Ben Bernanke says the recession is over. Isn’t that great? And only a year after the entire economy melted down. Sure am glad to hear it, aren’t you?
Not to gainsay an august presence like the chairman of Federal Reserve Board, but… I’ll believe it when I see people going back to work. An unemployment rate of something over 9 percent does not an “over” recession make. IMveryHO, that is.
I’ll believe it when the local schools stop cramming 50 kids into each grade-school classroom.
I’ll believe it when the Department of Public Safety stops talking about laying off more police officers.
I’ll believe it when the City stops laying off essential workers.
I’ll believe it when the foreclosures stop and people are no longer being thrown out of their homes.
I’ll believe it when the value of the house my son and I bought at what we then thought was the bottom of the real estate collapse returns to the “bargain” price we paid for it.
I’ll believe it when my income rises to cover the ballooning costs of taxes, insurance, and utilities.
I’ll believe it when the Dow rises above 10,000 and stays there.
Easy to say the recession is over when you have a job with a six-figure salary. Not so easy when you’re in the trenches, still living the recession.
Over at Get Rich Slowly, J.D. has a great post on dealing with a family financial crisis. Responding to a reader’s question asking how to stay out of the red when you’re faced with a job loss and dwindling statements, he brings up a similar problem his brother faced and is still struggling to overcome, and then he lists several points of good, commonsense financial advice. In the series of comments on this post, readers wandered away from coping with job loss to dealing with financially stressed, often dysfunctional family members.
There’s no question that J.D.’s debt-avoidance strategies are great advice…but what do you do when the family member refuses to listen to any such advice?
For many years, SDXB (Semi-Demi-Ex-Boyfriend) has dispensed exactly that advice (and more) to his profligate daughter. She’s capable of earning a good living (she’s an RN), but she’s even more capable of spending mightily, and she seems unable to recognize the difference between “need” and “want.” A single mother with four children, she rents $2,500/month houses (in a market where you can get a very nice place for $1,000 to $1,200) so that every child has a separate bedroom…and of course, they couldn’t do without a pool! At one point she had five cell phones (until the provider cut her off for nonpayment). Cancel the cable? Unthinkable! The kids have to have it!! She wears expensive clothes, drives an expensive car, and had an (endlessly) expensive divorce. Three landlords have evicted her, and the repo man broke down one landlord’s garage door in his frenzy to repossess her car.
Already on the brink of financial ruin, she suffered a serious accident resulting in head injuries that made it impossible for her to work. She’s now on disability and our state’s half-baked answer to Medicaid. But she still refuses to budget, will not reconcile a bank account, declines to even try to understand anything about personal finance, and continues to try to live up to means that she no longer has.
SDXB has advised her, gone to court with her, helped her apply for welfare, helped her move, given her money he couldn’t afford to part with in retirement.
In some cases, I’m afraid, there’s a point where you have to stop. When you continue to give a person money while that person continues to indulge in irresponsible behavior, you’re not really helping the person. You may actually be making things worse, by underwriting the irresponsibility.
And while you certainly can’t be telling an adult how to behave, neither are you required to support self-destructive and irresponsible habits. No matter how much you love the person and feel responsible for the person’s well-being, you and your family member may be better off if you lay down some ground rules and stick to them.
What might those rules be? Depends on the situation, o’course. But here are a few possibilities:
• The financially strapped family member agrees to get a job, even if it’s part-time and no matter how low-paid and “beneath” his or her status it may be. • The person develops a realistic budget that fits his or her current means. • The person moves into affordable housing. If the person can qualify for housing assistance, she or he will apply for it. • She or he agrees to eat at home, not in restaurants. • If the person can qualify for food assistance, he or she will apply for it. • The person disposes of all credit cards but one, and uses that as little as possible. • The person gets rid of all but one car and may, if possible, dispense with cars altogether and walk, ride bicycles, or use public transportation. • The person cancels cable or satellite TV. • She or he restricts phone service to a land line or to a cell phone—whichever is cheaper, but not both. • If no jobs are available in the person’s field, he or she will go back to school for vocational training in some industry that is hiring. • She or he agrees to limit the amount of time spent living in someone else’s home. • If the person has a drinking or substance abuse problem, that issue must be addressed within a specified period or assistance will stop.
