Chapter OneThe Beginning .
a Very Good Place
As I stood putting gas in my Jaguar, the cold damp
January wind chilled me and seemed to dampen my spirits
even more. I hoped the attendant inside would not run
a telephone cheek on my gold card. If he did, they probably
would turn me down. Then where would I be?
"This is ridiculous," I murmured. "Only in America
could you drive a Jaguar and not have the money to put
gas in it." I wondered where the arrogant young man
from a few years ago was. There I stood in the cold, a man
in my twenties, knowing I was in the process of losing virtually
everything I owned.
It had not always been that way. After college I hit a
couple of minor bumps in my career, but I found a niche
in foreclosure bargain real estate. With a formal education
in finance, a family background in real estate, and
a bunting desire to succeed, I had a head start on life.
As my real estate business grew, everything I touched
seemed to turn to gold. I began to collect rental properties,
as well as buy and sell bargain properties. I was very
good at it and made money quickly. By age twenty-six, I
had a rental real estate portfolio worth more than $4 million.
I had built a team of people to manage this growing
company and everything was moving perfectly.
Or so I thought. My wife and I did all the exotic vacations,
drove the top-name autos, and wore only expensive,
custom-tailored suits. You may be able to imagine that for
a young man of twenty-six, I thought I had it made.
I had arrived at "financial independence," that mystical
place every young entrepreneur wants to reach. If I
wanted something, I bought it-no thought required.
I had done it honestly, with hard work and intelligence.
So what could possibly happen in paradise?
Along with my knack for obtaining bargains, I had another
talent. I had an unusual ability to finance everything.
If one of my business lines of credit ran low, I
would put on my custom suit, get in my Jaguar, and head
for the bank. I would make sure to park in front of the
manager's window for a big impression. I had my financial
statements, corporate strategy, and tax returns all bound
for presentation. All this pomp and circumstance, combined
with the fact that my "deals" always worked and
enamored the bankers, and they loved to lend me money.
We had every type of personal line of credit, business
lines of credit, and equity lines of credit-and let's not
forget those wonderful gold and platinum cards.
If a banker would dare to indicate I might have too
much debt, I would hunt another source. I have taken a
$20,000 draw on a line of credit in a cashier's check,
walked out of that bank, and into another. With all the
"presentation" explained above and a $20,000 cashier's
check, I would "establish a new relationship." Which
meant I would deposit my borrowed cash into their bank,
promise to be a customer, and in return they would give
me a new $100,000 line of credit plus every platinum card
and personal line of credit they had.
The sarcastic way that I am explaining this to you almost
makes the process seem immoral. However, we
were making money, and we had a bright future, so the
banks wanted customers like us.
All Good Things Come to an End
Then it happened. Our largest lender was sold to a larger
bank. Neither pomp and circumstance nor my name
meant anything to the new upper management. Also, the
1986 tax act began to have its negative impact on real estate
so all the banks began to get worried. Upper management
decided to "trim back" on real estate lending.
Most of our borrowing was in short-term notes because
we resold most of our property for profit. Because we had
"open lines of credit" and short-term notes, the banks had
the right to call (or demand that we pay) most of our debt
within ninety days. And that is just what they did. The
new management called all my notes.
I had ninety days to find $1.2 million. I paid virtually all
of it, but doing so destroyed my business. That action
started a chain reaction that ended in my losing everything
but my home and the clothes on my back.
I remember the strain on my marriage. I remember
the mornings standing in the shower with the water scalding
my face and crying like a baby. I remember the sheriff
serving the lawsuit papers for default on notes. I
remember thinking of suicide, knowing I had a $1 million
life insurance policy that would provide for my family better
than I was doing. It took three and a half years for paradise
to completely unravel and for me to end up broke.
From the nightmare and emotional pain, however, was
born an idea-the idea of counseling the average consumer
through debt problems. I found that the foreclosure
experience I had, combined with my personal
experience with financial pain, was a foundation for opening
a company to counsel consumers. I attended any and
every workshop or seminar available and devoured every
book I could find on consumer financial problems.
