I’m the middle class who is being squeezed out. And I am pissed.

It took me months, but I have finally figured out what happened. I haven’t blogged about it partly out of embarrassment and partly because I didn’t think anyone wanted to hear about it during the holidays. But I know what’s happened to the Applebums, is happening to most everyone around us.  We can’t continue to deny the reality any longer. It seems we are all really struggling and the silence between us is a huge part of what got us all here in the first place.

Let  me begin by saying, I consider myself very good with money. I have a business degree, I have done bookkeeping and billing for a business, and am a saver by nature. I am the one who does the money for the family, so I am the one who is accountable. It’s not soley my fault that we are here, but I should have caught it sooner. That’s why I was all the more shocked when I realized how bad it had become. Because for a long time, I felt like we were pretty much on track. And then all the sudden I looked up and it’s like I had been asleep at the wheel.

The Perfect Storm for Debt

We have been slipping a little for a long time and I wasn’t seeing it. This is the part I had to figure out: how did I miss this? So for the last few months I have been CSI all over our financial situation, trying to understand how it stayed below my radar for so long. These are some of my discoveries:

1. Everything changed slowly

Our financial situation has changed greatly, but it happened in incremental changes so we never really felt it or even acknowledged it. For example, in the last 5 years, I have left a job, had one child, then a second. All while continuing a remodel on our house that started while I was still teaching.

Every single one of these actions could have been absorbed by our budget, but we never recalculated after ALL four had taken place. And I think we still live in that mindset that we have the same amount of disposable income we had before kids. And we don’t. In fact, I’m afraid that upon closer scrutiny, we will discover we have NO disposable income. Yeah, that’s why I have been so cranky the last few months.

2. Banks are exploitative and sneaky

Banks and credit institutions have been very clever in making our own debt obscure to us. Now I want to be very clear, me and Mr. Applebum are responsible for every single decision that got us here. But the banks just kept extending us credit that we never wanted and then made it more and more accessible to us.

For example, we do all of our banking with Big Corporate Bank because it is convenient. And know that our bank is one of the ones giving back tarp funds so they can get their bonuses. So we have  a home loan, bank accounts and LOC  all through this one bank. My money philosophy has always been: No debt, so I have always been very careful to pay off credit cards at the end of each month.

But then they just kept lowering and lowering the LOC interest rate. It got as low as under 3% at one point. I know right? So we started using the LOC to pay off part of the credit card balance. It was initially just to utilize the great interest rate for the the remodel costs. However, eventually the overflow covered by the LOC was not remodel, it was overspending. But we kept paying the credit card balances off at the end of each month,  so I felt like we were still on track.

And then we switched to online banking, and transferring money in and out of our line of credit was as easy as 1-2-3.  Click, click, you  have just added another $1,200 to your debt. It feels like nothing. And whereas, before kids we could dig ourselves out of a $1,200 hole in a couple of months, these days, not so much. Thus the hole has been growing and growing, just off in the distance. And then one day in November, I stumbled across this giant hole  and I was like Where in the hell did this come from?!

3. Real income has decreased, all cost have increased greatly

We haven’t had a pay increase in years. Five years ago, Mr. Applebum started a job that paid pretty well with good benefits. His salary included a bonus. For the last three years, the company has “frozen” all raises, including cost of living increases. The cost of living increases are laughable, something like 3%. But we haven’t even gotten that. And now, because of greed at the top for the last few years, it looks like no bonuses this year. We count on that bonus as part of our income, but because of wealthy others flagrant abuse, our family is suffering.

So for the last three years, our net income has decreased, while the cost of everything has increased. Our medical insurance costs have risen steadily, as has all our bills: phone, electric, gas, garbage, sewer, car and home insurance.  Our house tax has doubled in ten years. DOUBLED. Used to be $1200 every six months, now it is $2400. EVERY SIX MONTHS.

And again, we just didn’t realize how much things were changing around us. We viewed each of these increases individually and they didn’t seem like much. But when I start to calculate the percentage increase, it’s a lot.

And that’s on top of the ever increasing cost of living. Before the recession, prices were creeping up as inflation crept in. And since the recession, things are only getting more expensive. Our grocery bills are considerably higher and as are the prices on most all consumer goods. Last September,  I bought a pair of loafers at Macy’s for $95. Those same shoes now cost $110, that’s a 15% increase in just over a year! That’s what scares me most, ya’ll.

It’s been like a slow, slow squeeze like by a boa constrictor.

And now that I see it, I can’t un-see it. We have to admit that we can not afford the standard of living we have known for a decade. We will have to cut back to slowly dig ourselves back out of this mess. And this all has to be done in an economy that has not yet bottomed out.

There is hope

We are being given the chance to replace some bad habits with some good. We don’t want to live and continue to raise children in this culture of consumption. I want to teach my children values such as stewardship, resourcefulness and thrift.

I do not think the solution to our financial woes is to get this ghastly machine back up and running. The greed at the top of this food chain is astounding and unconscionable.  We have no choice but to disarm the machine. I’m scared too, I’ve gotten used to a few luxuries myself. But we can’t keep this up. It is costing too many people too much. We have to try something different. And that begins with accepting that should not return to our previous standard of living.

Related Entries:

The Belly of the Beast

The Story of Stuff

The Story of Stuff, Part Deux

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7 Comments (+add yours?)

