One of the worst ideas I‘ve heard in a long time recently came across my desk. The premise of the scheme is to artificially inflate ones income by converting what is already post tax dollars to income by running payroll through a “dummy” Company. Apparently, you can submit two months of paystubs (real or not, I guess) and increase your borrowing base for qualifying for a mortgage. All the tax in’s-and-out’s aside – not to mention reducing the size of your own personal net worth pie – this is plain mortgage fraud. What’s worse is that he was advised of this scheme by his own “professional”. As a regular advice giver, this situation caused me to think about my three favorite quotes about advice:

  • “All that glitters is not gold.” This person is so blinded by the idea of obtaining a home that they are willing to disregard what are probably two of the most important things that someone can build – post tax net worth and integrity. You can apply this one to pretty much any hair brained investment scheme also.
  • “Never take advice from someone who does not have to live with the consequences.” In this scenario, this person is going to put themselves on the line legally and financially by borrowing more than they can afford (or at least what they tell me and the government about). The “professional” providing this advice gets paid and then can slink back into the shadows while this person will be alone to pick up the pieces when/if this scheme implodes.
  • Generally, the third quote is the only one that is left after the first two are ignored, the only one that can truly encapsulate the magnitude of a terrible idea – “How big of a crater do you want to make?”

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