$70k to Food Bank in 2 Months

[Cynthetiq]

View: From $70K to food bank, one family's struggle
Source: CNN

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

Story Highlights
Patricia Guerrero went from making $70,000 to drawing unemployment checks
Desperate to feed her kids, she recently went to a food bank for the first time
Expert says charities are reporting a rise in middle-class families at food banks

Guererro: "It just happened so fast. It happened in a matter of -- what -- two months"

By Thelma Gutierrez and Wayne Drash
CNN

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.

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.Watch Guerrero describe going to food bank »

"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.

Stories like Guerrero's are becoming more common as middle-class Americans feel the pinch of an economic downturn, rising gas prices and a housing crunch, especially in a state like California that has been rocked by foreclosures.

On Wednesday, a key government report on the battered housing market found new home sales fell to their lowest level in 13 years in February, suggesting the nation's housing market is still struggling.

Americans also have been attending in large numbers foreclosure fairs where mortgage lenders, financial planners and counselors offer tips to hard-hit homeowners.

"Our economy is struggling, and families in the 'Inland Empire' and across the nation are hurting," California Rep. Joe Baca said, referring to an area of Southern California in his district.

"Our housing market is in a state of crisis due to rampant abuses of sub-prime lending, and unemployment is rising. At the same time, the cost of necessities such as gas, healthcare, and education continue to rise."Map: Foreclosures state-by-state »

Daryl Brock, the executive director of Second Harvest Food Bank in California's San Bernardino and Riverside counties, said his organization supplies food to more than 400 charities in metro Los Angeles, from homeless shelters to soup kitchens to an array of food banks. While the majority of people they help are working poor families, he said they have seen some major changes.

In the last 12 to 18 months, Brock said, the agencies he supplies have begun seeing more middle-class families coming to their doors.

"Our agencies have said there is an increasing number of people coming to them for help," Brock told CNN by phone. "Their impression was that these were not people they normally would have seen before. They seemed to be better dressed. They seemed to have better cars and yet they seemed to be in crisis mode."

He added, "The only thing they can do is give us anecdotal evidence that they think it's because of the sub-prime mortgage meltdown and the housing crisis." See recent trends of foreclosure filings »

A former loan processor, Guerrero knows all about that, although so far she has been able keep her house.

She used her tax refund to help pay many of her bills for the first two months, but now that money's gone.

She says she's now in a middle-class "no-man's-land."

"It just happened so fast. It happened in a matter of -- what -- two months," she said.

She's eager to get back to work and to hold onto her home until the market turns. But for this single mom, every day it becomes harder to hang on.

"It's just depressing," she said. "For me, I just don't want to get out of bed, but I have to. That's my hardest thing. I have to."

My heart goes out to this woman and her family, and to other families that are getting hit hard. I can only say that 2 months of savings is never enough. NEVER ENOUGH. I grew up hearing 6 months of savings, I planned for 12 months of savings. I hear financial analysts as they describe it as "in a post 9/11 world 24 months of savings." It sounds like she was pretty much living paycheck to paycheck.

For us it wasn't easy to save money, especially as we saw our friends all spending their earnings and then some. I was even laid off like 4 times in a row, I took odd jobs here and there, nothing was below me, but not everyone would hire me or even call me back. I tried McDonald's. I even talked to managers and would guarantee them months to no avail.

We used the tried and true method of living and saving: spend less than we make, save a percentage every month. Even after we wiped out our accounts to buy a home, we put 20% down as required by our cooperative. Even if we were not required it was the tried and true method of buying a home, 20% down to avoid PMI. Interest only loans? Why take the gamble and the risk? Patience is the name of this game.

Even though we have savings, I already have a game plan to diminish expenses and expenditures if the economy is starting to turn. I don't wish to get caught with my pants down.

How are you preparing?

We have a thread here about the apocolypse where we are discussing an imaginary thing. But this is a real threat for some, for others it may not be too far away like this woman just took a couple of months.

