Have you ever had people in your life whose financial situation made no sense whatsoever to you from the outside?

There’s a family I know with several children. Both parents have solid jobs, but nothing that earns a great deal. Their combined incomes are substantially less than Sarah and myself.

Yet their house is larger and nicer than ours. They both drive automobiles that are newer than either of our automobiles. They have an array of toys on their property, including several SUVs and thousands upon thousands of dollars in hunting gear.

How do they do it?

Honestly, I don’t really care what they spend their money on. I’m much more interested in how they’re able to finance all of the stuff.

Over the years of writing The Simple Dollar, I’ve heard from people in many, many different financial situations. Almost always, when people are in positions where they seem to be spending more than their salary, one (or more) of several things is true.

One, they have a hidden source of income. One reader wrote in to me describing how he had won a pretty nice lottery jackpot, but he had put it all into investments as soon as he got it (treasury notes, namely). Every few months, he received some checks in the mail from these investments. These enabled him to live a more extravagant lifestyle than he otherwise would.

There are many variations on “hidden sources of income,” from side business income to illegal income and from lottery winnings to inheritances.

Two, they’re in debt up to their ears. Many, many readers have contacted me in a panic over their debt load. They bought too many things and now much of their income is going to simply pay interest on the debt they’ve accumulated. Usually, these people are very stressed out and worried, and for good reason.

Three, someone in their life is giving them money on a regular basis. This seems to happen a great deal, far more than I would have expected. These people often have parents or other relatives in retirement who have more money than they can use themselves, so they give some amount to their children (or nieces or nephews) every month or so.

On occasion, you’ll find that someone is just very efficient at managing their money, but this is a pretty rare thing.

Here’s the kicker. Most of these financial situations are unsustainable.

What happens when the rich relative passes away? The person might receive some inheritance, but the monthly support is gone. What happens when even the smallest slip happens when you’re juggling a lot of debt? The house comes crashing down. What happens to investments if you regularly dip into the balance? Before long, they disappear – in fact, they tend to shrink in terms of their value even if you just take out the returns each year because of inflation.

These situations are all unsustainable over the long run.

In each of those cases, people are living as though they assume that the future will magically take care of itself. Most of the time, it won’t.

Someone will lose a job. Someone will get sick. Someone will become unhappy in a marriage. Someone will die unexpectedly. Someone will have an unexpected child.

All of these things can have a tremendous impact on a precarious financial situation. If you’re not ready for these things, you’re not in a good financial position.

What would happen to your situation if you were to lose your job tomorrow and couldn’t find one for another year? What would happen if your spouse suddenly passed away in a car accident? What if you suddenly found yourself with another child in your home? What if you had a mental breakdown tomorrow and had to spend a month in a psychiatric ward?

If you don’t have strong answers to those questions, your life is unsustainable. Just like the person up the street with a surprising level of material affluence, you’re in a situation where a sudden change could cause you to lose what you hold dear.

Financial freedom isn’t money to buy all the stuff that you want. Financial freedom is sustainability.

It’s having enough insurance so that if someone in your household passes away, you’re able to protect yourself and your children from the fallout.

It’s having enough money in the bank so that if you were to lose your job for a while, you wouldn’t lose everything you’ve worked for.

That kind of security is hard for many people to achieve. To get there, you’re going to have to make a few hard choices and give up on some of the affluence you might want. You might not be able to match the nice house that someone else has or the vacations that another family can take.

However, what you will have is sustainability. When life hits you like a freight train – and, eventually, it will – you won’t lose other aspects of your life. You won’t lose your home, your family, or anything else.

You might have a little less shine on your car. You might have smaller bedrooms in your home than you might dream of.

What you will have is the firm knowledge that the unexpected things in life won’t take the important things you have away from you.

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