The Texas Retirement Savings Massacre

Dear Money & Crisis Reader,

I’ve been in Houston, Texas, for the last week, visiting friends and family and enjoying some well-earned rest and relaxation.

I don’t normally talk about how I spend my vacation time. But this trip in particular was a strange visit — and more than a little relevant to our mission here at Money & Crisis.

On the surface, it was a Fourth of July in Texas like any other.

There were cold beer and fireworks. BBQs and heaping piles of food. And everyone we met along the way was as warm and hospitable as we’ve come to expect from our visits to Texas.

But there’s been a dark cloud hanging over the whole trip.

We felt it in the Uber that picked us up at the airport. Saw it in the shiny new floors of the homes we visited. And heard about it from darn near everyone we met along the way.

Hurricane Harvey is still here.

The waterlogged, rotten furniture is nowhere in sight. And most of the water damage to the homes has since been repaired and replaced.

But almost a year later, the people of Texas are still feeling the effects of Hurricane Harvey.

They’re feeling it in their bank accounts… in their financial security… and in their severely diminished retirement savings.

Harvey inflicted $125 billion in damage in the Houston metropolitan area — vying with Katrina as the costliest tropical cyclone on record. Few escaped the devastation caused by the flooding.

This One Hits Close to Home

One of the most miserable stories came from an old family friend, whose home ended up underwater in more ways than one.

For privacy’s sake, he asked me not to use his real name. So I’m just going to call him Uncle Stan from here on out.

Stan is in his mid-50s.

Up until last year, he owned two houses: a large family home where he lived with his wife, Marie, and raised his family. And a smaller, apartment-sized house, which he rented out to a young couple.

Uncle Stan was pleased as punch with this arrangement.

He was earning a nice little side income from his rental property and living in the home of his dreams. Of course, that’s not the whole story.

Neither of the homes was anywhere close to be being paid off. Stan was juggling two substantial mortgages. And as we all know, there’s nothing more dangerous than debt in a crisis.

“Y’know, we actually thought we were going to be fine for a while there,” says Stan. “It looked like we’d escaped most of the flooding during the actual hurricane. But when the levee broke on the 29th, we took a hammering.

“Both of our houses were completely flooded. And the water wasn’t rainwater, either. It was full of human waste, which just sat in the house, seeping into everything until we could drain it.

“I feel bad for the renters. They were a young couple. And he had a collection of valuable comics. They were worth about $40,000 in total.

“Once they got their insurance check, they just moved out and left all their ruined stuff in the house. Some of it was probably salvageable — they had a ceramic grill that was worth about $1,500 — but nobody wants to dig through human waste to salvage some homeware.”

With two houses to repair and no income from their rental property, Uncle Stan couldn’t afford to pay two mortgages.

They had to sell one of the homes. And because the mortgage repayments on their own home were much higher — and the damage would be much more expensive to repair — they decided to sell their family home… at a loss.

“Because of the damage done to the house, we now owed more money on the mortgage than the house was worth,” says Stan. “The house was underwater in more ways than one. And we had no choice but to take a five-figure hit.”

So Stan and Marie were down to one small apartment-sized house covered in human waste with no money for the process of rebuilding.

“We were desperate… We ended up getting one of those 0% APR credit cards and essentially writing ourselves a check for $30,000.

“If you can pay back the money before the year is up, you don’t have to pay any interest… but they jack up the rates sky-high after that. That’s how they get you.

“We thought we’d definitely have it paid back by now. But we’re coming up on the anniversary of Harvey soon and we’ve barely made a dent in it.”

You Could Always Bet on the Astros

If Stan and Marie aren’t able to meet their one-year deadline, they will be looking at some serious financial trouble in the near future.

Luckily, they have a loving family who have just agreed to lend them the money, interest free, so their financial situation doesn’t get any worse.

That’s great for Stan and Marie. But not everyone has folks who are willing or able to lend them $30,000 of financial aid. And Stan’s story shows us just how easy it is to get yourself into financial trouble if you’re not prepared for a crisis.

Stan thought he was financially stable while holding two fat mortgages and no emergency fund. He wasn’t.

Stan thought it was a great idea to pay for the repairs with a $30,000 loan from a 0% APR credit card. It wasn’t.

But it’s not totally his fault. The modern banking system is structured to take advantage of people like Stan, who don’t have a good grasp on their finances and aren’t prepared for a crisis.

Stan thought he was safe because the bankers and lenders he trusted said he would be fine. But if you don’t take ownership of your own financial situation, you risk losing everything in a crisis.

I asked Uncle Stan what he’d do differently if he could go back in time.

“That’s easy. I would have bet on the Astros!”

What about you? If you could go back in time, is there a crisis you could have prepared for better? What would you do differently? Shoot me an email and tell me about it.

All the best,

Owen Sullivan

Owen Sullivan
Editor, Money & Crisis

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Chris Campbell

Written By Owen Sullivan

Owen Sullivan isn’t a millionaire or one of the Wall Street elite. He was just one of the many folks who was hit hard when the housing bubble burst… and decided he was never going to let that happen again. Since then, he’s worked with industry experts to develop strategies and techniques to bulletproof his finances — and yours — against the next crisis. His methods don’t require years of financial experience. These are simple strategies that anyone can follow. After all, financial prepping shouldn’t be reserved for a select few.