Obviously, if a family member is disabled, sick, or mentally ill, it’s reasonable (maybe even a moral obligation) to provide much more support than you would for a person for a person with training, education, and the capacity to hold a job. My point here is that for a healthy, fully abled adult, responsible behavior should play a part in earning family members’ support.
Am I the only person who keeps imagining the grass is greener on the other side of the fence and then, once I’m in the pasture, discovering that’s not grass—it’s Astroturf?
On the way home from Saturday’s six-hour choir workshop, what should I spot but an open-house sign (Sotheby’s: around here, that spells “if you have to ask, you can’t afford it”). It pointed to a tract of new construction smack in the middle of the desirable Seventh Street to Seventh Avenue corridor known as North Central, just a few steps away from the old-money Episcopalian church I frequent. Since the outfit that tried to install a set of pricey ersatz “lofts” directly across the street from said House of God went belly-up, leaving a partially built hulk to weather away in the middle of a weed-strewn lot, I figured this developer couldn’t be much better off.
Indeed not.
The perky blonde Realtor said the four units they’d completed had been sitting there for over a year. One of the houses had a contract on it, but if it fell through, she remarked, the developer would probably be foreclosed. When the four models were built over a year ago, she said, the developer had asked upwards of $500,000 for them. The current asking prices ranged from $365,000 to $399,000.
Interesting. Though $365,000 is $100,000 more than I can afford, it’s edging toward a killer bargain for 2,200-plus square feet in a tony in-town district. Asked if the seller would come down some more or relieve the buyer of her own house, the Realtor thought not.
The models were very nice: big kitchens with top-of-the-line appliances (including gas stoves), attractive design, landscaping included. And pretty clearly, if a person were to wait long enough, a person could buy them from the bank for significantly less than 385 grand. The infill land the developer had acquired had room for 18 houses. So far he had built four and sold exactly zero new dwellings.
Even the Realtor remarked that she would be cautious about buying in a development so far from being built out. With four models up (only one of them provisionally sold), we were looking at the possibility of living in a tract full of weed-infested empty lots.
On the other hand…for the startling monthly HOA fee, the four future owners (assuming four buyers ever materialize) could afford to grass over the empty lots and turn their surroundings into a pocket park. Or, what the heck: put Astroturf down over the whole place and never have to water it. 😉
Speaking of Astroturf, after a perusal of all four formerly half-million-dollar models, here’s what became evident:
• Though the houses had common walls, the developer had the effrontery to claim they were free-standing structures with “no common walls” (so say his flyers) because they’re built with a pocket of air inside the contiguous walls.
• The HOA fee starts at an exorbitant $151 a month, and all that covers is maintenance of some low-cost desert landscaping and single short asphalt road leading into the tiny tract. No insurance, no pool, no tennis court, no community lighting, no nothing. Around here, that is very high for a tiny HOA with almost no costs.
• Every house had two stories. This meant no one would have any privacy, because everyone could see into at least two neighbors’ backyards and windows.
• The staircases were exceptionally long and steep, with only one handrail. Sprain an ankle or have your back go out (to say nothing of, say, suffering a stroke or a debilitating heart attack), and you’d be sleeping on a downstairs sofa. And of course, everyone loves dragging a vacuum cleaner up dozens of steps, cleaning each one on the way.
• The lots were so tiny that even with the houses jammed together like duplexes, each house had no front yard and a postage stamp in back. One model essentially had no back yard: its downstairs master bedroom occupied the entire back end of its lot.
