Tag Archives: United States

Taxes and Insurance

Why America Doesn’t Have Free Universal Health Care And A Look At Those Who Do

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Doctor, Luggage, Verbandszeug, Patch

Since candidates are coming out of the woodwork for the 2020 presidential election, let’s talk about the elephant in the room: Healthcare.

Regardless, of your political beliefs, most will agree that a fully funded functioning health care system is a must. You need hospitals that have basic medical supplies and more advanced equipment for surgical procedures.

Those things don’t come cheap.

However, other advanced nations have been able to make this happen.

The elusive Universal Health Care (UHC) that we Americans have been unable to have due to numerous factors. Primarily, for one reason: money.

Taxes are a huge component of making UHC a reality. That is how other nations are paying for it with varying degrees of success.

However, we cannot doubt Universal Healthcare’s popularity.

For example, it was recently reported that a Canadian family visiting America did not stop at any hospitals after they confirmed that their patriarch had died of a heart attack while on vacation.

Instead they drove for an ENTIRE DAY, with a corpse in the back seat to avoid paying the exorbitant healthcare costs here on American soil and the cost of shipping the body to Canada.

This is a TRUE story. I can’t make this stuff up.

Remember that article in the New York Times about The Velvet Rope Economy? The Doctor Is In. Co-Pay? $40,000.


Chris B. Murray for the New York Times The Velvet Economy article

That is the type of story that would scare anyone from going to the doctor in America.

So let’s talk about healthcare.

WHAT IS UNIVERSAL HEALTHCARE?

Universal healthcare means there is a health care system that provides coverage to at least 90% of citizens, typically paid for by the citizens of the country via taxes.

Here in the US, thanks to the Supreme Court’s decision to uphold the ACA (aka Obamacare), signed by former President Obama, the US has universal health care starting in 2014 using an insurance mandate system. But will it last?

Prior to 2014, the US no universal healthcare anything other than Medicare, but that is for the elderly.

However, most of the other developed nations do not make having a mandate necessary.

This is why the great healthcare debate rages on in the current White House. The Us is offering subsidies for healthcare and the current administration is not feeling it. But in other countries, no subsidy is necessary or rarely required, if healthcare is being funded by tax payer’s dollars. And we mean paying a lot of taxes.

We will get into that later.

WHAT COUNTRIES HAVE UNIVERSAL HEALTHCARE?

Doctor, Luggage, Verbandszeug, Patch

Have you ever wondered what counties offer the coveted universal healthcare, but you never took the time to look it up?

Well, now you can find it right here.

That’s right. I did the work for you.

There are thirty-three developed nations. Thirty-two of the thirty-three developed nations have universal health care, with the United States being the lone exception. That is until the Affordable Care Act came along.

Americans can regularly be heard talking about UHC. Why do other developed nations have it and we don’t? What is good for the goose should be good for the gander mentality.

Well, you are about to find out.

The following list, compiled from World Health Organization (WHO) sources where possible, shows the start date and type of system used to implement universal health care in each developed country. Note that universal health care does not imply government-only health care, as many countries implementing a universal health care plan continue to have both public and private insurance and medical providers.

Country                         Start Date   System Type

Click here for more source material on each country’s health care system.