I have that company and have dealt with several thousand
cases of consumer counseling on financial crisis. The
base of knowledge from that experience and my personal
pain are the source for this material.
Enough Pain Already!
Having lived through that trepidation, having sat with
countless others while they lived through the same horrors
of financial stress, and having watched more than
10,000 foreclosures come across my desk in ten years, I
have had enough! It is time we Americans get a handle on
our finances. We have been Gomer Pyle-ing it through
our lives long enough. Down South we call this ridiculous
walk down apathy lane in a Valium state of mind "ditty
I believe it is time for the typical American family to
get out of financial bondage. I also believe that they are
ready. Furthermore, I believe that through knowledge
and discipline financial peace is possible for us-all of us.
At the end of each chapter my wife, Sharon, will offer
her insights and comments on the material presented
there. Achieving financial peace would have been impossible
* Thoughts from Sharon .
I remember that sunny summer afternoon when Dave
called and told me that nothing else could be done. It was
over. We had to declare bankruptcy.
What would we do now? I wondered. I had such an empty
feeling. I felt that the whole world was crashing in on us. Now
everybody was going to know our secret. Everybody would
look at us funny. What would our family and friends think? Would we be able to take nice vacations? Would the children
still be able to dress nicely and participate in the same activities? What was going to happen to us?
Question after question raced through my mind. But I
didn't have the answers. I began to think, well, maybe I spent
too much on furniture. Or maybe I bought too many clothes.
What did I do to cause this mess? I was scared-no, I was
That day I asked the Lord for help, I realized that Dave
and I needed more than just money. We needed peace and security
so that everything would be okay. I have seen this valley
we were in turn into an opportunity to share with others
about the financial burden we had gotten ourselves into.
There is hope. As a wife and mother, I knew that I
couldn't give up.
There were times I had to be there for Dave just as he was
for me. We had to encourage one another many times. I realized
that it wasn't going to be easy.
But I knew we were just in a valley and that on the other
side there was a mountain and sunshine.
Chapter TwoEnough of Anything
Is Too Much
The American consumer is facing dire financial
straits. The story outlined for you in the previous chapter
and the thousands of families I have counseled lead me to
that conclusion. After witnessing national trends and
gathering information from personal observation over the
past twenty years, I am disturbed by the direction our
management of money has taken.
Our nation's financial situation, with record budget
deficits and bank failures, is deplorable. However, the
nation's situation is only a reflection of our own personal
inability to "just say no" to ourselves. Our failure to get
control of financial matters in our personal lives will have
to be rectified before we can demand accountability from
elected officials. Our spoiled Congress is only a reflection
of our spoiled selves. The good of our country is overlooked
so our pet special-interest groups can be served,
just like the good of the family is often overlooked so Dad
or Mom can have that special trinket they must possess.
Dessert Before Dinner
As a people we have forgotten how to delay pleasure.
We are living in a society that microwaves everything. We
must have it, and we must have it now! As Brian Tracy, a
well-known motivational speaker, says, "We are being
taught by everything around us to have dessert before dinner."
Now we are paying for our lack of knowledge and
The statistics of financial failure show clearly that this
decline is a fact. These statistics do not reveal cycles but
rather, more alarmingly, show steady decline. These statistics
do not show any attributable correlation with inflation,
unemployment, recession, or any national trend
except the rise in personal debt. Larry Burkett of Christian
Financial Concepts says that in 1929 only 2 percent of
American homes had a mortgage and by 1962 only 2 percentdidn't have mortgages.
We must not be misled into believing that these problems
are faced only by large companies or deadbeats. On
the contrary, these are typical American families with two
kids, a dog, and dinner every night. I have met with these
families and they are just regular folks. Their situation
just got out of control.
