Issue Date: December 7, 2005

Holidays, Bankruptcy, and J.Lo

By Jody Zink
Licensed Realtor in Ohio & Michigan

As I stroll innocently through the brightly lit aisles of my friendly, neighborhood Target, I see tons of nice, affordable furnishings I'd just love to have in my home: A new down comforter. Bose speakers for the Ipod. A nice, new leather ottoman (love putting up my feet during Apprentice). A marble chess set (I've never played).

I take time to smell the candles. Listen to some music. I cruise towards the checkout and being to eye the candy and J. Lo tabloid photos. That's when I start hearing the voices.

I hear my mom (who learned it from my grandpa): “Ask yourself if you really need it.” If you do, well then, buy it. If you don't. Don't.

I'd like to to apologize publicly to all the Target team members (in various states) who've stumbled upon my shopping carts filled to the brim with “stuff” left abandoned through the years. It was me. I was the one. It's just that my best friend's birthday card—the one single item I walked in for, winds up costing me more than a hundred bucks.

What's this have to do with real estate? Well, it draws attention to mistakes that homebuyers often make. When determining your ability to qualify for a mortgage, a lender looks at your “debt-to-income” ratio: the percentage of gross monthly income you spend on debt. This includes monthly housing costs (that's principal, interest, taxes and insurance), and monthly consumer debt (credit cards, student loans, car payments.) Any large purchase can negatively affect your “debt-to-income ratio” making it harder to qualify for a loan. And sometimes little things (i.e. beer, Starbucks, the bunny slippers we couldn't live without) really add up.

Generation Broke is becoming the new nickname for those aged 25 to 34. Mom always says you aren't supposed to spend money you don't have. I've received the lecture and continue to get the lecture (just last week, in fact.)

Not everyone, however, is getting the lecture. One of the world's richest divas under 40 (according to Fortune) appears to be one of them. Reports of J. Lo's credit card being rejected TWICE at a celebrity-studded fundraiser in NYC last week demonstrates one example. (Rest easy. The tab was eventually settled and she left with her four dresses.)

The average household last year paid $1,000 in interest on money borrowed. The amount of interest our nation shelled out could have purchased the entire inventory of 5,000 Lexus dealerships. Studies show Gen-Xers have the highest rate of bankruptcy and spend a quarter of every dollar earned on debt payments. (I'll pause here for some uncomfortable self-reflection on my last Visa bill.)

The next time you see an abandoned cart at your favorite store, think of how you, too could be helping to improve your credit. Think about how much you could save and invest for something bigger in the future. (Like a house, maybe?)

Ask yourself, “Do you really need it?”

Jody Zink is a licensed REALTOR in Ohio and Michigan with the Loss Realty Group. Her column appears every other week in the Toledo Free Press. She can be reached at jody@jodyzinkrealtor.com or 419-725-1881.