Norway                               1912       Single Payer

New Zealand                    1938       Two Tier

Japan                                    1938       Single Payer

Germany                            1941       Insurance Mandate

Belgium                              1945       Insurance Mandate

United Kingdom           1948       Single Payer

Kuwait                                1950       Single Payer

Sweden                              1955       Single Payer

Bahrain                              1957       Single Payer

Brunei                                 1958       Single Payer

Canada                               1966       Single Payer

Netherlands                    1966       Two-Tier

Austria                               1967       Insurance Mandate

United Arab Emirates     1971       Single Payer

Finland                                 1972       Single Payer

Slovenia                               1972       Single Payer

Denmark                             1973       Two-Tier

Luxembourg                      1973       Insurance Mandate

France  1974                       Two-Tier

Australia                              1975       Two Tier

Ireland                                  1977       Two-Tier

Italy                                       1978       Single Payer

Portugal                               1979       Single Payer

Cyprus                                  1980       Single Payer

Greece                                 1983       Insurance Mandate

Spain                                     1986       Single Payer

South Korea                     1988       Insurance Mandate

Iceland                                 1990       Single Payer

Hong Kong                        1993       Two-Tier

Singapore                          1993       Two-Tier

Switzerland                      1994       Insurance Mandate

Israel                                     1995       Two-Tier

United States                   2014?    Insurance Mandate

Please be advised that the dates given are estimates. Universal care rolled out gradually in many countries. For instance, in Germany government insurance programs began in 1883, but did not reach universality until 1941.

WHAT TYPES OF HEALTHCARE SYSTEMS ARE THERE?

You may have never heard of some of the above types of healthcare systems. That is why the definitions are being provided here.

Single Payer: The government provides insurance for all residents (or citizens) and pays all health care expenses except for co-pays and coinsurance. Providers may be public, private, or a combination of both.

Two-Tier: The government provides or mandates catastrophic or minimum insurance coverage for all residents (or citizens), while allowing the purchase of additional voluntary insurance or fee-for service care when desired. In Singapore all residents receive a catastrophic policy from the government coupled with a health savings account that they use to pay for routine care. In other countries like Ireland and Israel, the government provides a core policy which the majority of the population supplement with private insurance.

Insurance Mandate: The government mandates that all citizens purchase insurance, whether from private, public, or non-profit insurers. In some cases the insurer list is quite restrictive, while in others a healthy private market for insurance is simply regulated and standardized by the government. In this kind of system insurers are barred from rejecting sick individuals, and individuals are required to purchase insurance, in order to prevent typical health care market failures from arising.

What is free universal healthcare?

Universal health care is a system that provides quality medical services to all citizens. The federal government offers it to everyone regardless of their ability to pay.

Which country has free medical care?

According to Forbes, The two advanced economies with the most economically free health care systems—Switzerland and Singapore—have achieved universal health insurance while spending a fraction of what the U.S. spends. Switzerland’s public spending on health care is about half of America’s, and Singapore’s is about a fifth of ours.

HOW ARE COUNTRIES ABLE TO AFFORD IT?

Now let’s talk about them taxes.

Let’s start with Canada. The Canadian Institute for Health Information (CIHI) believes Canada spent approximately $228 billion on health care in 2016. That’s 11.1 per cent of Canada’s entire GDP and $6,299 for every Canadian resident. That per capita rate would put Canada near the high end of what other advanced economies pay.

Is health care free in Canada?

To review, per The Atlantic, Canadian healthcare basically works like Medicare, but for everyone. Medical care is free, and it covers almost everything other than prescription drugs, glasses, home care or long-term care and dental care. (Most people have supplementary insurance such as private insurance from their employers or the government to cover those things).

Does Canada have good healthcare?

Coverage and access. In both Canada and the United States, access can be a problem. Studies suggest that 40% of U.S. citizens do not have adequate health insurance, if any at all. … Yet, even if some cannot find a family doctor, every Canadian citizen is covered by the national health care system.

How is healthcare funded in Canada?

Basically, healthcare is being funded at both the provincial and federal levels. Financing the system is provided via taxation both from personal and corporate taxes. Additional funds from other financial sources like sales tax and lottery proceeds are also used by some provinces.

Do Canadians really pay more in taxes than Americans?

According to Investopedia, U.S. federal income tax brackets range from 10% to 35% for individuals. On the Canadian side, the range is 15% to 29%. Overall, it’s a bit more expensive to live in Canada than the US, and much cheaper than living in Europe. Taxes are higher, but generally people are paid more to compensate.

However, data from the OECD show that Canadians are lower-taxed than Americans. According to the Huffington Post, in the U.S., the same family would pay 14.2 per cent in taxes, a tax rate some 12 times higher than in Canada.

A brief note on France.

