Pack A Punch
The old “one-two” is defined by the Free Dictionary as “a series of two punches delivered quickly, one after the other.”
I recall the phrase from my youth when James, the playground bully, was imposing his authority on me. I lamented my tale at a family dinner one evening, and my dad’s dad listened, shrugged, and simply said, “Just give him the old ‘one-two.’” Figuring Grandpa knew about these things, I took him at his word. The next day, when James started picking on me, I turned, punched him in the gut, and said, “One.” As he bent over, my knee came up and met his nose and I said, “Two!” However, as his bloody--but conscious--head came up, I realized Grandpa had left out one very important thing, and my foe brought about a roundhouse that knocked me to the ground … and kept me there. As I fell, I heard him say, “Three!
Grandpa left out that the “two” has to be of “knockout” quality. The “two” of the old “one-two” has to be a “finisher.” Mine was just a “delayer.” It put off the problem, but didn’t put it away for good.
As analogies go, I can tell you that although the problem didn’t go away completely, squaring off with the bully and doing something other than just “taking the beating” made life a lot easier. There was an unspoken truce after the fight because I wasn’t fearful anymore. That note should be equally remembered as I flesh out a financial theory.
As with most life experiences, I reflect and try to glean something of value. What is the modern-day version of “the bully” in my adult life? Well, I think for most of us that bully is debt--mortgages, car notes, second mortgages, college loans, credit cards.
It picks on us at the beginning or end of each month. It never really goes away unless we look it in the eye and give it a good sock (pay it down substantially). More importantly, until we deliver the devastating “two,” it will keep coming back, hanging around and harassing us.
Developing The “Two”
I was several years into my career when I realized that, no matter how much money I made, the American way of life was always going to push me to extend myself a little further than I intended, due to a lovely thing called “available credit.” It whispers in my ear. It tells me that although I have almost saved enough for that new television, I could buy it today with half the money I saved, charge the balance, enjoy it now, and pay it off later. That would give me more cash to blow now for more fun today--never even worrying about tomorrow.
Friends, if we don’t think the words “now” and “today” are significant when it comes to credit and the American obsession with instant gratification, we have not noticed what makes this globe spin anymore.
There are things that “pose” as the knockout punch to the bully of debt. They are there to confuse or compound the problem. I use as examples the credit card with a lower interest rate, the second mortgage, the refinancing of the first mortgage. These do not extinguish debt, yet they pose as if they will. They simply hide in a different place for a while, behind the jungle gym, and wait until we aren’t looking to pop us in the eye.
When is a second mortgage a good idea? The answer is only when the knockout punch has already dealt a devastating blow to debt. For example, let’s say the Johnson family has $35,000 of high-interest, unsecured debt to be managed or paid off. Mom and Dad are both working and earning the same steady salary they always have. They have noticed through keeping track of the market that second-mortgage interest rates are at an all-time low, so they decide to obtain a second mortgage to pay off all that high-interest debt.
Now let’s break it down:
· The “one”: The Johnson family has been tracking interest rates and can take advantage of the fact that they can pay off the same amount of debt at a lower rate of interest that is also tax-deductible.
· The “two”: They cut up all the credit cards by which they got into debt in the first place.
· Another “two”: Dad or Mom takes a second job (evenings/weekends) with the intent of keeping it only long enough to pay off the debt. Income from this “new job” is applied 100 percent to paying off the debt.
· And another “two”: The family works as a unit to eliminate wasteful practices (shutting the water off when brushing teeth, turning the lights out when leaving the room, etc.), and finds inventive ways to “earn” holidays and dinners out. For example, Mr. Johnson declares that “all the money we make at the garage sale this weekend will go to one big night out as a family--movie, dinner, ice cream, the works.” These are cash transactions motivated by family harmony and shared goals.
This combination of “the two punch” is what seals the deal. Motivation like this makes a family strong and come together. Sure, finding the better interest rate will work over time, but it is the second punch--the closer--that puts the bully face down in the dirt, eating grass and crying for mercy.
As we all work to get our financial futures in shape, keep this little theory in mind. The old one-two is loaded with potential, if executed correctly. It might also take a while to develop the “two punch.” Taking on a second job may not turn out to be as profitable as we thought, so we should be prepared to find another. Saving on utilities may not pan out as highly as we hoped, so we should be ready to go another step and perhaps insulate walls, install ceiling fans, or do whatever is necessary to get that number closer to where we want it.
The bottom line is this: Our well-intended market savvy will only get us so far with the bully that is debt. He has stores of energy we may have underestimated from the beginning. We must use our awareness of that likelihood to be prepared for a good fight that is intentionally weighted in our favor. Let’s smack it with the left, and as its big ugly head comes towards us, we wind up and blast it with a right cross.
Then, my friends, we should apply the “three punch” to our own nose. Don’t put ourselves in that situation again!
Ron Ciancutti is the Purchasing Manager for Cleveland Metroparks. He can be reached via e-mail firstname.lastname@example.org