From $70K to food bank, one family's struggle

[FRED]

From $70K to food bank, one family's struggle
March 27, 2008

ALTADENA, California (CNN) -- When she was laid off in February, Patricia Guerrero was making $70,000 a year. Weeks later, with bills piling up and in need of food for her family, this middle-class mother did something she never thought she would do: She went to a food bank.
art.guerrero.cnn.jpg

Patricia Guerrero was laid off in February. Desperate to make ends meet, she recently went to a food bank.

It was Good Friday, and a woman helping her offered to pay her utility bill.

"It brought tears to my eyes, and I sat there and I cried. I was like, 'This is really where I'm at?' " she told CNN. "I go 'no way;' [but] this is true. This is reality. This is the stuff you see on TV. It was hard. It was very hard."

Guerrero is estranged from her husband and raising her two young children. She's already burned through her savings to help make ends meet, and is drawing unemployment checks. She has had to take extreme measures to pay for her interest-only mortgage of $2,500 a month. In fact, her mother moved in with her to help pay the bills.

Guerrero even applied for food stamps, but was denied.

"I never used the system. I've been working since I was 15-and-a-half. I needed it now and it turned me down," she said. more...

AntiSpin: The myth of the lazy, drug addled, spendthrift US consumer busted again. Most of the people getting hurt by the economic crisis are normal folks with too much debt and too little savings but don't know it. In "The Sun Also Rises" Hemingway has a character answer the question "How did you go bankrupt?" with the response "Gradually, then suddenly." For millions of Americans, "suddenly" is here.

[Mega]

Re: From $70K to food bank, one family's struggle

Fred
I was on site here in Liverpool today, its a nightmare, the so called "Gold-e-locks" ecom?.....Its just that a fairy tale!

The "Sheep" know somethings up, but "It will pass".................Here in Blighty we are just at the top of the Rollercoaster, the pause before the drop.

Mike

[Milton Kuo]

Re: From $70K to food bank, one family's struggle

Guerrero is estranged from her husband and raising her two young children. She's already burned through her savings to help make ends meet, and is drawing unemployment checks. She has had to take extreme measures to pay for her interest-only mortgage of $2,500 a month. In fact, her mother moved in with her to help pay the bills.

AntiSpin: The myth of the lazy, drug addled, spendthrift US consumer busted again. Most of the people getting hurt by the economic crisis are normal folks with too much debt and too little savings but don't know it. In "The Sun Also Rises" Hemingway has a character answer the question "How did you go bankrupt?" with the response "Gradually, then suddenly." For millions of Americans, "suddenly" is here.

I'm afraid I'm going to have to disagree with the AntiSpin. In this case, the myth of the stupid, spendthrift U.S. consumer is very much true. $2,500 per month and that's only the interest--no principal, property taxes, insurance, maintenance, and utilities have been factored in yet! It appears she was living well beyond her means, even before she became estranged from her husband.

A salary of $70,000 per annum and she is entirely bankrupt one month after being laid off? Whatever happened to the concept of saving for a rainy day? I used to earn less than her and was still able to save over 50% of my gross every year.

The inability to maintain mortgage payments so shortly after losing her job and the use of an interest-only mortgage leads me to believe that she is either a housing speculator or too foolish to be allowed to borrow money. Are addition, subtraction, multiplication, and division really that difficult?

These are the kind of people that might get bailed out at the expense of the prudent? I find these fools almost as despicable as the idiots on Wall Street.

[Nervous Drake]

Re: From $70K to food bank, one family's struggle

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[FRED]

Re: From $70K to food bank, one family's struggle

I'm afraid I'm going to have to disagree with the AntiSpin. In this case, the myth of the stupid, spendthrift U.S. consumer is very much true. $2,500 per month and that's only the interest--no principal, property taxes, insurance, maintenance, and utilities have been factored in yet! It appears she was living well beyond her means, even before she became estranged from her husband.

A salary of $70,000 per annum and she is entirely bankrupt one month after being laid off? Whatever happened to the concept of saving for a rainy day? I used to earn less than her and was still able to save over 50% of my gross every year.

The inability to maintain mortgage payments so shortly after losing her job and the use of an interest-only mortgage leads me to believe that she is either a housing speculator or too foolish to be allowed to borrow money. Are addition, subtraction, multiplication, and division really that difficult?

These are the kind of people that might get bailed out at the expense of the prudent? I find these fools almost as despicable as the idiots on Wall Street.

EJ writes in:

iTulip tends to attract like minded people. I'd guess 90% of folks reading this site are frugal and prudent people. Perhaps we learned prudence from our parents either by their example or the opposite – the negative impact on our lives from a parent's imprudence inspired fear of poverty, a strong motivator to save.