In practice, less than 50% of inhabitants in France pay any income tax at all; only around 14% pay at the rate of 30%, and less than 1% pay at the rate of 45%. According to the French tax authority, taxes range from 14% up to 45% for the wealthiest citizens. Like here in the US, there are citizens that pay no income taxes based on wages or other tax credits or exemptions.

WHY ALL THE UPROAR OVER UNIVERSAL COVERAGE?

First, we know right off the bat that no two countries are alike. Those that are third world are still trying to get clean water and internet access; therefore, universal healthcare is a privilege as water is a basic human need and a right. You know which one those countries are focused on.

However, the United States is by far the RICHEST country in the world.

Even with the deficit being 18 percent greater than last year, as the US is spending $4.4 trillion and has a revenue of only $3.4 trillion, which is a $1 trillion-dollar annual shortfall. We are still the RICHEST.

That is still the case even with the US debt being $22 trillion, and America owing the Chinese $1 trillion of that huge number. We are still the RICHEST.

However, roughly 15% of the US population are uninsured or lacking in health insurance coverage in some form.

Therefore, from people looking from the outside in, they are scratching their heads as to why we cannot offer universal healthcare to its citizens.

As you know, it all comes down to money.

College, Financial Freedom, Financial Independence, Wealth

Why I think college should only be 8 months

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University, Boston, College

“No. I can survive well enough on my own— if given the proper reading material.” ― Sarah J. Maas, Throne of Glass

Where do I begin?

Let’s start here. The cost of college.

College is expensive. According to the College Board, the average cost of a 4-year in-state public university hovers around $9,970, at private colleges $34,740, and $25,620 for out-of-state residents attending public universities.

Many folks don’t just have $10,000-$30,000 sitting around in their bank accounts.

According to numerous reports, many Americans do not even have $400 for an emergency. How the heck are they going to come up with 10 times that amount or more for college?

I, myself, had to become an extremely massive saver in order to stop living paycheck-to-paycheck.

This required me to become very frugal and find ways to earn more, cut spending, or both from my household budget.

Most of my problem was the revolving credit card debt I had. So, I had to come up with a plan to get it paid off. Every time I paid off one debt, I started saving that money.

I went from saving $1 a day to $13,000 a year.

Want to know how I did it?

See my post How Millennial Money inspired me to start saving $13,333.06 a year

What I really noticed about college besides just the price was that many of the things we’re learning came from equally expensive textbooks. Couldn’t I have saved tons of money by just skipping college and reading the textbook instead? Literally, all I would have needed is the syllabus of the course.

I went on Amazon to see books about the cost of college being worth it. It is right? Well, maybe.

Image result for ivy league admissions chart

The point I am trying to make with this article is to examine the following:

  1. Challenge the conventional wisdom that college will solve all your problems
  2. Going to college will make you rich
  3. Prestige is to be pursued at all and any cost

THE COST OF COLLEGE

It has been well-documented that college is coasting more and more every year.

The amount of student loan debt in the United States alone stands a $1.5 trillion.

I cannot even wrap my head around that number. Basically, it means that many people are either going to be paying back their loans for a long time or will not ever be able to repay them. That is a sad fact indeed.

We are mortgaging our young people’s future.

Many are unable to buy homes, start families, get married, and put down roots.

The cost of college is especially hard to manage for those that are of low-income. The issues of poverty do not stop with a college acceptance letter.

We are starting to create a reality in where the poor inherit their parents’ poverty while the rich hoard opportunities for their kids.

That glass floor is real. When poor kids are getting 1200 to 1600 SAT scores and pulling hard A’s but still unable to graduate, while trust fund babies are barely pulling soft C’s is just ridiculous. That means, a rich kid can get a college degree simply because their parents have wealth, income, and resources.

I have heard stories of low-income college students dropping out for owing less than $1,000 to get their degree. Frankly, this saddens and alarms me.

And I am not buying avocado toast at $10, according to one politician, who will remain nameless.

