Lending Money to Sam

Scott Burns in the Austin American-Statesman today. Go read that and then come back to get the rest of the story. Or if you’d rather not, Burns asks if you would be willing to lend money to some guy named Sam who regularly spends quite a bit more than he takes in and has built up quite a large debt. However, his credit is so good that the lenders give him a sweet deal: interest-only payments and even that is at an unheard of 3% APR (averaged across his entire debt portfolio). He has some upcoming obligations to his parents and his wife’s parents that he made some time ago and are about to come due. They look to be pretty extensive.

Some other interesting information on Sam: He has a long credit history and a really good record of staying current. Yes, the current situation is not sustainable in the long run, but it works in the short term, and he’s doing some really good things with the money.  Sam also has a lot more earning potential than his current income. Several years ago, he and his wife were able to work things out to where they not only balanced their budget, they had a surplus.

Up to this point, I really have no concerns with loaning Sam more money. Yeah, he’s got problems, but he’s just proved that he can be responsible and if it comes right down to it, he can bring in more income. All he has to do is ask.

But then things started to get weird. Sam had been complaining for years that his wife was a spendthrift. Boy did he complain. Nevermind that Sam wasn’t shy about spending money on things he liked, but he had a point that they were building up some pretty good debt. But right about the time that he and the Mrs. got things worked out for that annual surplus, Sam started going a little crazy. He could have paid back some of that debt he’d been complaining about. He could have at least put the money back in the savings account he’d set up for his parents and in-laws. But he didn’t. Instead, he took a pay cut. Sam reasoned that if he had more money than he needed to pay for his current budget, he should give some of his income back. Sam has always been pretty generous, but it was really strange to me, with all the complaining that he did about the family debt, and even having to sock money away for mom and dad, that when he had the chance to pay it back, he didn’t take it.

Sam went downhill from there. He got attacked, and went on an expensive quest for retribution. Okay, I can kind of understand that. Then he picked a fight with someone else who had been a problem before but,  as it turns out was no threat anymore. Sam made up his own rationalizations for picking a second expensive fight. He started spying on his kids. He started beating up the neighbors and claiming that it was okay because he didn’t really hurt them. “I mean, there’ s no permanent damage, so that’s okay, right?”

Recently things have gotten very bad. Sam still complains bitterly about his wife’s spending (never his own) and the debt they’ve been racking up and insisting that she cut back, but absolutely refusing to even think about asking for a raise. He refuses to get a second job, or start a business, or even readjust things so that he has a bigger take-home pay. He’s even gone so far as to threaten not to pay even the paltry interest payments on the debt they already have. Yes, he does have to borrow to be able to make the payments, but he’s putting the family at risk of having to pay higher interest. With as much debt as they’ve built up, that’s just crazy talk. Sam’s gone off the deep end and his wife isn’t strong-willed enough to stand up to him.

The profligate spending doesn’t bother me as much as his irrational attempts to cut it. He’s even talking about kicking some of his kids out on the street and letting some of them go hungry, just so he can avoid asking his boss for a raise, all the while ranting about how his wife wants to burden their kids with a mountain of debt. Sam talks big about his debt, but if he were really serious about not leaving mountains of debt to the next generation, he would be more open to increasing income. His current stance is hypocritical and short-sighted. In my book, that equals either crazy or stupid.


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