It is hard to say how one should feel about people who for one reason or another did not learn prudence. One can say they got to live it up while we were delaying gratification and saving for a rainy day and that they deserve their suffering now for lack of prudence. Or we can choose to be compassionate.

It is not easy to be compassionate because it feels like we are giving something up. But consider what in these times the imprudent has lost the prudent retains, not merely money but security and liberty not to mention self-respect and with no way to get it back but after years of sweat and toil that far exceeds the joy they may have experienced before, and the experience of catching up will certainly erase the memory of those earlier ephemeral joys, and in any case now they are older and so everything is harder.

Once we have arrived at a sense of compassion then the question is, What to do? The answer to that is personal; one tends to help one's family first, friends second, neighbors third, and others as one can after.

[dbarberic]

Re: From $70K to food bank, one family's struggle

EJ writes in:

iTulip tends to attract like minded people. I'd guess 90% of folks reading this site are frugal and prudent people. Perhaps we learned prudence from our parents either by their example or the opposite – the negative impact on our lives from a parent's imprudence inspired fear of poverty, a strong motivator to save.

It is hard to say how one should feel about people who for one reason or another did not learn prudence. One can say they got to live it up while we were delaying gratification and saving for a rainy day and that they deserve their suffering now for lack of prudence. Or we can choose to be compassionate.

It is not easy to be compassionate because it feels like we are giving something up. But consider what in these times the imprudent has lost the prudent retains, not merely money but security and liberty not to mention self-respect and with no way to get it back but after years of sweat and toil that far exceeds the joy they may have experienced before, and the experience of catching up will certainly erase the memory of those earlier ephemeral joys, and in any case now they are older and so everything is harder.

Once we have arrived at a sense of compassion then the question is, What to do? The answer to that is personal; one tends to help one's family first, friends second, neighbors third, and others as one can after.

EJ thank you for that. It hits home very personally.

Being the most prudent and sophisticated member of the family, my wife and I now sit in silence as we watch my less-sophisticated family members circle the toilet down into the despair of formally well off. For those still relatively young, flexible, and able to make changes, we offer no help. For those who are to old and weak…. We are still trying to figure out what to do. We know the tornado that is coming, yet we have to secure our survival first before of offer a helping hand.

[Guest]

Re: From $70K to food bank, one family's struggle

I met a woman in a wheelchair two weeks ago, just moved here from Arizona and had a heart attack - wound up in surgery and had 12 stents put into her kidney and coronary arteries. Turns out she had two kids, and they were paying their last $350 to stay another week in a $1400 a month motel room. I spent my Easter and the past week buying them groceries, giving her several hundred dollars cash, contacting city relief agencies, getting her a cell-phone and a one year prepaid service, so she can contact city agencies on her own. I've spent $700 USD in the past ten days helping her stave off the prospect of winding up on the street, with more expenses to go.

I am not well off. This is a fair bit of change for me to sling around. But when I saw the abject condition of this woman, how an emergency surgery ward allocated her one week of recovery time after stuffing 12 stents into her arteries, and put her right back out on the street, how city agencies and private agencies are all turning their backs - something snapped inside and I could not walk away. Now I face the quandary of having to stop doing all this because I'm reaching my limit.

These are the people who really deserve our compassion E.J. - not those like the woman in this article. All deserve compassion, but some are a good deal more desperate than the people you are discussing here. I'm not a bleeding heart type at all. I enjoy being cynical, as my 'best defense' against all the B.S. like the socialization of the gargantuan losses on Wall Street. But I discovered in a brief few days the extent of the brutality within the US safety net as it exists in 21st century America.

We preside over a MEAT GRINDER nation, where these people with life threatening conditions or situations are presumed to be able to fall back on city and private agencies, but those agencies in the current economic downturn were long ago swamped. These people are dying on the streets today. Nothing whatsoever to be proud about in this country right now, in our pretence of providing any kind of safety net at all for the most destitute. The people described in this article have not seen anything yet.

[c1ue]

Re: From $70K to food bank, one family's struggle

Lukester,

Kudos on your efforts.

The worst is still on the way.

[flintlock]

Re: From $70K to food bank, one family's struggle

I never understood why people continued to flock to California that simply could not afford to live there. $2500 month in interest! Americans simply will have to learn to live within their means. Unfortunately, those of us who do will still get swallowed up to some degree by the impending doom. My business was dependent on people having some discretionary money laying around for home improvements. I'm expecting a huge drop off in revenue this year. Its not a year or two that worries me. its a long term recession that I will have a hard time surviving. I'm already browsing the government jobs online.

All said, I'd still help people like her anyway I could. We all make mistakes.