The cost of a Bachelor’s (BA/BS) degree is just too darn expensive. The worst part is that an education is not an equalizer. Just because you went to Harvard doesn’t mean you are going to get the corner office. That fancy C-Suite is the carrot being dangled in front of all those Ivy League hopefuls.

Many do not make it there.

Don’t believe me.

Check this out.

When I looked up books on colleges, admissions, and the Ivy League online, I found the following titles:

  • Excellent Sheep
  • Nudge
  • No Sucker Left Behind
  • Where you go is not who’ll you be
  • The Chosen: The Hidden History of Admission at Harvard, Yale, and Princeton
  • The Price of Privilege
  • Paying for the party
  • Pedigree Elite: How Elite Students Get Elite Jobs
  • The Blessing of the B Minus
  • Academically Adrift
  • Winners Take All
  • Generation Debt: How Our Future Was Sold Out for Student Loans, Bad Jobs, No Benefits, and Tax Cuts for Rich Geezers–And How to Fight Back
  • Equity and Excellence in American Higher Education
  • How to Raise an Adult
  • iGen: Today’s super connected kids are growing up Less Rebellious, More Tolerant, Less Happy – And completely unprepared for Adulthood

I have read a few of the books listed above. Many are eye-opening recounts of their experiences with elitism, the Ivy League, college admissions, debt, student loans, finances, etc. Paying high prices, as much as $100 an hour for instruction, for college, taking on tons of debt and then receiving low starting salaries.

Stagnant wages and student loans are a dangerous cocktail.

The one book that still haunts me is No Sucker Left Behind. In this book, he describes college as a rip-off as he feels that colleges are involved in price-gauging schemes. Colleges, in his opinion, have become profit-obsessed businesses with an approach that is more reserved for used car salesman.

There are some Ivy Leaguer’s that become Corporate America rock stars. However, the majority go on to careers in the same type of jobs that those that do not go to top tier colleges.

COLLEGE EARNINGS

You think the Ivy League is the only way to go. Well, think again.

You hear all the time that a college degree means higher earnings, like $1 million more in income over a working lifetime. What you do not hear are the tales of people paying $100,000 for that sheepskin and then getting a $35,000 starting salary right out of college.

A blogger by the name of Sam has a website called Financial Samurai. He wrote a very eye-opening article called What If You Go To Harvard And End Up A Nobody?

He looked up profiles of people that went to Elite Schools.

Mostly more of the same from elites: people chasing money.

Surprise, surprise many end up in investment banking and consulting. If places like Harvard are the playgrounds of the rich, then places like investment banks are close behind. The Elite School graduate sandlots.

I have come to believe that you should pursue what is in your heart and your God given talent. Whatever that may be. God does not give anyone anything he doesn’t want them to use. Sacrificing doing any less than your best is to sacrifice the gift. Figure out what you are good at and then pursue that! The money tends to follow.

Some studies have followed, like the one above, people who attended Ivy League schools and others accepted to those schools but who chose lower ranked schools instead.  The result: There wasn’t a difference in lifetime earnings.  In other words, Ivy League caliber people don’t need an Ivy League education to have high earnings.

WHY FOUR YEARS OF COLLEGE?

Remember that $100 an hour for instruction that I previously stated? Due to that, the real cost of college is costing some students $100,000 a year, according to the book No Sucker Left Behind. So, that is what part of the reasoning behind four years is. Collecting the tuition and fees.

The BA/BS degree takes no less than 120 credits to complete.

Why is this?

Should we not question this? I get it. You do not want a doctor that is immature performing surgery on you. However, I value work ethic and experience over age.

Why not have a degree take 48 credits to complete?

How we would do this is to cut out all the unnecessary courses one needs to graduate. Forget the gen eds and endless electives. Stick to what we need to graduate.

A college degree should be done as quickly as possible so that people can get out there and work. Most families do not have 4 years to let junior go off and explore. They need him out there working and bringing home the bacon today!

I read an online forum called college confidential where it asked why is college in America so long. Great question. Here are some of the responses. This is how it went down.

