No. of Recommendations: 3
I really don't understand how intelligent people can make a major financial decision and not even read the contract.

http://www.aarp.org/money/credit-loans-debt/info-09-2011/mil...

Now they realize that they could have taken out a different loan that didn't charge 30%. Amazing.

Nancy
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Wow. They didn't even check the interest rate on this? Sheesh.
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Wow. They didn't even check the interest rate on this? Sheesh.

The article said there were insurance costs built in, which I'm sure weren't expressed in any kind of published interest rate. So they would have had to do the math on their own, if that's what you meant by "check."

That being said, I have a hard time feeling even remotely sorry for them. Not to mention that at the time of the article, they only had 2 years left to pay. The AARP could have picked a much better example to use as a cautionary tale.

v/r
Tom
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The article said there were insurance costs built in, which I'm sure weren't expressed in any kind of published interest rate. So they would have had to do the math on their own, if that's what you meant by "check."

Well, they admitted that they didn't read the contract. Probably didn't even ask a basic question like "what's the interest rate going to be?" And they had previously taken a loan against their 401(k) and got hit with a big tax bill.

I'm weeping no tears for them.

Nancy
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My cubicle mate is having a similar issue right now. He's all upset because the college where he is finishing his degree auto-enrolled him in health insurance and it will cost him $700. He filled out a form saying he already had health insurance, but didn't realize he needed to submit each semester.

The part that applies is when I did some research for him online to see if he had recourse to reverse the charge I found that they send a confirmation email back when he registered for classes saying that he was enrolled and the deadline for the waiver (which was due back in September). His excuse? "I don't read email from the college unless it's about a course." Really?

There are times I want to smack him upside the head. He's the textbook case of "never read the fine print but life should work out the way I want" BS.

Lara Amber
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Now they realize that they could have taken out a different loan that didn't charge 30%. Amazing.

Nancy


It isn't stated the same way as interest rate on a loan.

It also should have been easy to multiply the monthly payment by the number of months. Borrowing $92,000, Paying $240,000.

They are also paying income taxes on the payments.

It is no wonder that they were in deep financial problems and were looking for a quick fix.
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Windowseat: "And they had previously taken a loan against their 401(k) and got hit with a big tax bill."

401-k loans do not generate tax bills; plus the article recited 401k withdrawal, not loan.

And this was not some enlisted man with only a high school education.

Regards, JAFO
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plus the article recited 401k withdrawal, not loan.

Right you are. Brain is running at half-speed today.

And this was not some enlisted man with only a high school education.

A doctor, which implies that he has had access to information regarding finances. It doesn't mean he used the information, just that he had access to it.

Although, people who don't have a higher education can still be careful with their money. Getting the degree doesn't automatically make them careful in regard to reading contracts. When I rented my apartment I sat there in the real estate office and read the lease. The agent said it was the first time in all his years of renting apartments that he saw someone read the lease.

Nancy
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Windowseat:

<<<And this was not some enlisted man with only a high school education.>>>

"A doctor, which implies that he has had access to information regarding finances. It doesn't mean he used the information, just that he had access to it."

Agreed, but it also means that he some firepower to understand it if he chose to review it.

"Although, people who don't have a higher education can still be careful with their money."

No doubt. Agreed.

"Getting the degree doesn't automatically make them careful in regard to reading contracts."

Agreed.

I simply noted the foregoing because I find it more diffcult to feel sympathy for one who has the ability and chooses not to use it, than one without the same ability who is more easily flummoxed.

Regards, JAFO
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I guess what I don't understand is why a retired Navy surgeon had medical bills for his daughter. Dependent children are covered under military healthcare, which is free to service members and immediate family, until the children turn 18 OR, if they are in college, until the age of 22, or if they are disabled, for as long as they live with their parents. If she’s over 22, why isn’t she paying her own bills (or at least dealing with her own debt?)

Reminds me of a co-worker who is drowning in debt. He has been since we started working here. He was just telling me that they are living paycheck to paycheck and he will probably die before his CC's are paid off. He told me the same thing last year, but he’s got in deeper since then.

He is paid well, plus has his military retirement to help. He and his (unemployed) wife both drive Mercedes. He just bought a townhouse, on the water, and pays an extra $250 a month for a boat slip (and harness)....for the boat he just bought. They pay into the Disney Vacation Club every month, never miss a wine tasting, eat out twice a day, 6 days a week, have the latest tech toys and she flies home to visit her family at least once a month.

Yep, he's drowning in debt, and he knows it, but he'd rather have all the "stuff" than financial freedom.

It has to be some sort of compulsive disorder...like hoarding...debt hoarding? Is that a thing?
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guess what I don't understand is why a retired Navy surgeon had medical bills for his daughter. Dependent children are covered under military healthcare, which is free to service members and immediate family, until the children turn 18 OR, if they are in college, until the age of 22, or if they are disabled, for as long as they live with their parents. If she’s over 22, why isn’t she paying her own bills (or at least dealing with her own debt?)
======================================

He's not retired...the article said he was planning to retire.


Louis and Kathie Kroot of Lexington, Ky., had plans to retire soon. But Louis, a Navy physician, will be seeing more patients and fewer vacations during the next several years.

His daughter could be over 22. They could be just helping her. Not really enough information.

I didn't understand the seeing more patients and taking fewer vacations. Unless the military has changed a lot his pay is not determined by the number of patients.

Furthermore, military doesn't have 401k plans. They could have had one before joining the military though. Maybe the article just used 401K instead of TSP.

