Letters

Letters 8-18-2014

The Climate Clarified

Climate change isn’t an easy subject. A class I’m taking compared it to medicine in a way that was helpful for me: Climate scientists are like planetary physicians. Our understanding of medicine is incomplete, but what we know is useful...

Beware Non-Locally Grown

The article “Farm Fresh?” couldn’t be any more true than exactly stated. As an avid shopper at the local farm markets I want to know “exactly” what I am buying, from GMO free to organic or not organic, sprayed or not sprayed and with what...

Media Bias Must End

I wish to thank Joel Weberman for his letter “Seeking Balanced Israel Coverage.” The pro-Palestinian bias includes TV news coverage...

Proud of My President

The world is a mess. According to many conservative voices, it would not be in such a mess if Obama was not the president. I am finally understanding that the problem with our president is that he is too thoughtful, too rational, too realistic, too inclined to see things differently and change his mind, too compassionate to be the leader of a free world...

Home · Articles · News · Features · A Perfect Storm ... of Bills
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A Perfect Storm ... of Bills

Anne Stanton - November 3rd, 2005
Recent headlines read like the gathering of a miserable little hurricane.

Natural gas bills soaring
Overdue credit card bills hit record
Your monthly credit card minimum payments may double
State gasoline prices hit record: TC area costs most per gallon

If you are lower or middle class, it’s time to brace yourself.
Take your credit card -- to the wastebasket. Kidding (sort of). But here’s the news. Our ever vigilant government1 has pressured credit card companies to double the minimum monthly payment they require on consumers’ credit card balances. Your payment may soon jump from 2% to 4% of what you’ve borrowed. In shorthand, that means your minimum payment will likely double.
This is a good thing for the average Josephine because it means she’ll pay off her balance much quicker. It’s a bad thing if she can’t come up with the money and misses her payments. And if she does that, the credit card company will most likely hike her attractive “fixed” 3.99%” interest rate to 22% or even to 31%.
As a note, credit card customers are already struggling. A record number of them -- nearly 5% -- are more than a month late on their credit card payment. Meanwhile, Americans personal savings rate dipped to a record low of negative .6 percent in July. That means that Americans were dipping into their savings to pay their bills.
Want more bad news? If you have an equity loan or any line of credit with a variable interest rate, your minimum payment is going up. That’s because the Federal Reserve began to steadily tighten credit since June 2004, causing the commercial banks’ prime lending rate to rise to 6.75 percent.

So how is this adding up so far?
Well, let’s assume Josephine has amassed the average credit card debt of close to $10,000. So her minimum monthly payment will increase from $200 to $400.
Okay, now add the higher cost of natural gas to heat her home -- from $60 to 190.
And, add to that the higher cost of gasoline for her car -- for Josephine, who lives 12 miles out of town, gas costs $104 more a month.
And her equity loan payment on $20,000 has gone up $50 per month.
Total damage: $414.
For people who are already skimping or working two jobs, winter is looking grim -- if you never had seasonal affective disorder, you will! And, no, voting your children off the island is not an option.
For most people, money is a very personal thing, something to suffer alone. There aren’t exactly support groups for people who live paycheck to paycheck. Who wants to admit it? And if, say you do want to share your misery, watch your friends run away. They fear you’ll ask them for a loan.
But this winter, rest assured, you’re not alone. There are thousands of stressed out people just like you. Heck, even a woman, leaning her well-coiffed, brunette head out of a Mercedes SUV, was recently heard to say that she is coloring her own hair from here on out, and… doing her own nails! Obviously this is getting serious.

