Are You in Need?

[Traveler]

The last year has been very hard on the economy. 1/3 of the workers at the company where I am currently consulting have been laid off. Many have seen their investments and retirement shrink as much as 40%. I am wondering – how many on the forum need help? Currently my wife and I are doing okay and are able to help our children and extended family members. One of our children has moved back home and another plans to move in at the end of the year and rent out his house to help keep ends together.

I am just wondering if anyone else is experiencing stress.

The Traveler

[lindsayjane]

I am lucky to have a job that won't really be affected by the economy. I work in an assisted living community, and this industry is actually always in need of people. It's a lot like the need for nurses. CNA's, caregivers, etc. are always secure because there is such a large and growing population of elderly. I am also in management so my income is enough that I don't have any trouble paying bills with plenty left over. My biggest advantage right now is that I don't own a house!

[Guest Godless]

My biggest advantage right now is that I don't own a house!

Ditto. I was actually discussing the economic meltdown the other night with a bartender and we both agreed that being bottomfeeders has its advantages. We don't have any of those big investments that keep disappearing. My heart definately goes out to all of the people who are struggling right now in these tough times.

[WANDERER]

Mortgage interest nine percent or thereabouts...but just dropped slightly by less than 1 percent. It went to 18% in our last recession...I was doing the figures to see if I could survive a worst case scenario...perhaps...I planned for it when I took on the house...but it would be very narrow if wages were cut and taxes were hiked, things became more expensive and more work requirements had to come out of my pay packet due to funding cuts. If unemployment rises and rent and mortys become impossible and families move out of the area, then I might be transferred: the numbers game influences everyone.

Further interest cuts are ahead. I think it will be okay. No worries on the job front...but probably will have to take on more of a workload.

I stress a little about an even worse recession and food shortages and continued drought. Will the mining boom carry us through? Will our dollar be low enough to ride out this recession? Food storage is getting closer to the one year level.

Currently I'm working on the three baskets method of filing problems: what I can do, what I can influence or hope for and what I can do nothing about.

I'm not in need. I got a job in our last recession and I did okay. I know how to make it through tough times. I worry and I shouldn't. And then I get guilty over worrying because people have it really tough and I have nothing to worry about in comparison. Self-induced stress. Silly huh.

[MorningStar]

My parents lost at least a quarter of their retirement now and my dad is 64. My husband's job seems to be stable, but he's been at the company for 3 years and still hasn't had a raise. He says no one has had a raise there, so we're looking for a different job, hopefully something with immediate benefits. I'm also glad we don't own a house because we would probably be stuck with something we don't like, as people were pressuring us to buy a "starter home" and move in 5 years. Wouldn't have happened. We would be in the starter home for a loooooong time. We rent month to month. If anyone in my family needs us to move in to help cover their mortgage, all we have to do is give 20 days notice here.

Our biggest financial challenges have been from unexpected medical bills and ths cost of gas.

[RachelleDrew]

Our 401k is small, so if we take a loss i'll try not to mind. We are in our early 20's, we've got plenty of time to make up the losses. Heck if they take half of it we'll only be missing like two thousand dollars.

We are very lucky, we own both of our cars with no payments left. Our house was willed to us, so after we paid off the gift tax we owed nothing. We are both in college, so while we don't make a lot at the moment, we don't have to worry about losing items like a lot of other people do. We can focus on school and our families instead of working ourselves to death since the only thing we owe are student loans.

Most of our friends and family are having a hard time.

[Prodigal_Son]

I'm self employed. I offer a luxury service. So far I've felt a pinch, but nothing too brutal. But, because I offer a service that most could do for themselves, it's entirely possible that I'm going to see a massive falling out as I try to secure work for next season...

[NeuroTypical]

My little family of four is not having hard times. I've sought layoff-resistant jobs, and I'm currently in a place where many people would go out the door before I do. And as things stand now, nobody is being shown the door. We have no debt, no mortgage because we prioritized paying it off ahead of buying goodies.

