A Day in the Life of a Bankrupt Man – Insight 1

Meet Jim, a 26-year-old male. He’s an average guy for the most part – single, slowly working his way through college, working a part-time job to pay his bills. However, Jim’s parents filed for bankruptcy eight years ago and have not managed to work their way out yet. Everything Jim knows about money, he learned from his parents.

Jim will probably be bankrupt within five years.

Jim is a real person, though his name is fabricated. He could be someone you know, or someone you pass on the street. In fact, I suspect there are a lot of people like Jim out there. I, your humble narrator, know a lot about Jim simply because he is a friend of mine, and I have the privilege of observing his disastrous financial decisions.

Let’s take a sneak peak into his brain, shall we?

Jim: A few months ago someone accidentally hit my car while it was parked in my apartment parking lot. I saw the girl do it, and she gave me her information so insurance could cover it.

The damage was light – my bumper was cracked, but that’s about it. Anyway, the insurance company evaluated the damage and told me they would send me a check for $500 so that I could make repairs.

So far, so good, Jim. You are lucky that it was not a hit-and-run. So, did your check arrive yet?

Jim: The check eventually arrived, but it was for $1,100 rather than the $500 that I was expecting. I was totally shocked! I thought it might be a mistake, but assumed it must be my lucky day. So, I cashed the check, and my family and I spent it.

A few days later I got a call from the insurance company, and yes, they made a mistake. They caught their error, and now they want me to return the extra $600 to them. It’s not fair! I told the guy that I didn’t have $600, and he got really mad at me!

How does he expect me to come up with $600 so soon? My family doesn’t have $600, and even if they did, they’d use it to buy a car for my brother. So now I have to work out a plan with the insurance company to pay them back a set amount every month. I hate those greedy insurance companies.

Wow. Let’s examine the mistakes Jim made. First of all, he realized that the extra money might be a mistake, and one possible solution would have been to contact the insurance company. Or, he could have cashed the check, put it all into a high-yield savings account, and waited for the company to catch their mistake. That way he could at least earn a little interest from their error.

Second of all, he (and his bankrupt family) SPENT all of the money the insurance company gave them! Stupid! At the very least, he could have held onto the “extra” money in case the insurance company comes knocking.

Third, observe this crucial sentence:

Jim: My family doesn’t have $600, and even if they did, they’d use it to buy a car for my brother.

This, my friends, is the bankrupt mindset in action. Let me translate that sentence:

Reality: We don’t really have any money, but even if we did, we’d use it to lock ourselves into more debt.

That car payment would also come with a hefty interest rate. Ouch.

Thus, we arrive at a simple conclusion. The “wealthy” mindset compartmentalizes money and looks for ways to turn existing money into more money.

The “bankrupt” mindset looks at money and only sees what can be bought with it.

Which one are you?

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Author: misterIM

Site administrator. Technology enthusiast. Linux lover. As Martin Luther said of me:

He is the master of the (bank)notes. They must do as he wills. As for the other [finance authors], they must do as the (bank)notes will.

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