Are Your Finances Between a Rock and a Hard Place?

Have you ever felt like you’re between a ‘rock and a hard place’ financially; where your financial choices and the events of the past have brought you to a place you’re really struggling with and you can’t see an easy way forward, yet on the other hand there is no easy way back either?

I think we’ve all been there!

At the time it seems extremely difficult to change directions and undo the decisions of the past and when you look at all the alternatives there is no clear solution!

Of course that’s why it is referred to as being between a ‘rock and a hard place’!

I have a suspicion that most people are between a rock and a hard place financially (and maybe in other ways as well)!

We move forward until moving forward stops being easy! We then work out ways to push the boundaries a bit further. We squeeze a bit more and a bit more, driven by some goal or desire and then one day we realise we are under too much pressure, we went too far and we want to go back to a less stressful existence or take a different path and that’s when we find it’s not that easy.

We’re between a ‘rock and a hard place’!

I found this cartoon at http://www.cartoonmovement.com/cartoon/5266

Between a Rock and a Hard Place

I think it appropriately describes what I am talking about here!

Assuming it is the ‘rock’ that is stopping us from moving forwards; let’s look at some of those ‘hard places’ that stop us from undoing the decisions and events of the past so we can go back to a simpler, less stressful financial life.

What decisions are you avoiding that are keeping you from removing those hard places?

As I see it there are primarily two types of ‘hard places’ or barriers we have to deal with when we are between a rock and a hard place financially.

Here is an example of each…

  1. Joe is finding it impossible to save because of the repayments on the mansion he lives in. He’s strapped for cash each month and has considered selling up and downsizing to a smaller house in a cheaper suburb, but what would his friends and family think if he did that?
  2. Barry’s Credit Card is overflowing from purchasing consumer items that now are worth less than he paid for them. The repayments are killing him but he can’t sell the stuff to clear the debt. He’s stuck!

 

The first type is an emotional ‘hard place’ and the second is a financial one.

Let’s look at them both.

 

Emotional Hard Places

The fancy house that is keeping Joe broke… The problem with emotional ‘hard places’ like this one is that you are worried about what someone else will think. Yet in reality the problem is with you because you are approaching the problem from the wrong angle.

Instead of worrying that everyone will think you are going broke, imagine if you told people you were selling your house because you were looking for a run-down house to renovate for profit.

Then it would be OK to switch to a cheaper house. In fact some people might be jealous of you for being such a go getter and some might even be inspired and copy you!

It just takes a mind shift!

If you think about it, an Emotional ‘hard place’ can be dealt with just by thinking a different way. If you’re stuck for an emotional reason hopefully this gives you some ideas on how to deal with the problem.

 

Financial ‘Hard Places’

Selling the ‘stuff’ that filled up Barry’s Credit Card for a lot less than he paid for it seems like an unnacceptable option. However you may be surprised to find it could save him a lot of money.

If Barry sells an item he purchased on his Credit Card for $1,000 and only gets $500 for it and he pays this money off his high interest Credit Card he could be much better off than it first appears. The interest is what makes the difference.

Barry owes $5,000 on his Credit Card at 21% and is paying it off at $31.10 a week. It will take more than 5 years to pay off.

Paying $500 off the Credit Card saves $837 in interest and 43 weeks in repayments. This means Barry effectively got $1,337 from the sale (the $500 cash and the $837 saving in interest).

When you think about it like that, selling a $1000 item for half price and paying the money off the Credit Card, you actually make money on the deal! You get back $1337 from selling an item that cost you $1,000. That’s a $337 bonus!

Maybe selling ‘stuff at a loss isn’t such a bad idea after all!

Of course there are other causes that can made ‘hard places’ what they are such as lack of time, illness, accident or injury but the two I have looked at here are certainly the two stand-out ones in the majority of cases.

Now you’ve seen my two examples, I’ll leave you with a quiz…… Is the following example an emotional or a financial ‘hard place’ and what should Mary do?

 

Mary’s Rock & Hard Place

Mary’s kids have been in a private school for years and all of their friends and favourite teachers are at that school but she really can’t afford the fees. Her Credit Cards are all full and she’s a week overdue on the Car Registration.

What do you reckon?

Is it an emotional hard place or a financial one?

What should Mary do? Leave your thoughts below.

That’s all for today.

Warm Regards
David Wright