We've recently cut down on expenses, in order to fork more money into the market. For example, I've started bringing my lunch to work, so we'll have an extra $80/month to put into our kids 529 college plans.

By our reconing, stocks are cheap right now, and now is the time to buy. We're betting that this thing will have a floor, and then recover - just like it always has since the '20's.

LM

[HiJolly]

By our reconing, stocks are cheap right now, and now is the time to buy. We're betting that this thing will have a floor, and then recover - just like it always has since the '20's.

LM

If it's any consolation, the Church (Deseret Management Corp) agrees with you. They prefer not to lock in any potential losses - - no selling. They're living off cash for the time being.

HiJolly

[Maya]

The houseprices are still up around here, but it is more quiet and in some places the prices have got a bit down. Nothing special happening except that foodprices have gone up again, gasloline is lower than ever this year. Norwegean magazines look very positively to the future. I just got a nice taxrefund of a size of a months salary... We are going to by more storage food and fill the waterbottles.

[mightynancy]

My husband faces a possible layoff (works for a tech manufacturer) - I'm in education so I'm pretty recession-proof. My job doesn't pay enough to pay our bills, though. If I had to, I could get a better-paying job, but I love that my hours have me coming and going at the same time as my children. We can do nothing about what may happen, so I'm trying to be positive.

We're getting to be more and more environmentalist, and the bonus is that such an outlook is conducive to reducing costs! Before all this financial stress came on, we were already driving much less than before and using less energy in the home. :)

[rockwoodchev]

I'm going through this BIG TIME right now. My job is secure and we have more cash in the bank, than we owe on our mortgage.

My decision is about expanding. I'm poised on the brink of opening a new business for our family. It would causes us to incur debt to about 300K and secure a lease for an additional 110K.

The problem is listening to the other posts here. The business I'm looking at is a restaurant. $5-10/plate range and I'm very nervous about people not coming in for the exact reasons you are mentioning.

[Prodigal_Son]

I'm going through this BIG TIME right now. My job is secure and we have more cash in the bank, than we owe on our mortgage.

My decision is about expanding. I'm poised on the brink of opening a new business for our family. It would causes us to incur debt to about 300K and secure a lease for an additional 110K.

The problem is listening to the other posts here. The business I'm looking at is a restaurant. $5-10/plate range and I'm very nervous about people not coming in for the exact reasons you are mentioning.

A bird in the hand... I'd be paying off that mortgage in a heartbeat. President Hinckley always encouraged that...

[pam]

As times get tougher as I believe they will....when I'm struggling just to pay the day to day expenditures...going to a restaurant would be the first thing cut from my budget. I think would be the first for many as well.

[rockwoodchev]

Nahh.. Not in this situation. Financially, the worse thing I could do is to pay off the mortgage.

I've struggled with this concept for several years, but most every financial counselor will advise you the same. If you have a cheap mortgage, keep it. You're money will do much better elsewhere.

The logic is fairly simple. If you have a cheaper mortgage at lets say 5% and you have 100,000 left on the Mortgage. BUT, you have 100,000 in cash that you could earn 12% on in an investment. Financial advisors inside the church and out would advise you to keep paying on your mortgage, and do the investment. You net 7% increase.

President Hinkley encouraged people to be out of debt, except for school and house. Don't forget those 2 exceptions. They are very important.

Sure, I could pay off the mortgage, and in a year from now, I'd have 1 years worth of saved mortgage payments saved up. Or... I could start a business in which I employ 20 other people, teach my family work ethics, and earn enough to buy a new house.

Just,,,, is now a good time to start a business that depends on other people spending their money on my product...

[jadams_4040]

The last year has been very hard on the economy. 1/3 of the workers at the company where I am currently consulting have been laid off. Many have seen their investments and retirement shrink as much as 40%. I am wondering – how many on the forum need help? Currently my wife and I are doing okay and are able to help our children and extended family members. One of our children has moved back home and another plans to move in at the end of the year and rent out his house to help keep ends together.

