Tag Archives: unemployment

Fifty-five, Unemployed and Faking Normal

Most of us who are, already know this: It’s much harder, financially, to be single than to be living with someone in a relationship. There’s a basic cost of living that includes rent or mortgage, insurance, utilities, food, cable, phone and transportation. That’s just the basics. You pick the amount, but let’s call it $1,500 to $2,000 net per month.

For us singles, we’re paying that full amount. For those who are married, living with a partner or roommate, it’s almost the same amount, other than a small increase in food costs. Rent or mortgage payments don’t change if it’s one person or seven people paying it and  your cable company doesn’t care how may people watch what they’re billing you each month.

For women who are widowed, divorced or single it’s even harder. Arguably, they are paid 15 to 25 percent less than their male counterparts. They also have a harder time finding a job – especially in the last 12 years since the 2008 economic meltdown.

So I wanted to share an excerpt from a book called: Fifty-five, Unemployed, and Faking Normal by Elizabeth White. You can order it from Mosaic or online. Here’s an excerpt of the books’ introduction:

“You know her. She is in your friendship circle, hidden in plain sight. Her clothes are still impeccable bought in the good years when she was still making money.

To look at her, you would not know that her electricity was cut off last week for nonpayment or that she meets the eligibility requirements for food stamps.

But if you paid attention, you would see the sadness in her eyes, that hint of fear in her otherwise commanding voice.

These days she buys the $1.99 trial-size jug of Tide to make ends meet. You didn’t know laundry detergent came in that size.

You invite her to the same expensive restaurants that the two of you have always enjoyed, but she orders mineral water now, instead of the $12 glass of Chardonnay.

She is frugal in her menu choices, meticulous, counting every penny in her head. She demurs dividing the table bill evenly to cover desserts, designer coffees, and second and third glasses of wine, she did not consume.

She is tired of trying to keep up appearances. Faking normal is wearing her out.

There are no media stories about her. Her slide out of the middle class is not sensational enough.

A friend says she’s broke, not poor, and there’s a difference. She lives without cable, her gym membership, or nail appointments. She discovered that she can do her own hair.

She has no retirement savings – no nest egg. She exhausted that a long time ago. There is no expensive condo from which to draw equity and no husband to back her up.”

Kind of makes you think – and hopefully to be on the lookout for someone in your circle of friends.

Survey Says: We’re Worried About Our Debts…Ya Think?

This week, RBC released their Consumer Outlook survey, and it shows that more and more of us are worried about our debt load. I think that’s great news in that we’re finally getting real and seeing that borrowing money does not work, and being broke is not a fun way to go through life.

Fundamentally, it’s a real problem when we stay optimistic about our debts. THAT is what gets us broke! When we talk ourselves into buying this or that on credit, thinking that the payment isn’t that big a deal, we’re on a slippery slope of trouble. We block out the fact that it might take two minutes to spend it, but it’ll take years to pay it off!

A way better mindset is to be pessimistic about our debts and optimistic about our incomes. Instead, the survey shows that we believe we can become debt free reasonably quickly, but we’re worried about our job security. To me, that’s the wrong way around. We should be pessimistic about our finances. It’s what makes us realize maybe we can’t pay that payment for years, what happens when rates go up, I’m going to be in trouble if I carry my credit card at the max, and so on.

Yet, on the income side, 24% of us are worried about a job loss. To put it in perspective, however, the unemployment rate is 8.5%. But 5.5% or so is full employment. We know that from just a year or so ago. So, the real unemployment rate is around 3% and 24% of us worry. That’s a total disconnect between the two!

On the optimistic side, thinking we’ll pay off our debts pretty quickly, the numbers are even more surprising:

18-34 year olds expect to be debt free by age 43.
35-54 year olds think it’ll be at age 59. Yet, the group that’s closest to that age, those age 55 and older, think it’ll be at least until age 66! So a heads up to those under age 34: It ain’t going to happen! No way, no how – honestly. Sorry to be the bearer of bad news, but the reality is that you’ll likely have a mortgage payment of 25 to 30 years which right there, alone, makes it impossible.