We can disconnect cable TV and just keep internet service, even though we like shows, it's just not something we need. We have plenty of DVDs to watch (over 600 and many of them still sealed.) savings: $100/mo

I've been skipping full meals, eating cheaper salads and fruit. It is better for my health and I'm getting myself used to a change in diet so that it's not sudden. $150/mo

Our car is ready to be sold at a moment's notice. We live in a city with good public transportation and we can walk to work if that expense needs to be cut too. $400/mo

[Willravel]

This is EXACTLY why I do what I do. Food, clothing, job training and job placement.

[Strange Famous]

I have no savings at all, and Im in quite a bit of financial trouble (I have defaulted on a number of loans and am in negoiation with my creditors with regards to reduced offers I have made) - but then again no one can (or would) make me bankrupt because I have no capital so there is no benefit for them to do it.

I couldnt care less if I lost my apartment (which I have a mortage on and negative interest in anyway).

I'm in my situation because of irresponsible use of credit. She is in her situation because she committed to a mortgage that was beyond her means to cover and she had bad luck losing her job and not finding another I guess.

There's a mixture of bad luck and poor judgment in most cases like this.

[Tully Mars]

Originally Posted by Cynthetiq

My heart goes out to this woman and her family, and to other families that are getting hit hard. I can only say that 2 months of savings is never enough. NEVER ENOUGH. I grew up hearing 6 months of savings, I planned for 12 months of savings. I hear financial analysts as they describe it as "in a post 9/11 world 24 months of savings." It sounds like she was pretty much living paycheck to paycheck.

Hitting that nail on the head. Savings, savings and more savings. I went through some pretty rough times due to medical bills resulting from an injury not long after 9-11. I was extremely lucky, had savings, I'm guessing between 6-9 mos, hard cash. Also had business that manged to stay afloat even in my long absence. Even with that the medical bills can be astonishing. Even if you have insurance, which I did, any thing the insurance denies you'll have to pay and fight later or stop receiving treatment. Least that's what happened to me.

How people expect to survive on one or two months cash in the bank is beyond me.

Another item you brought up that Iagree with is cutting back when hard time hit. When things got tight for me, even with cash in the bank and a couple CD's, I stopped Sat. Tv, no movie rentals and ate a lot of top ramien and tuna.

When I lived in the States I used to hear people say they were broke, "we're behind on the house and on our bills" in one sentence and then say "Well, we have to eat out once and while." Or "We need a new TV, the remote on this one's acting funny." You're remotes acting funny? You're behind on your freaking house payment! Screw the TV, time to head to the Good Will and buy some board games and puzzles. On your way back buy some tuna or peanut butter.

Other then savings- people tend to think they NEED way more then they actually do, IMHO.

[highthief]

A $2,500 interest-only mortgage???

So, a really high mortgage to begin with and zero equity.

I do sympathize with anyone who loses their job through no fault of their own but people need to be a little more responsible with their credit.

[Charlatan]

Everybody should have an emergency fund equal to about 12 months of expenses.

The other thing is that people really need to monitor their expenses. Don't spend more than you make. Make sure that you are putting away about 10% to 15% of your pay into savings (more if you can). Live with less now so you don't have to do without later.

And... bloody hell. What kind of mortgage is that? It's completely nuts. Why would anyone agree to that kind of deal?

[Ustwo]

$2500 interest only on $70k a year?

Thats daft I agree.

[Tully Mars]

For everything else... there's Mastercard!

That commercial says it all. Can't afford it? Fucking finance it!

[girldetective]

>>How are you preparing?<<

I think about this a lot. I have about year's income saved in cash, that I could probably stretch 2 years if I lived frugally. I also have a 401K I could draw on in a pinch, but that would be painful. I currently rent and have been considering buying again, but I think not. I live in an apt on the edge of the city/burbs and I am looking to move into city central so that I can walk to just about anywhere or take advantage of pubic transportation. My car is paid for, but it would eliminate insurance, gas, and license fees. I could use a Flex car if I wanted to get pastoral.

[Cynthetiq]

in the video she describes going to the food bank:

"you take off the Tiffany bracelet; you don't take in your coach purse..."

