#230: Newton's Third Law of Motion (Friday, May 27)

For every action, there is an equal and opposite reaction. -Sir Isaac Newton, Laws of Motion

Unfortunately, many people don't realize that not paying your bills on time could affect your loved ones too. Here's a true story:

A friend of mine (we'll call her Pam) was really bad at money management. She had multiple credit cards and store cards which she rarely paid on time, and very time I visited her house, she was either dodging a phone call from a bill collector or there were numerous "Past Due" notices on her kitchen table. There'd even be times when I called and her cell phone would be shut off because she hadn't paid the bill on time. And to add insult to injury, she always has new clothes for every occasion.


A few years ago, Pam's son was ready for college. She hadn't saved any money for him. ("Oh, he'll get a scholarship, or financial aid, or take out loans and work," she'd said when I suggested she open a college savings account for him.) Unfortunately, since scholarships are usually so competitive, he didn't get any of the ones he applied for. Even with his financial aid (which included work study), he would still have to come up with about 40% of the funds for each school year. Since he had work study, he didn't have enough time to get another job and keep up his credit load, so the only other option was to take out a loan.


He applied for a student loan, but the bank told him he needed a guarantor, who would accept responsibility for the loan in case he defaulted. He used his mother's name, but because of her credit history, they said he needed a second guarantor. Alas, since Pam's poor money management was no secret, none of her family members or friends wanted to take on that responsibility.


He decided to take a couple years off to work until he could afford to go to school. He still hasn't gone back. 


The moral of the story: you don't have to pay your bills on time, but don't be surprised when it prevents you from reaching other goals such as owning a home, sending your kid to college or getting a job you've always wanted (yes! more employers are looking at your credit history these days before they hire you).