Hmmmm, there is no date on the AARP article, but here's one from 2011. It says the money was for taxes.


http://m.npr.org/news/Your+Money/142571356?textSize=small

It seems there was a class action suit, but the Kroots were not part of it.



http://www.publicintegrity.org/2011/08/23/5940/judge-rules-f...
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Some people are lazy in certain areas of their life, and that laziness can get them into trouble. This couple had a physician as one of the members, so he certainly had the intelligence level to understand any loan document. They just chose laziness and not to read them. I don't feel sorry for them or that they were "taken" somehow.

IIFC from "Millionaire Next Door" it's not out of the ordinary for doctors to not be so great at their own personal finances. Not sure if it's because they're very busy keeping up with the medical field in general - or just passionate about medicine but not personal finance. But based on that, I didn't find this article all that surprising.
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I work with doctors and there is an unfortunate side effect of being "A Doctor". Basically it boils down to they spend their entire lives being told how brilliant they are, they were in the top percentage in school, in college, and got into med school. There is a certain magical mystique to being a"Doctor". Parents swell with pride, etc. Unfortunately since they spent all this time being told how smart they are from basically birth, they tend to develop the mistaken impression that they will be good at everything they try and it will all come easily to them.

It takes some gentle reminding that they get peeved when a patient comes in thinking he/she knows more about treating an illness because of reading a few articles on the web, so why do they think they know more about HR/taxes/auto maintenance then someone who has studied it for years? Occasionally I have to be harder on them and remind them they are doctors because they are smart at math/science, not because they are smarter then everyone else. There are plenty of brilliant people who don't go into medicine.

Doctors are some of the worse when it comes to asking for help and admitting ignorance.

Lara Amber
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I'm weeping no tears for them.

Why do you hate 'merica?

xtn
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Yep, he's drowning in debt, and he knows it, but he'd rather have all the "stuff" than financial freedom.

Heck, why not live it up on somebody else's dime? Why do you hate 'merica?

xtn
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I didn't understand the seeing more patients and taking fewer vacations. Unless the military has changed a lot his pay is not determined by the number of patients.

I read that to mean that because he cannot retire now as planned, he will have to continue working, hence seeing more patients. I took the part about fewer vacations to mean that he can't afford to take as many now because he needs to cut back and cannot afford them.

I didn't get past the first paragraph when it dawned on me that they were living beyond their means since they were helping their daughter with medical expenses, and she's most likely not a minor or the insurance would have covered her, and they owed taxes on a 401k withdrawal.

It certainly looked to me like they put themselves in this predicament, and I am not feeling any sympathy for them.
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I didn't get past the first paragraph when it dawned on me that they were living beyond their means since they were helping their daughter with medical expenses, and she's most likely not a minor or the insurance would have covered her, and they owed taxes on a 401k withdrawal.

I would do whatever it took to save my daughter's life, insured or not.
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I would do whatever it took to save my daughter's life, insured or not.

I didn't see in the article where it said that it was treatment to save the daughter's life. I also didn't see where it said that they were responsible for the medical debt, and it is just as likely that they were not responsible for it, and the daughter could have handled the medical expenses in other ways. There's not enough information given, but it did look to me like it wasn't the daughter's medical expenses that put them on the brink. It looked a lot more to me like they had overspent beyond their means. Even so, they were spending money that they had to borrow, and so now they have to deal with paying that money back.
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I would do whatever it took to save my daughter's life, insured or not.

I'm sure most people would.

Maybe I'm a skeptic, but I figured the daughters medical bills were a smallish part of their debt and they just thought that sounded better than 'we spent it on crap'. They don't seem to have made wise decisions all around (401k taxes not being put aside, etc..).
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I didn't get past the first paragraph when it dawned on me that they were living beyond their means since they were helping their daughter with medical expenses, and she's most likely not a minor or the insurance would have covered her, and they owed taxes on a 401k withdrawal.

Or maybe she had a major medical issue - like organ transplant - that even when insurance covers can mean thousands in co-pays.
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Maybe I'm a skeptic, but I figured the daughters medical bills were a smallish part of their debt and they just thought that sounded better than 'we spent it on crap'. They don't seem to have made wise decisions all around (401k taxes not being put aside, etc..).

I agree, it could have been nothing medically wise and they just HAD to have the latest and greatest of everything. Then again, there is a slight chance they raided their savings, 401K, and finally did this recent stupid move to help pay for some sort of life saving treatments for their daughter. It does happen.

We all sit here and poo-poo them, call them idiots, and assume their problems are all from crazy consumer over spending. I'm sure it makes us feel just a little better about ourselves when we do this. I'm just suggesting an alternate reasoning for making these financial moves. I'm not saying I agree with what they did, I'm just saying they may have just been overwhelmed by a grave medical issue and they made some rash decisions to help fund treatments.

My original response was to the statement that they were living beyond their means since they were helping their daughter with medical expenses. I don't agree with that statement. If it were my daughter and she was in a serious medical situation, I'd do whatever it took.
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Just FYI, one article said that it had been thousands of dollars in mental health treatment that was the medical expense for the daughter. MH treatment tends to be pretty limited as far as coverage, and it can require quite a bit of up-front money if it's inpatient treatment.

I'm not even going to try to understand the whole "pension assigning" business and how it is or isn't a loan, but I'm guessing that at the time, they had enough money coming in so that they didn't think paying this back would be that much of a hardship. That could have made them careless. They didn't seem to see it as a problem until somebody did the math and they realized how high the rate was.

cm
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His excuse? "I don't read email from the college unless it's about a course." Really?

Colleges do need to cut back on the amount of emails they send out. I'm getting tons of emails about weekly newsletters, events happening on campus (I'm in an online program), and the such. It's hard to keep track of what emails I need to read fully, and what emails to delete. I'm careful about what I unsubscribe to, since I don't want to miss something important only to find that I unsubscribed from that email list.

I've taken online courses at three schools, and all three of them are guilty to differing degrees. Its like they think that my life revolves around them.
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