The Consumer Reports Money Book states that the
typical household has $38,000 in debt and that total consumer
debt has almost tripled just since 1980. In 1980 the
total consumer debt was $1.3 trillion, and now it is beyond
the incredible figure of $3.3 trillion-in just a few
short years. A recent survey conducted by Consolidated
Credit Counseling Services found that 71 percent of
Americans say debts are making their home lives unhappy.
A recent study in The Wall Street Journal states
that 70 percent of the American public lives from paycheck
to paycheck. Interestingly, a Marist Institute poll
published right after that Wall Street Journal article
stated that 55 percent of Americans "always" or "sometimes"
worry about their money. If 70 percent are broke
and only 55 percent are worried, I guess the other 15 percent
The Federal Reserve says mortgage debt has more
than doubled since the early nineties. Foreclosure has
become a way of life in America with tall grass and hanging
gutters in virtually every neighborhood. Foreclosures
have increased 200 percent since 1980 with more than
600,000 homes lost in 2001 alone. The American Bankruptcy
Institute says that in 1980 there were just more
than 500,000 bankruptcies filed and by last year almost
1,500,000 were filed with new records set almost every
year in between. It is getting ugly. Seventy-one percent
of the bankruptcies are Chapter 7, which is the "total"
bankruptcy where you lose everything, but 95 percent of
those cases were "no asset" eases. That means they had
no assets to lose by the time they got to bankruptcy.
As a matter of fact, a recent study done on the typical
bankruptcy by the University of Texas in conjunction with
the University of Pennsylvania confirms this. Published in
the Wall Street Journal, the study noted that the typical
bankruptcy was not a guy under a bridge or a real estate
high roller but rather "well-educated, middle class baby
boomers with big time credit card debt."
The Times They Are A-Changin'
In the 1950s you seldom would have heard of a person filing
bankruptcy, being foreclosed on, or having his wages
garnisheed for nonpayment of debt. Now, if you live in a
middle-income neighborhood, out of your closest one
hundred neighbors there is at least one house empty from
foreclosure, plus one foreclosure under way, and four to
seven of your neighbors are more than three months behind
on their house payment. In some areas these numbers
are double. The generation of adults that started
housekeeping in the 1930s and 1940s would be appalled
at their grandchildren's lack of financial responsibility.
Since the Civil War we have seen a steady change in
the way we Americans handle our money. As a boy in the
1850s, prior to the Civil War, my great-great-grandfather
lived in Indiana. In his memoirs he mentions a family who
owned a neighboring farm. This family got the fever to
move West but couldn't because, unlike most anyone else
in the county, they owed money on their farm. The language
he used to discuss this mortgage gave insight into
the attitude of the day regarding debt. He gave the impression
that one should pity this family as if they had
cancer or view them as sinners who had some skeleton in
their closet. This view of debt is completely foreign to us
today. Astonishingly, the mortgage in question was only
The generation of people who set up housekeeping in
the 1930s and 1940s was scarred by the Great Depression.
Those folks would borrow very seldom, and they
lived under their means. They would be shocked by the
way most families live today.
The family of the 1950s and early 1960s began borrowing
in order to buy a home, because "How in the world
could you expect a young couple to pay $13,500 cash for a
house?" (Incidentally, that same house in most cities is
now worth over $100,000.) This family would borrow on
very little else except a house because the Depression-era
mentality of their parents had partially been passed on to
The family of the late 1960s and 1970s, however, began
to borrow in order to purchase homes and automobiles
and a few other items. Credit cards became popular during
this time as a result of the first aggressive marketing of
credit. For the first time ever, Americans were sold on the
idea of borrowing. Financial institutions began to develop
"financial products," meaning an array of different ways
that they would lend us money. You will see later the
wealth that these companies have attained as the result of
selling America on debt. Jupiter Media's study says that
there are 15.4 billion credit advertising impressions on
the American public every three months!
The seventies, eighties, nineties, and the new millennium
have seen lending and borrowing at an all-time high
in modern history. We want it all, and we can borrow to
get it all, before we can afford it all.