I also did the math, I didn't really look too hard at it, just the idea of interest only loan no matter what the terms were, I stop at 'interest only'

mortgage payment $2,500/mo 12 months = $30,000/year

She just recently estranged from her husband, she doesn't say why be it money problems, martial affair, or anything just that he left them.

her mom moved in with them which allows them to rent out that house for income, and she collects unemployment.

SF I'm glad you're comfortable to state where you are. As I headed home I wondered if this would just make it a biased thread, those that are savers and preparers and those that just didn't weren't responsible with their credit or finances. I thank you very much for being forward and honest. This is what this place is really about, the ability to be frank and honest with others and still have a seat at the table.

[Tully Mars]

Originally Posted by Cynthetiq

in the video she describes going to the food bank:

"you take off the Tiffany bracelet; you don't take in your coach purse..."

I also did the math, I didn't really look too hard at it, just the idea of interest only loan no matter what the terms were, I stop at 'interest only'

mortgage payment $2,500/mo 12 months = $30,000/year

She just recently estranged from her husband, she doesn't say why be it money problems, martial affair, or anything just that he left them.

her mom moved in with them which allows them to rent out that house for income, and she collects unemployment.

SF I'm glad you're comfortable to state where you are. As I headed home I wondered if this would just make it a biased thread, those that are savers and preparers and those that just didn't weren't responsible with their credit or finances. I thank you very much for being forward and honest. This is what this place is really about, the ability to be frank and honest with others and still have a seat at the table.

Tiffany jewelery? Before I go to a food bank I'm selling everything I own.

Well, I'd keep my Timex so I won't be late for job interviews but my Citizens dive watch would be history.

[Cynthetiq]

Originally Posted by Tully Mars

Tiffany jewelery? Before I go to a food bank I'm selling everything I own.

Well, I'd keep my Timex so I won't be late for job interviews but my Citizens dive watch would be history.

I thought that too, but then I thought to myself, those things she didn't really "own" because her spending habits appear to me that she would have paid for them with Mastercard.

[Baraka_Guru]

Originally Posted by Tully Mars

Tiffany jewelery? Before I go to a food bank I'm selling everything I own.

I don't even know what a coach purse is.

But this article has reminded me of how badly I need to make more money. It's a bit scary when your debt load is greater than your gross annual income, especially when you don't even have a mortgage, let alone any assets.

[Sion]

Originally Posted by highthief

A $2,500 interest-only mortgage???

As I'd never heard of an interest only mortgage, I googled and found this:

http://www.mtgprofessor.com/Tutorial...erest_Only.htm


some excerpts:

What Is An Interest-Only Mortgage?
A mortgage is “interest only” if the scheduled monthly mortgage payment – the payment the borrower is required to make --consists of interest only. The option to pay interest only lasts for a specified period, usually 5 to 10 years. Borrowers have the right to pay more than interest if they want to.

If the borrower exercises the interest-only option every month during the interest-only period, the payment will not include any repayment of principal. The result is that the loan balance will remain unchanged.

For example, if a 30-year loan of $100,000 at 6.25% is interest only, the required payment is $520.83. In contrast, borrowers who have the same mortgage but without an IO option, would have to pay $615.72. This is the "fully amortizing payment" – the payment that would pay off the loan over the term if the rate stayed the same. The difference in payment of $94.88 is “principal”, which go to reduce the balance.

...

For What Types Of Borrowers Are Interest-Only Mortgages Suitable?
Interest-only mortgages are for borrowers who have a valid use for a lower initial required payment, and are prepared to deal with the consequences.

Pay Principal When Convenient: Borrowers with fluctuating incomes may value the flexibility the IO mortgage gives them. When their finances are tight, they can make the IO payment, and when they are flush they can make a substantial payment to principal.

Ask yourself whether you are disciplined enough to make the payment to principal when you aren’t obliged to.

Buy More House: It is common for families to begin with a "starter house", then move into a more expensive house as their incomes rise. This process of "trading up" carries high transaction and moving costs.

You can avoid these costs by skipping to the second house now. In the short term, this will cause a cash flow strain, but the IO mortgage may make it manageable.

Ask yourself whether you are comfortable with the risk that the expected higher income won’t materialize.

