Dispatches from the Formerly Middle Class #2

Sadly I haven’t had any takers for the idea of having a guest post each week from someone who is not coping well with the economic downtown (hey, if you have a story you want to share, let me know). But have no fear, I got off work early and figured in the absence of a a guest blogger, that I would share a story with you that I read about.

This piece was in the NY Times a few days ago, anyway in case you don’t feel like clicking the link and you haven’t read this story. Its basically about how credit card companies are starting to offer settlements on delinquent accounts on a more regular basis. In this piece Edward McClelland a forty-something year old freelance writer ended up becoming delinquent on his credit card (since I am married to a forty something freelance writer, I am guessing McClelland isn’t earning the type of loot he used to) and eventually settled with the creditor for half the bill.

Now for folks who are used to paying their bills and have never found themselves in this situation it may be newsworthy that credit card companies will settle with you but the reality is they have always done this…and no I don’t know this because I am a lifelong deadbeat but my mother was a bill collector so I know quite a bit about how the collection industry works.

See, if you have little in the way of wages that can be garnished and the self-employed generally meet that criteria and you have no assets, creditors really can’t do a lot to you. Yeah, they can sue you but again if you have real property, remember the old saying “You can’t get blood from a turnip”…well the same rules apply to collecting money.

Now in the NY Times piece McClelland in the comments section is being taken to task for what many fine upstanding folks consider shirking his responsibility for not paying the whole bill, but the reality in the new world is that many of us want to honor our commitments but if you don’t have it, you can’t pay it…. I personally like eating and while Visa is important, eating is even important.

Personally I applaud the man for trying to do the right thing in these tough times…as I am learning day by day as I deal with my own financial downfall that many of the things that we used to do are simply not part of our reality.

So here is another weekly dispatch from the formerly middle class.

Stop playing with us

Am I the only one who hears the news reports about the economy and thinks, quit bullshitting us? Seriously, just this weekend, I was hearing how the “experts” think more people will get out and travel this summer…after all gas prices are cheaper. Gee, its jumped like crazy in the past few weeks to a lovely $2.40 a gallon but hey its not $4 a gallon, so therefore its cheap. Yes, gas is cheaper than it was last year but lets be honest its not like gas is 75 cents a gallon or some ridiculous price. I suspect more people will be on the road but maybe its because after months of living close to the bone, they just feel the need to cut loose for a moment before they go insane. Its the type of logic that a dieter uses after weeks of being good and following the diet and they just need to take a day or two off.

Then there is the report I just read a few minutess ago, that consumer confidence is up, folks are starting to shop more. That might be true but I suspect the fact that good weather is here and again folks are cutting loose for a moment, considering that unemployment is still rising and in some states and cities its already in the double digits, I doubt the recession is over.

On the other hand its easy to spin shit and make us think things are getting better. Funny thing is I know very few people who are not feeling the impact of this economy in one way or the other. I was just having lunch with a fellow non-profit consultant who is thinking of looking for a regular gig since her work load has dropped…I know that feeling all too well as the past 6 months has seen all my work dry up and potential new clients can’t afford my rates which are reasonable.

Too many people are struggling, over the weekend the NY Times reported that the newest wave in foreclosures are not folks who got the the sub-prime create a loan with shaky credit but folks who used to have good credit and jobs. Folks who lost a job and realized they couldn’t find a new one that paid at the rate they used to make, folks who have exhausted all their resources and when it came down to putting food in their bellies, and keepsake the phone and lights on (useful things to have when looking for a gig) versus paying the mortgage and starving, they took option A.

After all it takes quite a while to actually be foreclosed on or evicted from your dwelling so you play that mental fuck fuck game thinking your ship is going to come through soon, only it doesn’t and the next thing you know, you are the face of poverty. The new face of poverty or the working class in America is someone who played by the rules…someone who got that degree, figured they work themselves up from the from being a desk jockey in a cubicle to actually getting an office with a door. Only they changed up the rules and there are a whole lot of Americans with fancy degrees who are feeling they were sold a bum deal.

If I sound a tad bitter today its because in some ways this post is about my life and while thankfully as long as I pay the taxes on my house I will always have a place to rest my head, I know for many others that is not the case. Yet at the same time as I think about my rather large student loan debt and those lovely degrees I possess and how they have not translated to financial stability, I get a tad pissed. Truth is my life in many ways was a lot simpler and stabler when I was a simple working person with no degree. See, I could off less without Sallie Mae wanting her money back. I gotta earn more because I have more expenses and even with bankruptcy Miss Mae still gets her money.

No, I get mad these days when I think of how the powers to be have manipulated us in the past (college as a surefire way to economic stability for one) and continue to manipulate us (things are getting better..oh really? For whom?)