• In a laudable attempt to escape the snout-house look, the developer had built the garages in back, accessible from city-maintained alleys. This meant that to haul your groceries in, you had trudge across the back yard, enter through a back door, and traipse through the family room or dining room into the kitchen. Nothing like getting your exercise, rain or 118-degree shine!
• The models’ backyards were landscaped. Whoever designed the landscaping hadn’t a single clue about plantings and trees. In two of the teensy yards, they had planted sissoo trees. In the biggest of the houses—one that had a studio over the garage, giving it around 3,000 livable square feet under roof—they had planted two sissoos! Sissoo trees get huge, quickly reaching sixty feet in height with forty-foot-wide canopies, and they have a fine proclivity for heaving sidewalks and foundations. They’re widely considered to be a nuisance tree. Because the yards were so minuscule, there was no way to place such a monster tree far enough away from the structure to avoid damage.
• The handsome kitchens looked, at first glance, to be very upscale, but on closer inspection, the cabinetry was the same Kraft-Maid stuff that the previous owner of my house had ordered up from Home Depot and installed himself! The wall cabinets didn’t extend to the ceilings (which were not unduly high), and so they didn’t hold much and their tops functioned as efficient dust-catchers. I can testify that my cabinets do not hold a set of Costco wine glasses, which are generally too tall to fit. If you adjust the shelves so you can fit a few wine glasses within reach, you end up with one shelf space that’s too shallow to hold anything taller than a cookie sheet. For the half-million bucks the developer originally hoped to get for these places, he could’ve afforded to hire a finish cabinet maker to build some custom cabinetry.
The gas stovetops were amazingly small. Mine is not large, and I can just fit a large frying pan next to a saucepan. The design of these left even less space to array four pots and pans. At most, the four burners would accommodate only two large pans at once.
The sink was nothing special. The Koehler unit I installed in my house, with its two large, deep sinks and gooseneck faucet, is far more usable.
It was, in short a faux gourmet kitchen designed for people who eat out most of the time.
• The view from the second floor revealed that most of the neighborhood consisted of aging high-density housing: old apartments dating back to the 1950s, at least one of them distinctly down at the heels. The best of the models, on the north side of the little tract, backed onto the playing field of a large public middle school. Though the traffic generated by such a school would concentrate on the other side of the building, residents of the new tract would enjoy a constant serenade of P.A. system announcements, blaring, electronic change-of-class bells, and kids hollering. The private school a half-block to the south is not served by school buses or public transportation. This means hundreds of parents parade past every morning and every afternoon, dropping off and picking up their kids.
• Each house had two air-conditioning units, except for the large model with the studio over the garage, which had three. Think of that. If one AC unit generates $220 bills during a 116-degree July, three could present you with a $660 tab!
IMHO, a two-story duplex—tucked between aging apartment complexes and a large, noisy school and amazingly dubbed a “single-family detached home” because it’s separated from its adjacent neighbor by a three-inch-wide air pocket—is a far cry from my block house on a quarter of an acre with a large pool, five citrus trees, and room to grow a sissoo if one were so inclined. They may be new and they may be on the “right” side of Seventh Avenue, but they’re not worth $100,000 to $150,000 more than my place.
Talking with people about the collapse of the economy, you gain some unexpected insights and hear stories you hadn’t thought about.
This afternoon I dropped by a pricey optical boutique in hopes that they could adjust my glasses frames and get them right. Background: Three or four years ago, I bought a pair of stupefyingly expensive Silhouette frames, mostly because my former best friend had a pair (yah, I know…monkey see, monkey do!). Their design really is neat. The lenses are completely rimless, not even any wire or nylon line around them, and the temple and nose pieces are so light and airy you hardly notice you have a pair of glasses perched on your schnozz. They have no hinges: the temple piece is made of a sproingy substance that can be folded, sort of, but springs back to its original shape.