I am just wondering if anyone else is experiencing stress.

The Traveler

I think we are all experiancing at the least "difficult" times; And many millions are really suffering a lot. this is the end result of political corruption and corporate greed; Of which i will not speak any further of because it absolutely makes me sick.

[Prodigal_Son]

Nahh.. Not in this situation. Financially, the worse thing I could do is to pay off the mortgage.

I've struggled with this concept for several years, but most every financial counselor will advise you the same. If you have a cheap mortgage, keep it. You're money will do much better elsewhere.

The logic is fairly simple. If you have a cheaper mortgage at lets say 5% and you have 100,000 left on the Mortgage. BUT, you have 100,000 in cash that you could earn 12% on in an investment. Financial advisors inside the church and out would advise you to keep paying on your mortgage, and do the investment. You net 7% increase.

This is HEAVILY FLAWED. You're not paying 5% because the interest is graduated. Pull out your last mortgage payment and calculate the percentage of interest vs. principle. Not until the last couple years of a mortgage are you actually paying near what you think your rate is. These loans are front loaded.

You may still be better off, but don't kid yourself into thinking 12-5=7, because it doesn't.

Not to mention the fact that investing right now is like Russian roulette...

President Hinkley encouraged people to be out of debt, except for school and house. Don't forget those 2 exceptions. They are very important.

Don't forget that he repeatedly stated that he paid it off just as fast as he could and encouraged others to do the same.

=================

I'm not picking a fight or anything. And I hope this doesn't come across as disrespectful. I just saw a flaw in the logic that seemed vital to understanding the problem fully.

Maybe I'm just too timid, but considering the state of affairs today, I'd say pay off your house so it's truly yours, and then go from there... Cash in the hand is one thing - a volatile and temperamental investing market is something else entirely. So my vote would be to play it safe. Build on a rock. A paid for rock. THEN move on to bigger and better things. That way, if the business fails, your monthly financial obligations are very minimal...

[rockwoodchev]

Hi,

I'm just passing on the logic I've been given by financial advisors for years. I agree on the P vs I schedule. Early in the loan, a person is paying mostly interest and very little principle. Currently on my loan, I'm paying just about 50-50 P and I.

I'm not sure I'd agree that the logic is heavily flawed however. When talking about the cost of money, one needs to consider what it is being used for. If the only debt that a person has is a 30 year mortgage, at say low 5's% and they are 10-15 years into it. Then I think the cost of that money is fairly low.

There is lots of material about this on the web. Click here and here for more information.

Generally speaking, if you have a very low mortgage rate, it is better to invest the money than to pay off your mortgage. It’s an interesting fact—the rate of return on your mortgage is the interest you’re paying on it. If you have a 6 percent mortgage and you’re paying it off, you’re earning 6 percent. If you can earn more than 6 percent in the stock market, you should probably put it in the stock market. But, on the other hand, pay it off in an expeditious way. It’s good to have it paid off, or at least mostly paid off, by retirement time.

So no.. I disagree that it is heavily flawed or even flawed at all. The exact numbers may be a bit off, but take a look at the two links above and see what I mean. Talk to a financial advisor. I'm not recommending that people keep debt, but when you have 2 alternatives, you need to consider 2 major factors. 1) What is the best financial advice, and 2) What is the best "Peace of Mind" advice.

I think for some people, they are interested in leveraging what money they have into more money, and others look at that mortgage and thinking they need to get out of debt as soon as possible. I'm just looking at the 1st situation.

Make sense?

Edited October 14, 2008 by rockwoodchev

[mominzion]

We are barely holding our noses up above water...if you can call it that. We aren't on the streets yet. I am very blessed because we purchased our home from my mom-in-law and she won't foreclose on us (not that we are at that point, but future security I guess). No bank owns any of it....that in itself is a relief!