Why is it that it takes so long to get a professional degree in the US?

In order to study Optometry or Medicine or Dentistry etc you need to do 4 years in college first, not even 1 or 2 years but 4 years whereas in the UK the 16-18 education is enough to prepare you for it.

People may want to start/support a family and at the same time pursue their passion but the length of study is off putting.

Answers were the following:

Gen eds.

The US is looking for mature people to be their doctors and lawyers, not a 21 year old whose frontal lobe is not yet fully developed.

If you have many AP/IB credits, you can get your degree in 3 years, too.

I would not want my doctor/dentist to have had only 1 year of formal education.

It’s a business. The more classes one is required to take, the more money the school makes.

What I suggest is that colleges get straight to teaching you all you need to know in your field. This would cut down on the time and expense of school.

And as for those who say people need to mature. Sure, I’m all for that, but how many people know 30 year-olds that are still wet behind the ears? Lots.

If you want people to mature, put them to work. Nothing makes people grow up faster than responsibility and accountability.

If maturity is really an issue, then have people start in at the bottom.

Nothing beats entitlement out of you like taking orders, scrubbing toilets, and fetching coffee.

Make people work their way up. After college, they could apprentice and work while learning their jobs. Get paid to train and work instead of paying for more training. It is just that simple.

I think college should allow student s to do an intensive 8 months and 48 credits

You would take 4 three-credit classes every 8 weeks. This would mean doing 4 eight-week semesters instead of 8 three-month ones. You would earn 12 credits every 2 months.

A college schedule could be like this:

Year One. English, Economics, major, major.

Year Two. Economics, Science, major, major.

Year Three. History, Math, major, major.

Year Four. Economics, major, major, major.

You see what I did there. I focused on the major and getting people out of college. That should be the point of college, right?

Why the focus on finance? Other than the fact Greenbacks Magnet is a financial blog, it just makes sense to teach people about money as they have to manage it for their whole lives.  

After 8 months, you earn 48 credits and graduate. That took less than one year. It also saves you heaps of money. If four years costs you $40,000, then 8 months should run you $6,667. That is huge savings!

I was gobsmacked to hear of doctors owing $300,000 to $1 million in student loan debt. Do you know what type of interest you pay on that kind of debt? It’s immoral.

Interest of 5% on $1,000,000 is $50k a year. That means after income taxes you have to pay $50,000 just to pay the interest on this debt. To service this type of debt, you would have to pay more than $50,000 a year just to touch the principal.  

I remember reading one lawyer say that he expected to have that student loan bill tacked to his coffin.

Just utterly insane!

 PRESTIGE AND CLASS

I read a book called Class Matters by the New York Times and Bill Keller. The book discusses how people chase money and prestige. Class determines everything about you: where you live, who you marry, what you do to earn a living, where you shop, and who your friends are.

The zip code you grow up in can ultimately make or break you.

In the book, it discusses how Americans have long thought of themselves as unburdened by class distinctions. There is no hereditary aristocracy or landed gentry, and even the poorest among us feel that they can become rich through education, hard work, or sheer gumption. And yet social class remains a powerful force in American life.

Class―defined as a combination of income, education, wealth, and occupation―influences destiny in a society that likes to think of itself as a land of opportunity.

What was jaw-dropping was this part of the book: And we see how class disparities manifest themselves at the doctor’s office and at the marriage altar.

For anyone concerned about the future of the American dream, Class Matters is truly essential reading. I agree with that assessment given to the book.

THE CREDENTIAL RACE

Grades are important. Sort of. Those getting straight A’s have to conform. Visionaries are not conformists. A New York Times (NYT) article quoted Dr. Karen Arnold as saying, “Valedictorians aren’t likely to be the future’s visionaries.”

The NYT article also noted the following:

This might explain why Steve Jobs finished high school with a 2.65 G.P.A., J.K. Rowling graduated from the University of Exeter with roughly a C average, and the Rev. Dr. Martin Luther King Jr. got only one A in his four years at Morehouse.

