I believe that there are two types of people in the world. There are those with their palms up – people who want something for nothing. And there are those with their palms down – jumping at opportunities as they arrive. The former are reactionary: things happen to them. The latter are masters of their own fate: things happen because of them.
Why I’m telling you this
I’m inspired to write about this from a BBC ‘news’ article (Mortgage misery: The homeowners facing repossession). The piece came to my attention through FIRE Shrink’s excellent weekly roundup (link). FIRE Shrink nailed the summary of the article:
Couple buy property on interest-only, self-certified mortgage which they don’t understand. Complain when in financial difficulty.
The couple’s story
The couple took out an interest-only mortgage pre-Credit Crunch. It was a self-certified mortgage (as in, they didn’t have to prove income) as they were self-employed. In other words, they got a mortgage with no affordability checks. They got their mortgage through an IFA, despite already having over 50k of debt.
Apparently, they were unaware they needed to save up to pay off the capital when the loan matured. The husband claiming:
We weren’t told we had to have a repayment vehicle, but at the time I was desperate. So we were mis-sold the mortgage.
It goes wrong
It wouldn’t be one of those oft familiar financial sob-stories were it not for some unlucky breaks. The husband was diagnosed with a chronic illness which forced the couple to give up work. Despite both being self-employed they apparently did not have any critical illness or income protection cover which could have paid off their debts in full.
Instead of being sensible and buying insurance, they complained to their bank (as it was all the bank’s fault). The bank offered to extend the mortgage-term or grant them a repayment holiday. The couple took the later (no doubt because that involved not paying anything). Of course, that wasn’t good enough. The bank should have offered them a cheaper mortgage the couple argue. The bank sniffily replied: if you’d been paying your mortgage we could have offered you a product switch – but you ain’t paying us a cent so no deal for you.
Satisfied that it was everyone else’s fault but theirs, the couple took the bank to the Financial Ombudsman twice. And lost twice. Thankfully for them, the bank still has yet to foreclose on them.
The article ends:
They are now living on benefits, with poor health, and in nothing short of mortgage misery.
I don’t want to come across as though I’m dumping on this particular unfortunate couple. But they are one of many people who are going through this interest-only mortgage farrago. I don’t have the indignation of Mr Ermine when it comes to these things (link for a similar story, and epic rant). But let’s be clear, these people are not a victim of mis-selling. They are victims of their belief the world owes them something.
For me, the stand-out sentence in the article is:
As a result many people took out interest-only mortgages, knowing they were cheap, and believing that their rapidly growing housing equity would eventually help pay off the loan.
This is the quintessential palms facing up situation. People were attracted to these mortgages because they offered money for no effort. “I get a cheap way to buy a property, and I never have to save or be smart, as rising house prices will do all the work for me.” In other words, they are entirely reliant on things happening to them.
Palms up / palms down
You can end up in bad situations like this when you are after something for nothing. It’s the same with all GET RICH QUICK! schemes. The allure of a windfall for no work or effort is too tempting for some. But there is always hidden risk: you are often left at luck’s whim (or with the GET RICH QUICK! schemes, being circled by sharks). If you are a palms up person life happens to you – both the good and the bad. You don’t own the good – it’s a gift to you. And you can’t control the bad.
If you keep your palms down, you take life’s opportunities as they come. And that’s where the idea that you make your own luck comes from. You take the chances on your terms. That’s one of the things I like about Financial Independence. It’s down to you to make your own breaks. That’s not to say bad things don’t happen; of course they do. But it’s on your terms, and the fix to the problems is usually in your control.
For example, a stock market crash wipes out a quarter of your FI fund. A palms up person will moan that it’s not fair, if only the market was rational I’d be fine. A palms down person takes it in their stride and doubles down on earning more / saving more / investing wisely – the things they can control.
You needn’t look far to find inspirational stories of people who took control of their lives and made it pay off. The beauty of being palms down is that there is no one way to success. Each successful Financial Independence story has it’s own journey. It’s own ups-and-downs and slices of luck.
All the best,
Young FI Guy