Invest the Cash Flow: For most homeowners, paying down mortgage debt is the most effective way to build wealth. Nonetheless, some may build wealth more rapidly by investing excess cash flow rather than paying down their mortgage. For this to succeed, their return on investment must exceed the mortgage interest rate, since that rate is what they earn when they repay their mortgage.

A valid example is the young borrower with a long time horizon who invests in a diversified portfolio of common stock. This should generate a yield of 9% or more over a long period. Another are business owners who might earn a high return investing in their own businesses.

Ask yourself whether you really will invest the excess cash flow, as opposed to spending it; and whether you have a firm basis for believing that your investments will yield a return higher than the mortgage rate. I don't recommend it as a wealth-building strategy for most borrowers. See Is Unused Home Equity a Missed Fortune?

Quick Capital Gain: An interest-only (IO) is the instrument of choice in a quick turnover situation if you are trying to maximize the amount of house you can buy, and are limited by your income. The IO option lowers the required initial payment, which allows you to qualify for a larger loan amount.

This is why buyers in markets undergoing strong price appreciation, who are looking for quick capital gains, gravitate to IOs – or to their big brother, the flexible payment (option ARM), which has even lower payments in the first year than an IO. See Questions About Option (Flexible Payment) ARMs.

The more expensive the house they can buy, the larger the expected capital gain. However, if you don’t need an IO to qualify for the house you want to buy, it is not the best choice in a quick turnover situation. See Is Interest-Only Best For a Quick Turnover?

Allocate Cash Flow to Second Mortgage: John Doe finances his home purchase with an 80% fixed-rate mortgage (FRM) at 5.5%, and a 20% HELOC at 7.75%. The FRM is IO, and Joe uses all his available cash flow to pay down the balance on the HELOC. This makes sense because of the higher rate on the HELOC, and the possibility of future rate increases.

Payment Responsive to Principal Reduction: On most IO loans, whether fixed or adjustable rate, the monthly mortgage payment will decline in the month following an extra payment. This is the only type of mortgage that has this feature. On a conventional FRM, the payment never changes while on ARMs, the payment doesn't change until the next rate adjustment.

Some borrowers find this feature extremely convenient. For example, a home purchaser who must close before his existing house is sold may want to use the proceeds of the sale, when it occurs, to reduce the payment on the new mortgage. On many but not all IOs, a large extra payment reduces the payment in the following month

On some IOs, however, the payment doesn't change until the anniversary month, and on others it does not change until the end of the IO period. If you are contemplating an interest-only loan and find immediate payment adjustments in response to extra payments a highly desirable feature, ask about it. See When Will Extra Payments Reduce Monthly Payments?

What Hazards Should YouWatch Out For?

The major hazard is being deceived into accepting an interest-only mortgage that does not meet any of the suitability tests described above. The deceptions are about alleged desirable features of IOs that don’t in fact exist.

Borrowers can immunize themselves against most deceptions by remembering one critical fact. If two mortgages are identical except that only one has an interest-only option, lenders view that one as riskier. The reason is that, after any period has elapsed, the loan with the IO option will have a larger balance.

Deception 1: An interest-only loan carries a lower interest rate. Lenders usually charge a higher rate for an identical loan with an interest-only option, for reasons indicated above. I have never seen a price sheet in which a lender quotes a lower rate on an identical loan with an IO option, though I am told it happens; this is not a perfect market.

The deception arises from comparisons of apples and oranges. Most interest-only loans are adjustable rate mortgages (ARMs), and ARMs have lower rates than fixed-rate mortgages (FRMs). ARMs with the IO option have lower rates than FRMs because they are ARMs, not because they are IO.

Deception 2: An interest-only loan allows the borrower to avoid paying for mortgage insurance. Since loans with an IO option are riskier to the lender, the option cannot cause the disappearance of mortgage insurance.

Any IO loans with down payments less than 20% that don’t carry mortgage insurance from a mortgage insurance company are being insured by the lender. The borrower is paying the premium in the interest rate rather than as an insurance premium.

Deception 3. On an ARM with an interest-only option, the quoted interest rate is fixed for the interest-only period. It may or may not be. The interest-only period is the period during which you are allowed to pay interest only, usually 5 or 10 years. The period for which the initial rate holds can be as long as 10 years or as short as one month.