THE REAL GRADUATION RATE

Did you know that the average graduation rate is 6 years?

Roughly 57% of students graduate in 6 years. Only 20% of American students graduate in 4 years.

Most students are not even graduating in the already exceedingly long period of 4 years’ time.

According to Complete College America, for a non-flagship public university, only 19% of students graduate on time and even at flagship research public universities, the on-time graduation rate is only 36%. Only 50 of the more than 580 public four-year institutions have graduation rates above 50%.

According to 2013 data from the University of Texas at Austin, students who graduate on time will spend 40% less than those who graduate in six years.

That means more time out of the work force and more debt.

According to Forbes, staying out of debt and saving are the best ways to build wealth.

WHY SHOULD COLLEGE BE 8 MONTHS?

Why can’t you do your 10-year plan in 6 months? – Peter Thiel, angel investor of Facebook

I whittle it down to this one reason: No student loans or a lesser amount of them.

Building wealth requires you staying away from and out of debt.

They say student loans are good debt.

I say that all debt is debt. You must repay it. Not having to pay back $20,000 or more of debt with interest is life changing.

If you want to be wealthy, stay away from debt. Save every penny. Learn to turn every dollar into two.

Good Luck!

Banking, Bankruptcy, Budgeting, Credit Cards, Real Estate

From debt-free to owing $1 million in mortgage debt

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“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” —James W. Frick

It seems like only in America can a family go from debt-free to being $1 million dollars in debt in a decade.

And yes, you read that right. A couple got into $1 million of debt in 10 years!

As unbelievable as that sounds, it is very possible. If you don’t believe me then see my post called Meet an orthodontist with $1 million in student loan debt.

Although, student loans are a different financial beast, mortgage debt can be just as damaging to a family’s finances because, like student loans, bankruptcy does not absolve you from the debt. You still owe the money.

I read this article in the Washington Post several years ago entitled, “Swamped by an underwater home.”  The Boatengs had no debt in 1997 and by 2006 owed over $951,000. By 2013, their debt had gone up to $1,011,176.

When this article was published in 2015, the Boatengs had not made a mortgage payment in 6 years. It took them 10 years to go from $0 in debt to $1 million in debt. This is crippling debt. Most families in the United States will not come anywhere near this amount of debt in a lifetime, but this couple did in less than a decade. Here is their story.

HOW TO GO FROM DEBT FREE TO OWING $1M IN 10 YEARS

Comfort and Kofi Boateng won a visa lottery to come to America from Ghana in 1997. Their odyssey would not take them to where they truly wanted to be like Homer’s, but just the opposite. Instead of the American Dream they would be ensnared in an American Nightmare.

In the Ghandian culture, people pay cash for their assets including their homes. In Ghana, Comfort graduated with a degree in computer science at the University of Science and Technology in Kumasi and his wife, Kofi, received an associate’s degree.

The couple married in 1989, he was 30 and she was 26.

Wanting more opportunities, they applied online for a lottery administered by the State Department to receive a U.S. permanent resident card. If this was football, this would be considered a Hail Mary.

The reason for this is that the odds of getting chosen were slim. Per federal data, less than 5 percent of the 1 million immigrants granted permanent residency enter the United States through the lottery. But, this family beat those odds.

In July 1997, Comfort was on his way to American in a plane headed for Maryland.

On May 5, 2000, they bought their first home, a three-bedroom townhouse for $128,900 in Germantown, MD. This was after renting for several years and taking 2 of those 3 years to save for a down payment.

Even though his wife admitted she didn’t know anything about loans and houses, she was now a homeowner.

For me, this is a red flag. If you do not know about loans or homes, then why buy a home with a loan? This is a double whammy. At this point, I would urge anyone to learn about these things before doing anything else.

FROM $128,900 IN MORTGAGE DEBT TO $223,900 IN FOUR YEARS

In 2003, the Boatengs become American citizens. Comfort’s mother gets a green card to come live with them and this eliminates $300 in weekly child-care costs as they now have three children.