  1. Pamela
    Jan 14, 2010 @ 13:22:40

    You can’t believe how timely this post is. I have found myself in a similar situation after having a child, some furlough time off without pay, and my husband getting laid off. Luckily, we have been able to find a solution to pay off the LOC and credit card debt by refinancing the mortgage. We had been able to remain debt free for so many years, but then had a couple of emergencies that required the use of credit…then once it started to creep up, it just got worse and worse. I am hoping once we close on the refinance, we can go back to staying debt free again.

    Reply

  2. Cath
    Jan 14, 2010 @ 15:07:00

    You know, I don’t live in the US, but most of my friends are discussing these very same issues. And it’s really weird, but as a single person who has always made minimum wage and no more, and always, always struggled financially I consider myself very lucky right now.

    I’ve always been poor. I never have what is termed disposeable income. I pretty much live pay to pay, buying only the basics and scrimping and saving for what others consider necessities. For example, I’ve had to make several sacrifices for my internet connection. I consider it worthwhile, but I don’t consider it essential. I only just recently bought a car, because it was a huge bargain at $500. I’ve lived without one for nearly 20 years, even though I live in the sticks with a half hour walk to public transport. I’ve bought second hand clothes and reduced price groceries for years. I use coupons wherever possible.

    I’m not bragging here, I assure you. My friends and family are suffering in the same way you are. And I feel for each and every one of you. I really do. I used to envy them for their ability to eat out when they wanted, buy new clothes, renovate and redecorate, trade up to a new car every other year. Now, it’s a struggle to be able to maintain that and it sucks that it should be so. For years my lifestyle has been considered pitiable. Because it is. It should not be the new default lifestyle of the middle class just because the rich minority don’t want to relinquish their cherished life of ease and luxury.

    The only reason I consider myself lucky is that I haven’t actually had to change the way I live. I’ve just had to watch as those around me who have struggled to achieve a better way of life have had to watch it fall down around them.

    Reply

  3. Tom Marsland
    Jan 14, 2010 @ 19:44:38

    Great post. You captured some of the situations we’ve been going through here at home exactly spot on. Combined with the car loan, student loans, personal LOCs and such, we’re in the hole a decent amount and it took time to realize that we as well, don’t have the same amount of disposable income that we used to.

    Tom

    Reply

  4. runningwithavagina
    Jan 14, 2010 @ 20:20:22

    I loved this post. I’m glad you’ve investigated what happened and have a plan for getting back on track!

    Also I highly encourage you to use the haterade & hater tots tag as well! Thanks for adding me to the blogroll 🙂

    Reply

  5. Tom Marsland
    Jan 16, 2010 @ 05:36:37

    One more comment that I thought of. If you’ve ever looked at mint.com for tracking spending trends, I highly recommend it. It’s something my wife and I are using to help get back on and stay on track.

    Reply

  6. Dagney
    Jan 16, 2010 @ 23:08:48

    Oh my, you must have placed a tape recorder in our house on Thursday and Friday afternoon. My husband and I just hit the tight wrap of the “boa constrictor effect.”

    We have the same job, which has not seen a cost of living raise in over 5 years. Then this year, our pay was cut, and we were “asked” to pay more into our own pensions. We are now making 2K less per month, (between us), which we had not really noticed, until the last two weeks…

    I was paying bills the other day, which used to be a breeze, with enough left over for savings and nice dinner out. (We’re talking one dinner here). We are the middle of the middle class.

    The term “didn’t see it coming” will be ringing in my head, I mean you just nailed it right there. My husband and I pride ourselves on being frugal. Our vehicles are older and pedestrian, we don’t own boats, and other expensive toys, we clean our own house, I don’t get manicures, we use energy efficient bulbs, we have skylights to save on electricity, we have never run the AC in our house, we use a fireplace for heat we aren’t striving to keep up with every fad in phones, technology, neither of us are a mental mess that needs to go on spending sprees or drinking sprees with friends… you get the picture. Now all of a sudden, a matinee movie and lunch at a low-key noodle house are MAJOR luxury expenses.

    This all came to a head on Friday when we were on the phone with USAA, attempting to plead our case for an extended grace period on a bill, which was met with a line of questioning. My husband explained, (with the patience of a saint), that we had taken a rather drastic pay cut, and our financial straits were not due to partying in Bahamas, but rather, our jobs. More questioning followed.

    And…then…I…lost it. I just lost it.

    I started screaming at this woman on phone. I mean, REALLY screaming. “What part of two thousand less per month is a confusion here?” I was out of control. My husband explained, (with more patience), that he had been a loyal customer for many years, that his father was a loyal customer for many years, etc… Could we possibly have this bill pro-rated over the year? No. No. and more No.

    So we sat down on Friday and started hammering out some new ground rules. No movies, no On-Demand movies, no dinner out, no eating lunch out at work, no extra anything, no water service, no organic everything; ever so infuriating as our only “extras” amount to a whopping $300.00 per month, this includes the gym, and my jiu jitsu classes; which are not really extras, more like investments in health and life (we are obsessed with being proactive about our health and well-being).

    The good? Well, plenty, to let my optimism out for a bit, we will read more, we have started cooking at home more, we are enjoying more sunsets at home, instead of having a coffeehouse/bookstore day.

    I don’t mean to sound like some kind of spoiled snarky brat, I know there are plenty of folks who are worse off than us. It’s just that we have doing the RIGHT things, with saving, investing in our future, being healthy, being frugal, working hard…and now we are having conversations about how to extend a block of tofu.

    Oh sigh…thank you for your words, how refreshing to know it’s not just us.

    Reply

  7. Trackback: Repair It! « Bonita Appleblog

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