with a project you can’t afford? Of course, take on more debt. They mortgaged the land and took out a $500K construction loan! By their own admission, they need his start-up (oh yeah, I forgot to mention, his income comes from a start-up) to take off to afford the new payments.

Good luck! I hope all the stress is worth it.

And the other story: a 39-yr old man bought a virtual space station for $100K. He financed it by taking out a second mortgage on his house. Wow! (On the positive side, a 30-something buying a virtual property is not living in his parent’s basement.)