The Boatengs refinance their Germantown home several times to pay for home improvements and consolidate other debt. They cash out $95,000. They now owe $223,900 in mortgage debt.

Ultimately, with 6 people now living in the home, they decide they need a bigger house.

The townhouse, thanks to the booming housing market before the 2008-2009 stock market crash, their home is now worth $355,000 within only 3 years.

FROM $223,900 IN MORTGAGE DEBT TO $838,583 IN 1 YEAR

The Boatengs decided to move to from Germantown to Bowie, which is in Prince George’s county Maryland.

A home is found in a subdivision with manicured lawns, European cars, and intercom systems in a place called: Fairwood.

The neighborhood has a lot that Comfort likes because it reminds him of his dormitory back in Ghana.

At this point, he is already emotionally attached, which is a major no-no when it comes to money.

The family decides to build a house for over $600,000!

They think it will be a good investment. Their thinking was it is likely to go up in value like their Germantown home and could use the equity (more cash outs) to pay for the kid’s college educations.

I now have to call a time out! Flag on the play. I am shocked that this couple did not see the RED FLAGS here! How are you going to afford this? His wife is working as a secretary making $30,000 and he as an IT specialist making $80,000-$100,000.

They do not have the money to pay for this. This is the part in game where they are supposed to forfeit.

Alas, they continue to roll the dice with their finances. Little do they know the house is about to win.

Their real estate agent assures them it is affordable, if the refinance (yet again) the mortgage on the Germantown house — which they were going to keep (this just makes no sense, now they are going to be landlords!!!) — and cashing out the $60,000 in equity. That money will be the down payment for the Fairwood house.

Bad, bad, bad idea. They are now taking advice from a realtor.

Let me tell you something. This person is not their financial advisor, CPA, attorney, business manager, or anything. He owes this family nothing. They have signed no documents to act as a fiduciary. They are not working is this family’s best interest.

Think of it like this. A baker likes to bake. If you ask the baker, if you should buy a cake, the answer is going to be yes. A barber likes to cut. Same rules apply, if you ask a barber, if you need a haircut.

However, I digress. Let’s get back to the story.

The Boatengs receive a loan from Lehman Brothers.

I’ll offer you a little background on the Lehman Brothers. It was founded in 1850. This bank was the fourth-largest in America and was not only one of the biggest subprime mortgage lenders (that helped cause the 2008-2009 housing crash), but also became the biggest bankruptcy in American history with $600 billion in debt. It had been in business for 158 years.

Due to their income, they could only qualify for an interest-only, adjustable rate mortgage. This is the worst type of loan there is. Do not ever take out an interest-only loan.

He has a great credit score of 748, which is how they got they loan. However, credit scores only mean you are great at managing debt. Nothing more. It does not necessarily mean you have any wealth.

For the first five years, they only make interest payments, then afterwards they would be required to pay more. How much more? Nobody knows. That is why these loans are so dangerous.

The Boatengs borrow $493,600 from Lehman Brothers, at an initial loan rate of 6.1 percent. In five years, it would reset to at least 8.3 percent. Their payments go from $3,662 up to $4,336. Thinking they would be able to refinance in the future to get a better rate. This day would not come.

He would then lose his job while the home was being built.

This is the part of the story where I am like. It’s all over. The house of cards has come crashing down. The jig is up. No more easy credit access. The bill has come due. There is no free lunch. It’s over.

And what happens next?

They admit to being emotionally attached, do not tell the lender of his job loss, decide not to walk away from the $20,000 deposit and not back out of the deal.

The Boatengs get a second loan to complete the financing through their broker’s company, a 30-year fixed-rate mortgage of $61,700 at 8.5 percent. The couple paid $29,000 in closing costs and put down a total of $73,000 in cash at the closing. They move in on November 25, 2005.

They now owe $838,583. Comfort has no job or any income and the couple are drowning in debt.