Because they’re expensive, not every optical dispenser carries them. And because they’re kinda exotic, opticians who don’t sell them sometimes are a little flummoxed about repairs and adjustments to the frames. When they get bent, which can happen if you sit on them (ahem!), the repair job is not something for the happy handyperson—you end up having to take them to an optician who knows how to deal with them.
The other day, for no good reason, one of the temple pieces snapped off its lens. So I schlepped them downtown, not a hideously long drive but off my beaten path and so a bit of a nuisance. The woman who’s now running the place announced that the warranty had expired (say what? thôt they had a lifetime warranty!) and it would cost $85 to repair them. Exasperated, I ponied up the money to have her ship them back to the factory to be fixed, eight-five bucks being significantly less than the price of a new pair of the cheapest, ugliest glasses in the shop.
When I went to pick them up, she had me stick them on my face, took one look at me, said “that looks fine,” and out the door I went. No adjustment. Soon as I got home and glanced at myself in the bathroom mirror, I realized one lens was higher than the other. I looked like some sort of wacked-out comedienne…not exactly the image one likes to project when standing in front of 25 hypercritical students.
Hence the visit to the high-fashion optical boutique: it’s a lot closer to my house, and they dispense this variety of overpriced glasses.
The proprietor adjusted the frame so it sits straight on my nose, remarking (in passing) that the lenses had been drilled incorrectly and the temple pieces are too short for me.
This fall, before I’m canned, I’m going to need to buy a new pair of glasses. I’d planned to buy the cheapest junk I could get, just as a back-up.
“Well,” said he, “Before you buy something you won’t want to wear in public, take a look at these: I have a whole showcase full of frames marked way down. Four of my suppliers have gone out of business, and I need to move this stock.”
Hmmmm???
Indeed, the prices were marked down from stratospheric to about mid-level expensive. And some models were very, very handsome, obviously top of the line, with high-quality construction. Much nicer than the pair of glasses I was dragging around town to get adjusted correctly.
He said that the last part of 2008 and first part of 2009 were the worst period he’d ever been through, in twenty years as an optician. Not only was there no traffic through the store, but suppliers were collapsing all around him, some of them leaving him high and dry. “The outfit that made these,” he said, indicating a drawerful of jewelry-like frames, “stiffed me for $4,000!”
Over the past three months or so, however, things have been getting better. He said that right now his business is just about back to normal. People are starting to buy again, and he feels better about the prospects for the future.
Opticians pushed to the wall by the recession. Who would’ve thunk it? With so many people half-blind, aren’t glasses a necessity? On the other hand: it’s not surprising. Even low-end glasses are pricey, and “insurance” programs to help you buy the things are right up there with dental insurance: they don’t cover much. The industry has aggravated the problem by lobbying successfully for regulation forbidding you from buying a pair of glasses unless you’ve had a $70 eye exam in the past year. Add tax, and voilà! A $300 pair of glasses morphs into a $400 gouge. At Arizona’s 8.3 percent sales tax, even a cheaper $150 pair ends up costing you $240—and has to be replaced in a couple of years. Who has that kind of money laying around the house?
I wonder how many Americans are putting off glasses, dental care, and nonemergency medical care, feeling they can’t afford it? Are you delaying vision, dental, or health care because of the recession?
Here’s something fun and useful: check out Miss Thrifty’s Six Thrifty Uses for a Lemon. The main post has six great ideas, and readers have been adding more—including one link to an experiment that shows how to use lemons as batteries! The physicist in me fails at that stage. But since I’m a woman, my name is vanity…and lemon juice is one of my favorite frugal cosmetics. Here are a few ways to use fresh or bottled lemon juice to spruce up your daily beauty routine:
♥ Facial toner. Don’t spend a ton of money on fancy astringents to apply after you’ve washed with expensive facial cleanser. After washing your face, squeeze a little lemon juice (or use about 1/2 to 1 tsp bottled juice) into the palm of your hand and gently rub it over your face and neck. Be careful not to get it in your eyes.