So my mood will pass, it always does but lets be aware of how the powers to be and media try to sucker us with their spin…Happy Tuesday!

PSA…Real Financial Advice

Several years ago when the Spousal Unit and I started to experience a decrease in our income, for the first time in my adult life I really had to get serious about tackling our finances. I am embarrassed to admit that for many years I pretty much mimicked what I had seen with my own parents when it came to money, get paid, pay your bills and if there is anything left just spend it. Yep, and I cringe in writing this but for years I never thought about what happens if???? No rainy day fund, no plans for the future just spend, spend spend. Always counting on future job growth and raises.

Early in our marriage we were netting just a hair under 6 figures and in that time saved not a dime and still managed to put things on credit cards. I know, just dumb as hell. I sometimes I wish I could go back in time for just a year, lets just say I would have a nice savings fund. Some might ask how did you get to that point? Like I said, my folks had no financial sense, we never talked money. I do recall seeing them stave off collectors and was an adult before I realized you can pay the light bill before they send the disconnect notice.

However in these rough financial times, I will say that the way I was raised (with little cash) has been helpful after all unlike my good girlfriend who just can’t imagine ever buying second hand clothes, I have no problems with yard sales, thrift shops or things like that. In fact I now prefer buying used over buying new. I get more bang for my buck and often net some unique items.

However in the past several years as I was saying, I had to start getting real serious about our finances, sadly it took a huge loss in income to get real about money. So I started surfing the net and reading folks like Dave Ramsey and Suze Orman. Now before I start I should say that I think both of them have some excellent nuggets of advice but overall I feel like they are not living where I live or where many folks are currently living. After all at the end of the day, these guys are laughing all the way to the bank on the funds they earn from us buying their products.

That said, the best thing Dave Ramsey says that I agree with is that everyone needs an emergency fund, look…I’m not talking 6 months of income put away. Yeah, that is a great goal but for many us including yours truly, that is not reality now or anytime in the future. Yet we all know situations where the car needs a minor repair or you need to call a plumber out and its a few hundred dollar expense, now maybe you can put it on the credit card and that is most certainly an option. However in this current economy you may not have that available on your card and you shouldn’t count on it being available, after all the credit card companies are reducing their lines. No, this is when an emergency fund is a great idea and really in my opinion what it is designed for.

Now if you are like me and don’t have much cash left over after paying the bills, you may be saying where the hell do I get the cash to fund this emergency fund? This is when cleaning out your house and having a yard sale or listing your stuff you don’t use on Craigslist would be a great idea. Two years ago, I made a decent sum getting rid of the kids stuff on ebay as well as my old Coach purse collection. I generated well over a thousand bucks in about 6 weeks time and while it didn’t go towards the emergency fund (I was out of work at the end of 2007) the money did go towards paying bills. So it was still worth selling shit off. Right now I am thinking of a spring yard sale and this time the cash will go towards the emergency fund, since last weeks plumbing debacle reminded me of why I need one. It was 4 days before pay day and I was running on empty thankfully a good friend was able to front me the cash till payday but its been years since I have had to borrow money and while I was thankful, truth is I don’t want to be there again.

Now other gems of advice that the financial gurus give you seems predicated on having folks who earn enough money like I used to and are just making bad choices with how to spend it. If you are like me and have been where I was until recently and simply did not have enough money to meet all the bills that’s when I find the advice these so-called gurus give to be rather lacking.

Look, the bottom line is you need food, shelter, utilities, transportation and any regular medical needs…these are what I call priority items. Lately I skim the financial boards and am amazed at the number of folks who don’t realize that if you are jobless, Visa and Mastercard are not a priority. Yeah, good credit is important but don’t pay the credit card folks to the exclusion of the folks who keep you housed. That’s just not a smart move. Suze talks alot about the important of a good FICO score, yeah it is important but if you are struggling, something has to give. Call me crazy but what good is having Visa paid but living in a cardboard box?

Also in these current times, we have to look long and hard at needs versus wants….cable TV complete with movie channels is nice, when you can afford it. However I axed premium cable a couple years ago when the going got tough and for the most part don’t miss it. Only reason we have any form of cable is that the company gave us a deal since we use them for internet. which in our case the internet is actually a legitimate business expense since the Spousal Unit needs it for work. Otherwise it would be gone.

I am an avid reader and love reading the newspaper, had home subscription..I now read it online for free. There are all sorts of small items we pay for, we consider them necessities but truth is they are not. Speaking of , I only had Starbucks one time last week, regular readers know about my battle with the Bux….better to use that money on more enriching activities.

So just a little financial advice from someone in the trenches.