A chat with a bankruptcy lawyer
For a bankruptcy lawyer, Paul Bare sets a good example. His office reflects a certain, shall we say, restraint in spending. No leather couches and plush settees here. Bare meets with clients in a small conference room, a box of tissue on hand for the weepers.
If there is any expert on how people can get themselves in trouble, it’s Bare. He hears hundreds of stories a year. The story he hears most is the one from people who get seriously sick and don’t have health insurance or inadequate insurance.
Number two is divorce: “Divorce is an emotional, not a financial decision. But you take a husband and a wife who are both working and barely making it, and all of a sudden, you have two houses, two utility bills, and child support one can’t afford and the others says isn’t enough.”
The third top cause of bankruptcy is job loss. “That’s becoming a bigger one. You lose your job and can’t find a similar one at comparable pay.”
This is becoming a bigger problem as the auto industry slowly sinks and jobs move overseas. This affects many businesses in Northern Michigan connected to the industry.
And the fourth reason has to do with a failing business. The owner overdid it with credit cards and bank loans trying to keep the business afloat.
Single moms with preschool children are at risk because of daycare costs. They might earn enough to cover the bills, but over their heads when daycare is thrown in. New retirees sometimes go bust because they fail to let go of their full-paycheck lifestyle. And this is weird -- many begin to gamble at the casinos, much to the chagrin of their adult children in so many ways.
Americans, ever the optimists, make up the difference with their credit cards, certain that better times are ahead. But in two, three years, they’ll have a serious problem, Bare said.
Bare pauses. There is one more category -- the people you always hear about on programs like Rush Limbaugh. The people who are just plain irresponsible. They spend, spend, spend, live the high life, and, boom, declare bankruptcy. They are out there, but they are definitely in the minority, Bare said.
“The frustration I feel is when I talk to groups of big people and hear, ‘If people were just more responsible, saved more money they wouldn’t get into this situation.’ When I look at the real world, it just doesn’t apply. Every dollar is going for fuel, groceries, and car payments. It’s a very fortunate family that is putting money aside. How is it a lack of personal responsibility to have a health emergency with inadequate health insurance? How many people purchase additional health insurance that their employer doesn’t provide? Very few. They can’t afford it.”

The five stages of despair
To borrow from Ellen Kubler Ross, there are five stages to confronting your debt: Denial, anger, bargaining, depression, and acceptance.
By the time people walk into a bankruptcy lawyer’s office, they have already gone through all of them. They have seen a credit card counselor, they have talked to a minister, they have drained the patience of their family. There is no way out.
Some are in what Bare calls the first stage of bankruptcy: they can’t pay their credit cards. They are behind and there’s no hope of ever catching up.
The second stage case is more serious. The person has played credit card roulette and the chips are getting called in. It works like this: a person has used their entire paycheck to pay their bills and now relies on credit cards for their retail purchases such as groceries or school clothes.
Then they start getting low-interest cash advances to pay their credit card bills. When one credit card maxes out, they get another.
These second stagers get into a lot more significant debt—in the $40,000 to $80,000 range of credit card debt.
“My experience is that people in business tend to put themselves in more trouble,” he said. “They have the ability to juggle their money and get themselves in trouble before they crash. For them, hope springs eternal. They’ll get a better job, maybe sell the house.”
But then reality hits. The housing market is flat. The new job never materialized. There is no hope!
OH MY GOD this article is depressing.

Time to rethink your life?
Number one, don’t freak out. Yes, people in deep financial trouble tend to get very grouchy with their families.
Secondly, VIGILANTLY check the interest rate on your credit card statements each month (after cutting them up). If they jump, immediately call your credit card company and tell them you want the interest rate reduced. They’ll usually do it.
If you’re starting to hit the skids and just can’t pay your bills, do seek a professional for help. You’ll lose that feeling of struggling alone, and these pros are experienced in negotiating debt. For example, they can help you with credit card companies, which might (please read that over again -- MIGHT) accept a cash settlement thousands less than what you owe them. This forgiven debt is considered income, but hey, it’s something.
When it comes to fuel oil, you’re likely aware that 12-month “budget” plans are available, so that you can space out your bills. The Michigan Public Service Commission has also set new rules to protect senior citizens and impoverished residents from shutoffs during the five coldest months. It also gives people five more days to pay their bills. But bottom line, the bill still must get paid.
Drop your pride and talk to your friends about what they do to save money. You’ll be amazed what you can learn.

The spiritual side to money
This whole money thing can be rather painful as your inner adult screams in your ear about over-spending, shame, and how your grandma would never use credit cards.
But don’t beat yourself up. Instead, reframe your thinking about money and consumerism. Our own Stephanie Mills from Glen Arbor wrote an uplifting book, Epicurean Simplicity, which nudges the reader to slow down and enjoy the simple and much cheaper sensual pleasures of life such as a walk in the woods, bicycling, good food and good friends. A beautifully written book, this is my favorite quote: “Consumerism is as destructive of our humanity as it is of nature …”
Another book, useful for those with children, is Living Simply With Children: A Voluntary Simplicity Guide for Moms, Dads and Kids Who Want to Reclaim the Bliss of Childhood and the Joy of Parenting.
Author Marie Sherlock implores parents to veer away from the consumerism route, and instead to nurture a child’s inherent imagination and love of nature. How many times, she asks, has a parent bought an expensive toy, only to see their child playing with the box for weeks while abandoning the toy in the corner.
Your kids, she says, can learn how to “focus on the good stuff, which isn’t stuff at all.” An uplifting message during these hard times.

1Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation




 
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