It’s easy to forget how rapidly your financial situation can change. One day you’re making millions of dollars, the next day you’re facing eviction because you’ve missed rent payments.
A recent guest on Caleb Hammer’s YouTube show seemed to be in precisely that position.
This Pennsylvania trio bought a $100K abandoned school and turned it into a 31-unit apartment building — how to invest in real estate without all the heavy lifting
Find out how to save up to $820 annually on car insurance and get the best rates possible
Finish 2023 stronger than you started: 5 money moves you should make before the end of the year
Fifty-two-year-old David Hanson had a successful construction company that generated $1.5 million in revenue and roughly $400,000 in net income. But, as he told Hammer, a series of unfortunate events — including the pandemic and the deaths of his wife and stepson — turned his life upside down.
“I believe in this,” Hanson says about his latest venture, which Hammer believes is a pyramid scheme.
Here’s how Hanson ended up on the brink of bankruptcy and seemingly in the midst of a pyramid scheme.
From top 5% to broke
Based on analysis by SmartAsset, Hanson’s net income of $400,000 would easily put him in the top 5% in his home state of Texas. By his own admission, the success of his construction business and decades of hard work should have put him in a comfortable position.
However, the business hasn’t been the same in recent years. The slowdown in residential construction expenditure and inflation of construction costs are only part of the problem. Personal issues kept Hanson away from work. “Frankly, my wife passing away was a huge factor,” he told Hammer. His wife suffered from muscular dystrophy for many years before passing away. His stepson passed shortly after.
Despite the slowdown, Hanson could have avoided financial trouble by relying on savings. Unfortunately, his spending habits quickly eroded that safety net. “I was spending it, I’m telling you,” he says. Much of the money went into his son’s motocross career (which he admits isn’t profitable) and expenses associated with traveling and living out of luxury hotel rooms.
Now, the situation is precarious. Hanson hasn’t made an income for several months and hadn’t paid rent since September. His only financial asset is $200 in crypto. All his business and personal bank accounts are in overdraft, while his credit card debt is somewhere between $30,000 to $40,000. There’s another $20,000 due for unspecified legal expenses.
He’s facing eviction and borrowing electricity from his neighbor. Unfortunately, his escape plan could put him in a deeper hole. His latest business venture is a weight loss supplement he sourced from a company with a multi-level marketing scheme. He insists it’s not a pyramid scheme, though Hammer’s sketch of the organization’s structure looked suspiciously triangle-shaped.
Read more: Thanks to Jeff Bezos, you can now cash in on prime real estate — without the headache of being a landlord. Here's how
Salvaging the retirement
Hammer estimates that Hanson has roughly a decade of productive work ahead of him. Which means it’s not too late to secure his retirement. However, this would involve cutting back on expenses, paying down debt, selling some of the motocross equipment and focusing on productive construction-related businesses rather than pyramid-shaped ventures.
“Why don’t you just do [construction] and get rid of the debts and then save up enough money for retirement?” Hammer asks. He pushes back against Hanson’s claim that his dreams are a top priority. “For me, reality takes priority, though. We need to get rid of debts. We need to have money to be able to retire.”
Unfortunately, Hanson’s situation isn’t unique. A survey by Credit Karma revealed that 27% of seniors 59 or older had no retirement savings. Some of these people might be relying on the Social Security program that is also slowly depleting.
Effectively, millions of older Americans need to salvage their retirement in a hurry. Selling assets — such as a primary residence or vehicles — could help these seniors pay down debt. Delaying retirement into their 70s — which is increasingly common — might also be needed to accumulate savings. And funding his kids motocross career might have to stop too.
However, another option to salvage a retirement is to move. States like Mississippi, Oklahoma, Kansas, Alabama and West Virginia are considerably cheaper to retire in. Moving to another country is also an option, with some seniors moving to Portugal, Ecuador and Costa Rica in recent years.
Moral of the story: It’s never too late to fix a bad financial situation.
What to read next
Millions of Americans are in massive debt in the face of rising rates. Here's how to get your head above water ASAP
Rising prices are throwing off Americans' retirement plans — here’s how to get your savings back on track
The US dollar has lost 87% of its purchasing power since 1971 — invest in this stable asset before you lose your retirement fund
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.