Where the initial rate period is 3, 5, 7 or 10 years, the interest-only period is likely to be the same. Where the initial rate period is a month, 6 months or a year, the interest-only period will probably be longer. These are the cases where deception is most likely to arise.

Deception 4. It is less costly to amortize an interest-only loan. This is patently ridiculous, but some variant of it keeps popping up in my mail.

There is no magic connected to amortizing an interest-only loan. A borrower who takes an interest-only option but decides to make the fully amortizing payment instead will amortize in exactly the same way as the borrower who takes the same mortgage without the option.

...


so basically, this is similar to leasing a vehicle, allowing people to buy more house than they can really afford. So, I'm sorry, Patricia Guerrero, that you lost your job, but you probably wouldn't be broke a mere two months later if you had been more prudent with your finances.

[Tully Mars]

For What Types Of Borrowers Are Interest-Only Mortgages Suitable?
Interest-only mortgages are for borrowers who have a valid use for a lower initial required payment, and are prepared to deal with the consequences.

So this loan isn't really good for anyone. Not the borrower and as we're now seeing on the thee "street" not the lenders.

I guess maybe this loan is good for the person selling the house to the person getting the cash this way. Other than that it sucks all the way around.

[Cynthetiq]

I believe th IO loans are only good for the flippers who were gambling already, a little more gamble is just a little more gamble.

[Strange Famous]

Personally I think having savings is the worst thing you can do.

The best thing about my situation is I have no assets. None of my creditors can do anything to me because I dont own anything whatsoever.

Then again, I dont have any dependants... so I only have to take care of myself, and Im pretty sure I can always do that, I dont own anything much that Id be THAT upset if I lost it.... if I lost my job I just wouldnt pay my creditors anything - they can only legally take what you have in the first place!

[Cynthetiq]

Originally Posted by Strange Famous

Personally I think having savings is the worst thing you can do.

The best thing about my situation is I have no assets. None of my creditors can do anything to me because I dont own anything whatsoever.

Then again, I dont have any dependants... so I only have to take care of myself, and Im pretty sure I can always do that, I dont own anything much that Id be THAT upset if I lost it.... if I lost my job I just wouldnt pay my creditors anything - they can only legally take what you have in the first place!

can you elaborate on the savings thing?

or do you mean in your situation having no savings is a good thing?

[Strange Famous]

I guess it depends on what you want to do in life.

For me, savings have no real value because I dont want to settle down, no one else relies on me and I dont rely on anyone else. I've never really had a "home", just lived in different apartments and shared houses and so on all my adult life. I dont have a nice car, I spend my money on living the lifestyle I like. I am not proud of running up as much debt as I have, but broadly I would say my perfect lifestyle would be to spend every penny I had on having fun and not one penny more (the spending a few pennies more has been my downfall)

But yeah, its not for everyone. If you have a family or even a serious girl, it isnt so easy to take that kind of attitude.

[Tully Mars]

Originally Posted by Strange Famous

I guess it depends on what you want to do in life.

For me, savings have no real value because I dont want to settle down, no one else relies on me and I dont rely on anyone else. I've never really had a "home", just lived in different apartments and shared houses and so on all my adult life. I dont have a nice car, I spend my money on living the lifestyle I like. I am not proud of running up as much debt as I have, but broadly I would say my perfect lifestyle would be to spend every penny I had on having fun and not one penny more (the spending a few pennies more has been my downfall)

But yeah, its not for everyone. If you have a family or even a serious girl, it isnt so easy to take that kind of attitude.

It's not a bad plan as long as you don't ever age.

[Strange Famous]

well, I'll worry about THAT when Im old

[Charlatan]

The most important thing about savings, even more than retirement funds, is fuck you money. Having enough savings gives you the ability to leave a job that is not a good situation.

[Cynthetiq]

Originally Posted by Charlatan

The most important thing about savings, even more than retirement funds, is fuck you money. Having enough savings gives you the ability to leave a job that is not a good situation.

cue the Yello Song (from the end of Ferris Bueller's Day Off)

Oh yeah....

that's exactly how I started saving money. I never saved money. I smoked, drank and shat it all out. For years. I don't even want to know how much money that was...