♥ Neutralizer. If you wash your face with soap, you may find that it leaves your skin feeling dry and puckery. Most hand soaps are somewhat basic—they’re made with lye, after all. Acid neutralizes bases. Applying a small amount of lemon juice or diluted vinegar immediately after washing with soap will bring a quick stop to that parched sensation. If your complexion is naturally oily, a little lemon juice may eliminate the need to apply moisturizer after washing with soap.
♥ Hair rinse. There’s nothing like lemon juice to get the last of the shampoo out of long hair. Pour a little lemon juice over your hair (1/8 to 1/4 cup bottled juice to about a cup of water works well) after shampooing and before conditioning. Again: take care not to get it in your eyes—it stings just like soap.
♥ Hair brightener. Many women apply some lemon juice to their hair and let it sit, without rinsing, for an hour or two. Especially if you go out in the sunlight with lemon juice in your hair, it enhances blond highlights and subtly brightens naturally brown hair. You will need to rinse the juice out before you’re seen in public, since dried-in lemon juice will leave your hair sticky.
♥ Sunspot fade. Used two or three times a day over a number of weeks, lemon juice will lighten age spots. To make this really work, though, you have to stay out of the sun! Apply the juice to lighten spots. After the juice dries, cover the area with a good sunblock. And if the spots are on your face, be sure to use sunblock under your make-up and wear a hat when you’re going outdoors for any length of time.
In the frugal cosmetics department, here are some related posts:
Ever think about what you’d do if you could turn back the clock and be 20 again? Though I wouldn’t especially want to live my life over, there are a number of money moves—and decisions that had more influence on lifelong personal finance than I could have guessed at the time—that I’d either not do at all or that, given a peek forward 40 years, I’d do differently.
For example:
• I would have taken advanced degrees in disciplines whose graduates make decent pay.
Can’t say I regret having prepared for an academic career. It has allowed me to earn an adequate (not generous) living after spending way too much time as a lady of leisure. However, I’d never recommend to a young person who wants a life in academe that she or he pursue a doctorate in the humanities. University faculty in business, engineering, and law earn more than those in other disciplines. A Ph.D. in accounting can start at the assistant-professor level with a six-figure salary, and believe you me, that is one hell of a lot more than you earn teaching history or English.
Mind-numbing major? Puh-leeze! What could be more mind-numbing than postmodern theory? Oh yah: postmodern feminist theory! Give me a bag of beans to count, any day!
Knowing what I know today, I’d still want a career in higher education. I would take an undergraduate degree in a humanities discipline that a) interested me, b) would furnish a young mind, and c) would build skills in logical thinking. But at the same time I would take lower- and upper-division courses in statistics and basic college-level math. Then I would get myself an M.B.A. and a Ph.D. in business management, a subject not too taxing for my sketchy math skills. With those credentials—which certainly demand no more work, expense, or skill than the doctorate in English that resulted in a well respected book published through a prestigious press—I’d be earning about twice what I make now.
• I would have started working in higher education early on, even though it entailed having to teach five sections a semester of freshman comp at a community college.
What I didn’t understand, in my callow youth, about that horrifying prospect is that over time community college faculty find ways to evade the most onerous courses and to wangle course release time, just as university professors do. Nor did I have any idea how much more community college faculty here earn, compared to GDU, UofA, and NAU faculty.
Without the fugues into magazine journalism, today I’d be earning a decent income, and I’d probably occupy a layoff-proof job. Or, more likely, I would have retired by now with plenty of savings to support me in the style to which I was accustomed while I was married to the corporate lawyer.
• If I were 25 again, I would insist that my husband include me in the marital finances.
