The Seeds of Financial Problems
The Seeds of Financial Problems
The Seeds of Financial Problems
The Seeds of Financial Problems
The seeds of financial collapse were planted early in Paul and Julie Averal's marriage. When they were married, she at twenty-one and he at twenty-two, neither one knew much about financial matters. Their financial plans were simple. They would delay having children for five years. Julie would use that time to finish college and get established in her teaching career. After that, they would begin a family. There was some thought that Paul might go back to college someday, but that was only a vague idea.
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But after living in an apartment for five months, Paul decided that it didn't make any sense to keep throwing money away on rent. Some of the guys at work had told him he was losing all the tax breaks the government allowed home owners. "You're just paying the government's bills for welfare when you rent," another shift worker had said authoritatively. "Get yourself a house and start building some equity." Paul began to look for a home they could buy. He found one that was near their price range, but the bank wouldn't finance it on the basis of his income alone. So during the summer college break Julie took a job as receptionist for a local dentist. Based on their combined incomes, they signed to buy the home. Julie told Paul several times that she didn't think it was a good idea to buy a home, but he assured her that he would be getting raises to cover the addtition. They couldn't afford the down payment, so Paul's dad cosigned for a note at his credit union. Paul neglected to mention the loan on his mortgage application and also failed to mention that Julie's income was temporary. The monthly house payments required almost 60 percent of Paul's take-home pay. Almost immediately they were in financial trouble from the payments alone. With the insurance, taxes, and utilities added, Paul and Julie were on the road to debt without realizing it.
After the first month, Paul was unable to make the loan payment to his company's credit union. When it was sixty days delinquent, the credit union attached his salary and had the payments deducted automatically, as per their written agreement. Paul's father was sent written notice of collection proceedings against him for the two months in arrears. When he received the notice, he hit the roof and stormed over to Paul and Julie's to confront the issue.
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By that point, Julie had gone back to school. She had had no knowledge of any financial problems. When she found out, she was devastated. Paul's dad demanded that they pay the past due bill. When Paul told him they could not, his dad suggested that Julie get a job.
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