One day I realized I wanted to be able to say to the boss, "Screw you guys, I'm going home."

Now when the boss says,"Jump!" instead of saying,"How high?" I pause and think about if I want to jump or not.

[Charlatan]

Exactly!

[tisonlyi]

^^^those last 3 messages are 100% da troot, homies.

Aside from that, we live in cultures which bombard their citizens with the message of BUY BUY BUY, NO! BUY MORE! every waking minute of every day... Many people live almost 100% to the limit of what they can afford, because they're encouraged to and, in many cases, because they don't know poverty and have never experienced a real reverse in an economy.

That said, not having your "Fuck you, buddy" money or easily saleable assets to hand is likely to be a one-way street to ohnoesvile

[Tully Mars]

Originally Posted by Cynthetiq

cue the Yello Song (from the end of Ferris Bueller's Day Off)

Oh yeah....

that's exactly how I started saving money. I never saved money. I smoked, drank and shat it all out. For years. I don't even want to know how much money that was...

One day I realized I wanted to be able to say to the boss, "Screw you guys, I'm going home."

Now when the boss says,"Jump!" instead of saying,"How high?" I pause and think about if I want to jump or not.

Ditto.

[Yakk]

Originally Posted by Strange Famous

well, I'll worry about THAT when Im old

Warning: Do not be the above person. When costs go up by a factor of 2, your employment pospects tumble, and you hit a depression streak: you end up on the street, dead.

There are costs to saying "fuck you" to long-term gain for short-term pain.

That credit problem? That isn't bad luck. That is what is expected to happen when you ignore long-term for short. It isn't a surprise to anyone who thinks it through.

The lady in the OP? I'd expect it to happen. She was gambling on everything being hunkey-dorey forever, just because it had been hunkey-dorey for a handful of months or years.

Trade off long-term wealth for short-term wealth, don't invest in attempts to deal with likely and typical downturns, and you are fucked. What is worse is that you deserve it: you chose to burn your income on short-term games rather than long-term benefits, so in the long term you are worse off.

Originally Posted by Cynthetiq

Now when the boss says,"Jump!" instead of saying,"How high?" I pause and think about if I want to jump or not.

Exactly.

The worst part is, spending money on shits and giggles is a horrid way to actually feel happy, good about yourself, and stuff that most people are aiming for.

So people who burn money on short term pleasure end up enslaved and they feel worse than the people who find ways to be happy without throwing good money away after bad.

It is a trap. A giant, gleaming trap. Get out of it now.

If you refuse to, feel free to fall into it and enjoy the tasty meat that is the bait, but don't expect me to feel bad for you when you are at the bottom of the pit, trying to gnaw your foot free. Learn some personal responsibility.

Heck, learn social responsibility: build a network of people who will bail you out of bad situations.

And yes: I fall into the trap sometimes. I sometimes burn my long term benefits for my short term pleasure. I fuck up. That doesn't mean I cannot view some of my actions as bad ideas!

[smoore]

Late to the party but...

IO loans are good for flippers and disciplined contractors (those that don't have a set wage). You take an IO loan for a fixed amount that you KNOW you can cover. When the month is good you pay principle when it's bad or you need to replace equipment you just pay the interest. You can get another IO loan in 10 years once your original must be paid normally.

This woman makes me sick. I'm sorry you can't sell your house but c'mon... coach bags and tiffany bracelets? What sort of car does she drive? Plus, I'm lower middle class but I'm no dummy. There is enough food in this house to feed my family for three months. After two months lots of the meals would be rice and beans but we'd eat.

[genuinegirly]

Originally Posted by smoore

...lots of the meals would be rice and beans but we'd eat.

Yes. That's key. Knowing how to meet basic nutritional needs without lofty expenses.

Tt gets frustrated every time he hears a news report that talks about correcting the mortgage issues with bailouts. He's concerned about the market not mending. He's also concerned that it'd screw up chances for people like us, who are just starting out, looking at buying a home soon, with good credit.

