$200,000 a year and completely broke.

Someone who I have worked with for a few years has recently left the company. For reasons I won't go into, the move was sudden and unexpected. He is in his early 50's, extremely smart, very employable, but his financial choices are questionable at best. I was very close to this person, and he would often share some very personal details of his financial situation. I have recently reread "The Millionaire Next Door," and I would say he is the perfect example of a hyper consumer. His financial situation is completely out of control. Overspending on just about everything from cars for his kids, last minute trips, and even a stretch-Hummer for one son's senior prom party. An overall complete disregard for the value of a dollar.

This person made a combined income of about $200K a year including his salary, his wife's salary, and a pension from the government. He was living paycheck to paycheck. I know this because he told me, as he would say, "most people live check to check." I didn't say anything about my situation. Don't get me wrong...I am hardly perfect, but not living check to check. He had convinced himself of a couple of things. One being, "most people live check to check" and that "it is impossible to get ahead." $200K a year and completely broke.

I work for a medium-sized corporation with a benefit of a retirement plan made up of a 401K, stock sharing plan, and a healthy match made in the form of cash and company stock. This is about 95% retirement money subject to all the rules and regulations you would expect. This person's account was just over $100K at the time of his departure. Again, I know this because he told me. He was contributing only 3% of his salary. When he told me his account was $100K, he framed the conversation in the terms of "you'll have this much some day, too." I kept my mouth closed as I usually do. I rarely disclose any personal money info (except on this blog).

This person left our company about 6 weeks ago and has recently cashed out of all retirement accounts. I imagine that after all penalties and taxes he is walking away with maybe half ($50K). To make things worse he has cashed out at the end of a tax year. Interesting enough, his financial move has come up at work. His former boss and my big boss asked how he was doing and if he had found another job. In my area, he could realistically find another job within about 4-8 weeks. Someone in the room replied, "he hasn't found another job, but he is OK because he cashed out of his 401K and he now has several months to figure things out."

I feel totally amazed at these comments. Not only is this person not okay and probably headed for financial ruin, but I am amazed that other people view this move as no big deal. Not only did all those taxes and fees have to be paid but he is most likely going to blow through this money in a few months. Even with a government pension of about $40K a year, he is in real financial trouble unless he makes some real changes.

If my wife and I both lost our jobs or even just one of us lost our jobs we would be worried. We would quickly hit the pavement looking for new work and slow down on all non-essential spending. Cashing out of even taxable accounts would be a last resort. The money we have saved has come from hard work and sacrifice. I would do everything I could to avoid spending it down on monthly expenses. I think what I have observed really comes down to a person's values. How they value money and really how they value themselves. A hyper consumer who thinks he is providing for his family by giving cars and lavish gifts, is really potentially leading them over the financial waterfall. Loving your kids (again, I don't have any yet) means making some tough decisions on what you are going to provide and what you are going to hold back - having some control over the situation and not being a victim.

I am left wondering why people who have made poor financial choices seem to be more inclined to bring them up in conversation as if these moves are okay. Are they trying to get reassurance? Should I speak up more about my opinions? I'm not for hiding one's mistakes, but at least admitting that they were an unfortunate financial move. Why is there a social awkwardness in admitting that you are saving as much as you can for your future? And really saying that if you are not saving for your future you are in danger of some pretty bad things?