[EJ]

Re: From $70K to food bank, one family's struggle

I never understood why people continued to flock to California that simply could not afford to live there. $2500 month in interest! Americans simply will have to learn to live within their means. Unfortunately, those of us who do will still get swallowed up to some degree by the impending doom. My business was dependent on people having some discretionary money laying around for home improvements. I'm expecting a huge drop off in revenue this year. Its not a year or two that worries me. its a long term recession that I will have a hard time surviving. I'm already browsing the government jobs online.

All said, I'd still help people like her anyway I could. We all make mistakes.

An iTulip entrepreneur leaving the private sector for the public? We prefer a market solution. Here's an idea.

As I mentioned in our Jan. 2005 housing bubble decline forecast, I still expect that at some point in the cycle we are going to see a trend where large single family homes (aka McMansions) are divided up into multi-family homes.

The economics of the business are that the home owner spends, say, $10,000 to add separate hot water and heat as required by code and other minor non-structural changes, such as an additional inexpensive kitchen, in order to get, say, $1,000/mo. in rental income. This will increase both the supply of inexpensive rental space for the wave of families left without housing due to foreclosures and also a source of income for homeowners at the margin of their monthly mortgage payments. Very rough numbers here but if you can do the work for $5000 per home net and do one every couple of weeks that's not a bad business.

A this point I think it's time for entrepreneurs in your line of work to think about positioning your businesses for that opportunity.

[bill]

Re: From $70K to food bank, one family's struggle

An iTulip entrepreneur leaving the private sector for the public? We prefer a market solution. Here's an idea.

As I mentioned in our Jan. 2005 housing bubble decline forecast, I still expect that at some point in the cycle we are going to see a trend where large single family homes (aka McMansions) are divided up into multi-family homes.

The economics of the business are that the home owner spends, say, $10,000 to add separate hot water and heat as required by code and other minor non-structural changes, such as an additional inexpensive kitchen, in order to get, say, $1,000/mo. in rental income. This will increase both the supply of inexpensive rental space for the wave of families left without housing due to foreclosures and also a source of income for homeowners at the margin of their monthly mortgage payments. Very rough numbers here but if you can do the work for $5000 per home net and do one every couple of weeks that's not a bad business.

A this point I think it's time for entrepreneurs in your line of work to think about positioning your businesses for that opportunity.

It will take the power of planning commission, city council or redevelopment agency to approve high density zoning to allow such multi family, however it could be done. Look what they are already doing http://www.itulip.com/forums/showthr...2217#post32217.
Multi family living in single family homes as well as renting garage conversions is already taken place in L.A. without permits.
Asian community of L.A. has had many problems with renting a single family home to one lease holder and to find out later that lease holder has set up a hotel type operation, leasing up to 20 plus individuals per night at $10-15+ a pop. Talk about cash flow!

[jimmygu3]

Re: From $70K to food bank, one family's struggle

An iTulip entrepreneur leaving the private sector for the public? We prefer a market solution. Here's an idea.

As I mentioned in our Jan. 2005 housing bubble decline forecast, I still expect that at some point in the cycle we are going to see a trend where large single family homes (aka McMansions) are divided up into multi-family homes.

The economics of the business are that the home owner spends, say, $10,000 to add separate hot water and heat as required by code and other minor non-structural changes, such as an additional inexpensive kitchen, in order to get, say, $1,000/mo. in rental income. This will increase both the supply of inexpensive rental space for the wave of families left without housing due to foreclosures and also a source of income for homeowners at the margin of their monthly mortgage payments. Very rough numbers here but if you can do the work for $5000 per home net and do one every couple of weeks that's not a bad business.

A this point I think it's time for entrepreneurs in your line of work to think about positioning your businesses for that opportunity.

Good suggestion. I'll tell my out-of-work brother-in-law the custom builder. I don't know about most neighborhoods, but mine has a good number of 'starter castles' and it's against the zoning to make them multi-family.

[jimmygu3]

Re: From $70K to food bank, one family's struggle

Asian community of L.A. has had many problems with renting a single family home to one lease holder and to find out later that lease holder has set up a hotel type operation, leasing up to 20 plus individuals per night at $10-15+ a pop. Talk about cash flow!

As I've said before, the Japanese are years ahead of us. ;)

[jimmygu3]

Re: From $70K to food bank, one family's struggle

$2500 month in interest! Americans simply will have to learn to live within their means.

Actually, a $2500 payment on an interest-only mortgage includes PMI and escrow for taxes and insurance. The loan amount is probably about $350k. If she and her husband got the house when they were making a combined $120k, that's not a crazy ratio. The divorce and job loss just put her under.

[Guest]

Re: From $70K to food bank, one family's struggle

Thanks C1ue.