I don't know what to make of it, myself. I do hope that people will look out for their families and see to basic needs first.

[spindles]

Well, I'm in the not a lot of savings in the bank group. Having said that, we've been renovating so any free cash we had lying around got mostly swallowed by that. In OZ we actually have the opposite interest rate picture to the USA (our rates have been rising consistently for a few years and *fingers crossed* they have just about topped out). My mortgage payments are a significant portion of my income and my wife does not work (well, nothing paid - she'd say looking after two small boys is work enough for a few people ).

We have planned to pay off (now the renos are basically done) significantly more than we need to, as anything going into the mortgage is reducing the principal + the loan has a re-draw facility so if you really *need* the money you can access it.

If I lost my job tomorrow? I have contingencies (i.e. people I would go to for help) and I would definitely take *any* job I could get...

If I died tomorrow or was incapacitated? I'm insured - the house would be fully paid off and there'd be a bit for my wife and boys left over.

[smoore]

If you have an ARM (as it seems from your post) get that thing on a fixed rate ASAP. The world credit markets are about to go haywire. Get a rate locked in now, for your own sake.

Originally Posted by spindles

Well, I'm in the not a lot of savings in the bank group. Having said that, we've been renovating so any free cash we had lying around got mostly swallowed by that. In OZ we actually have the opposite interest rate picture to the USA (our rates have been rising consistently for a few years and *fingers crossed* they have just about topped out). My mortgage payments are a significant portion of my income and my wife does not work (well, nothing paid - she'd say looking after two small boys is work enough for a few people ).

We have planned to pay off (now the renos are basically done) significantly more than we need to, as anything going into the mortgage is reducing the principal + the loan has a re-draw facility so if you really *need* the money you can access it.

If I lost my job tomorrow? I have contingencies (i.e. people I would go to for help) and I would definitely take *any* job I could get...

If I died tomorrow or was incapacitated? I'm insured - the house would be fully paid off and there'd be a bit for my wife and boys left over.

[Cynthetiq]

Originally Posted by genuinegirly

Yes. That's key. Knowing how to meet basic nutritional needs without lofty expenses.

many people no longer know what a nutritious meal is... or how to make it themselves. while I eat out all the time. i do know how to cook at home and make things from raw ingredients. it is a pain in the ass to make my own sauces, but not impossible, and also not really needed in times of crunches.

[shackie]

The original idea behind adjustable rate mortgages and interest only, was to enable people that couldn't qualify for a "standard" mortgage to be able to get into a home and then refinance to a ixed rate mortgage when their credit situation improved. Unfortunately, the lenders and realtors began to get money hungry and used these types of homeloans to get people into homes they couldn't actually afford. Not that it is the lenders fault entirely. As a home buyer, or purchaser of anything that is being financed, it is the purchaser's responsibilty to ensure they can actually afford the payments on what they are buying. You never hear of someone buying something with no interest no payments for 12 months being shocked when their payments come due. Because they understand the terms. With her actually having actually being a loan processor, she should have known she needed to have a good savings plan to protect her investment. Unfortunately, she was like everyone else that was in denial about the "housing bubble". Now she is paying the price, and more and more people will be joining her every month. Hopefully, everything will work out for her in the future.

[Sensei]

I'm single, 26 years old, and make less than $45,000/year. Some of my other single friends my age have already bought houses so that idea has crept into my mind. Stories like these (about people who earn far more than I do) really frighten me about taking on a mortgage.

[Mister Coaster]

I'm with the crowd that says this chick gets what she deserves. I make considerably less than $70,000 a year and support my wife and daughter. (as of a week ago, 2 daughters) And we have enough savings to last well over a year, and that would be without sacrificing anything.

Lenders in California were really pushing the Interest Only loans a few years ago, and this chick is just another victim. The California market was overinflated, and everyone knew it, but they wanted to keep doing business, so they got people who otherwise couldn't afford to buy a house there to do the IO thing. Sucks to be her, but being ignorant isn't an excuse.

If she had any sort of financial intelligence, there is no way she'd be broke after 2 months coming off a $70,000 a year income. Cry me a river, boo hoo. Sell your f'ing jewelery and report that story to CNN.