And almost everyone under age 54 has a car payment. The average car payment is $480, financed over seven years. What’s a seven year old car worth? Exactly. So what happens then? We finance another one and go on another seven year broke cycle. Skipping one of these seven year finance cycles and putting that money into an investment account or RRSP will be over a million dollars when you retire. Instead, we buy something that’s worth less and less each month and keep paying and paying.

Keep in mind that every time you commit to a payment, you’re voluntarily taking a pay cut! That payment has to be made, so it’s money you no longer get to keep! It may be that $200 credit card payment, $400 car, the financed furniture, or whatever. Yet, if our boss wants to give us a pay cut we go insane. But we do it to ourselves every time we borrow!

One more thing which will become really important to all of our finances over the next year or so: The RBC survey showed that only 57% of us think interest rates will go higher. Excuse me? Rates are the lowest they’ve been in generations. So when they move, where do they HAVE to go? Up! And every line of credit and every variable mortgage will take some big jumps. The It’s Your Money book has a chart that asks how ready we are for the next rate increase. Anyone with just $150,000 of debt being hit with a 3% rate increase will spend another $329 after tax for nothing but more interest. And if we say we’re broke now, where’s that $329 going to come from?

What can we do? The really easy basics that 90% of us won’t do:
-Stop borrowing – period. When you’re in a hole, it makes sense to stop digging. Debt is NOT your friend.
-Do a written budget each month to know, not guess where your money is going
-Stop going to a restaurant unless you work there
-If your car is financed – sell it, no matter what you owe. That saved payment alone will likely get all your other debts paid off within a year. Drive a $2,000 beater for a couple of years until you’re debt free.
-Pay yourself first: Have some money taken right off your pay, or out of your bank account towards savings. If you don’t see it, you can’t spend it.
-Leave the credit cards with a relative. Out of sight, out of mind, and start paying in cash or by debit card.
-Get an emergency savings account of two weeks income so the next crisis will just be an inconvenience.

More Stories and Insights from the U.S.

Last week we discussed some real on-the-ground stories from Phoenix. Here are a few more insights worth sharing:

First and foremost, something very critical that separates us from the current U.S. policy. We spoke briefly last week about Prime Minister Harper traveling the country stating how well we are doing as Canadians in this economy. And he’s right. This isn’t about politics, although in the interest of full-disclosure, I’m a fiscal conservative. I believe that much of the intervention in the U.S. economy by the government is doing nothing more than creating a phony and temporary sugar high. Cash for clunkers was $3 billion of tax money to sell 700,000 cars – the car market is now dead again.

There’s an $8,000 tax credit for first time home purchasers. I guarantee you, when that expires in November, the housing market will die off again. Foreclosures are still increasing, and there are more than 17 million people out of work – and that’s still rising. The only way to get the economy back to health is to create jobs, and to reduce the killer debt load the average American is under.

If you believe the government programs are a blessing and not a temporary fix – just wait a year for them to expire, and you’ll see the results. Until then, you might not like Prime Minister Harper’s policies, but as a former economist, he knows that governments can’t be the solution to everything.

General Motors has now begun to sell new vehicles on the giant auction site e-bay. The trial with their California dealers was last month, but you can bet it’ll be back nation-wide. And GM is now working on a $4,000 vehicle. Tata Motors is selling their inexpensive one in India right now for $2,000, and they already have European certification, so you know they’re coming to North America at around $5,000 or so. Yes, GM is behind again – but not as far as usual.

Anyone who travels a fair bit will love this story: For some time now, there has been an on-going, multi-country investigation into illegal price fixing by airlines into their fuel surcharges. The CEO of Virgin Atlantic has already admitted to it. But it’s sad that any company that’s convicted will only have to pay a fine. And that fine will be way less than they made in profits from the fuel surcharges. Some of these executives should spend some jail time!