FROM $838,583 IN MORTGAGE DEBT TO $951,176 OF DEBT IN LESS THAN 1 YEAR

The couple is tapped out. They have no money to furnish the home. The first payment is due on January 1, 2006.

The payment on both homes (they still own the one in Germantown) is $5,550 a month!

Shut the front door! No, I mean literally. Shut the door to that place and give the keys back to the bank. Sell it and walk away. From both properties, in my opinion. You owe the bank everything you have.

The tenant in Germantown couldn’t pay. The housing market crashed, now being underwater, they couldn’t sell.

What did they decide to do? Take out more debt. Kofi started selling Mary Kay and took out $15,000 in personal loans with Bank of America. Then another $20,00 for her Mary Kay business with a 15 percent interest rate over 10 years. She didn’t see the risk because she thought she could earn $7,000 a month with Mary Kay.

Hold the phone. What happened to being cash heavy when starting businesses? Or starting them with your savings. Businesses need capital. Why not start small and see if a business works out? Then expand. She is putting the carriage before the horse here. There is no guarantee of making $7,000!

The Boatengs now owe $951,176.

FROM $951,176 TO $1,011,176 OF DEBT IN 6 YEARS

They decide to consolidate again. Howvever, consolidation only works when you pay off what you owe.

The couple took out a $620,000 refinancing loan from Countrywide Home Loans. It was again an interest-only subprime loan, carrying a 6.29 percent interest rate and adjusting in two years (even sooner this time) instead of five. Their payment on the Fairwood house would rise to about $5,230 by November 2008. That is $62,760 a year, after tax income!

They were unable to pay the $5,000 monthly payment and tried to modify their mortgage, but were able to get relief. They owed to much to qualify for HAMP. Ain’t that a kick in the head.

The Boatengs made their last Fairwood mortgage payment on Sept. 18, 2008. They are now in default and can be foreclosed on at any time. This means not only losing their home, but any money they put into it.

By November 2011, their payments were set to go up to $6,000. The bank valued the house at $378,216. That is $238,839 less than what they paid.

During this time, his wife went back to school in 2003 and graduated in 2009. She owed $90,000 in student loan debt. She lost her job and unemployment ran out after eight months.

Comfort was mostly unemployed or not working full-time from 2005-2010.

In 2014, the family was notified by Nationstar Mortgage, their new lender, that late payments dating back from 2008 were due now: $318,611.97.

Comfort’s mother passed away in 2014 and he was still looking for full-time work.

He became so frustrated he thought: Why stay in America? Why not just go back to his country and find a job there?

Like me, their housing counselor noticed that their downfall began with the idea of buying a second home for more than $600,000!

The couple owed $$ 1,011,176.

That was 2014.

FROM $1,011,176 TO $1,371, 813 OF DEBT 

By 2015, they owed $257,776 on the Germantown house, $969,037 owed on the Fairwood house, $55,000 in personal loans and still have the student loan debt (which is not dischargeable in bankruptcy). The couple who had never owned a credit card before moving to the United States now owe more than $1.3 million.

They currently earn about $100,000 a year.

It does not take a rocket scientist to know that they do not make enough to pay off these debts. They owe more than 10 times their gross income (what they make). And more than 19 times their net income (what they take home).

The interest on that type of debt is mind numbing. We are talking more than $50,000 a year in interest alone. That debt is likely to balloon to $2 million in another a decade. This will be during their golden years. They are building no wealth.

The reasoning for taking on so much debt was that the couple stated they saw that was how everything was done in America. You had to borrow to get ahead. Everything involved debt.

I want anyone out here reading this to take this away from this cautionary tale: Stay away from debt.

Don’t borrow more than you could ever afford to repay.

Do not borrow one million dollars, if you do not have $10 million in the bank.

You should have 10 times more in the bank than you owe, not owe 10 times more than you make.

That way if the bill comes due, you can pay it off in full.

At this point, borrowing money is strategic and not the only option.

Matter of fact, just pay of all your debt ASAP and owe no one a penny. NOT ONE RED CENT!