It was easy to tell my women friends to get a grip on their family finances, establish credit in their own names, and know where the money was. But all the time I was dispensing that excellent advice, I wasn’t following it myself! I had no idea where all our money was going, I did not know what my husband was investing our money in or what debt he was obligating us to, and to tell the truth, I never did know exactly how much he earned. Because he deliberately entered false figures in the checkbook, I couldn’t reconcile the bank statements when I tried, and so I had no clue how much we had in our joint account. Nor did I know about the two other bank accounts he’d opened without my name on them.
• I would open my own savings and checking accounts—preferably at an institution other than the one that held our joint account—and set aside part of my paychecks, my freelance income, or (when I wasn’t working) part of the grocery money.
Being my relentlessly frugal father’s child, I was bothered when the husband refused to save for our son’s college education. But he never tried to exercise any serious control over how much I spent. In those days, I paid for everything with checks and often asked grocery-store cashiers for cash back (cash-back policies were more generous then). I could easily have creamed off $100 a month—weekly cash-backs of $25 would’ve gone unnoticed. If I’d started doing that the month my son was born, I would have stashed $21,600 for him by the time he graduated from high school.
My husband also refused to budget; his express reason was that budgeting is for poor people. Consequently I had no control over our spending and no idea whether I was spending more than we had. If I’d put aside money for myself, I could at least have budgeted independent of his whims and felt more in control of some of our finances.
• I’d use a credit union instead of banks.
Even before banks decided to make a profitable business of fleecing their customers, credit unions were always preferable to commercial banks. Savings rates are higher, checking is free, and service is infinitely better.
• I would have learned about investing early on.
If I’d had a clue about such things as mutual funds (no joke: before I walked from the marriage, I’d never heard of them), I wouldn’t have taken my husband’s private banker’s weird advice to invest a $40,000 inheritance in (hang onto your hats, folks!) one-week CDs! Yes. Forty grand sat in one-week CDs for over a year, until after I ran away, spent three awful months sleeping on the ground in the outback of Alaska and Canada, and finally made my way back to the city.
Yup. I could’ve invested the $21,600 of grocery money in instruments that earned compounding interest, too. Hmmm. Check out this handy-dandy little calculator. Assuming we went ahead and paid for my son’s education out of his father’s capacious salary and so I just kept on investing a hundred bucks a month for him at, say, 8 percent, today he would stand to inherit another $177,395.38. Ah, coulda shoulda woulda!
Moving on…
• I would have learned and started to use Quicken the minute it came out.
Quicken is the answer to the innumerate English major’s dreams. Not having to add and subtract (something I can’t do reliably even with a calculator) made it possible to reconcile bank statements easily, without dampening sheets of paper with sweat or with tears. Consequently the program allowed me to take firm control of my financial life, in a way that wouldn’t have been possible when every encounter with money involved a daunting episode of math torture.
• I would have learned how to use Excel.
I still don’t know it well enough to free myself from Intuit, which, despite the glories of its Quicken program, rips off customers by issuing ever-more-bloated annual updates that won’t read data in formats more than three or four years old. Excel does everything I need Quicken to do, it doesn’t go out of date, and it functions across platforms.
• I probably would have spent less on my current home’s landscaping.
I’m pleased with the yard and glad to have it, but something acceptable could have been accomplished at lower cost. Specifically, I wouldn’t install such a large front patio (or possibly any front courtyard!), and I would have planted younger, less expensive trees.
• I would have opened a Roth IRA as soon as they became available and maxed out contributions every year.
Though we can add a substantial amount to our 403(b) above and beyond our mandatory retirement contributions, the university matches only 7 percent of our paychecks. IMHO, that makes these highly restrictive investment instruments less desirable than the after-tax Roth IRA, which accrues interest and dividends tax-free and can be passed to your heirs without encumbrance.
My not building Roth savings from the get-go is a function of late-blooming investment knowledge. Which takes us back to item 6: learn about investing early on.
What would you do differently if you could start from financial scratch again?
On this subject, check out Frugal Scholar’s conversation about the most successful things she and Mr. FS did with their finances.