My husband owned a business for 3 years that was basically a handyman thing...he worked for realtors that had to have a punch list done in order to sell the house. It was pretty lucrative, but then the real estate business came to a hault! So needless to say we needed to do something in a hurry. I am on disability so we couldn't make it on mine. Our economy in Albuquerque NM was nearly impossible to manage on basically one income....and him finding a job and add that income to my income, you might have a single person's income! Anyway our Bishop told us to move back to Mississippi. THis is where our original house that we bought from dh mom is. He also advised us to let our house go back to the bank (we couldn't sell it for what we borrowed on it). So basically our financial status is in the toilet. We are filing bankruptcy, and starting over. That is NOT an easy process either. I have no doubt that we will pull through. We won't be eating steak for dinner, but my babies won't be hungry either. I have been working my heart out canning, and preserving foods. Gathering essentials...etc. We have been more focused on what we have been taught throughout the years. Just too bad it took a crash in economy to wake us up. It does make it harder, but it is still doable.....I am proof of that. My children feel picked on because they don't have the coolest things in their peer groups, but it is agood lesson for them too. It just breaks my heart when my 12 year old son comes home and says, with tears, "Mom, do you know how it feels to be the one that has to ask..."what if we can't afford it" when the teacher wants money for things?" That one really got me. But what do you do? We are all in this together.

Side note....my husband has been through about 4 jobs since we've moved in March. He is now working in a factory as a full time employee with benefits....so hopefully we have found our place.

[Prodigal_Son]

Rockwoodchev: good articles. Food for thought. You seem to be thinking things through pretty well. I guess I'm one of those types who has an emotional connection to my money. I'm one of those who is just sure that when I stick my money in the market, that (in time) it's as good as gone...

[rockwoodchev]

mominzion.

Wow... I'm so sorry about your situation. I'm very curious about the Bishop advice, and you following it. Was the Bishop trained in financial situations and aware of the implications of letting your house go? I'm dumb-struck by a Bishop giving this advice to anyone.

I'm not slighting Bishops, but I hope and pray this guy was a tax attorney, a CPA, a Financial Planner, or had some skills and training in finance. Please don't tell me he wasn't and you followed his advice. Oh... Just because someone gets the mantle of "Bishop" does in no way mean that they suddenly get a gift of knowledge they didn't have before.

[mominzion]

I'm not sure what he does for a living to be honest with you. I followed his counsel on blind faith, I guess. I know we are done for in the credit department that's for sure. Ya, I don't want to bad mouth him, but he is not one of my favorite people. You see I think our ward was in for some financial crisis or something. We had a new subdivision built and that consisted of the MAJORITY of the ward....The ward was even named after this subdivision when we split from our old ward. So we were in the "ghetto" part of town now (although it was still decent)-it really is quite a yuppy kind of ward. Most of the ward is young people with kids under 5 that bought houses on floating mortgages (housing prices $250-450 G range). So way over most of their heads. Well the economy started crumbling and badda bing badda boom....now everyone is hurting. That ward really has left a bad taste in my mouth to be honest about it. I shouldn't say the ward...the way the ward was run.

When we went to the Bishop for help with our house payment, he flat out told us "That is not what the fast offerings were intended for." So I left there so confused! I just figure he needs to study a little more. Hopefully he gets it. I pray that he will because My mom who is a widow and many of my siblings still live in that ward. It breaks my heart when I see the unsupportive nature that goes on. I know that bishop loves them, but he doesn't thoroughly explain what he is wanting them (used to include me) to learn....he ain't great with communication. I know he is guided, but explain what way we need to go with some sort of explaination. I always felt more bewildered when I left his office then when I got there, but I also felt more like I have to do this on my own and not rely on his help. So there you have it in a nutshell. I'm not resentful....just conserned about how things are handled. I am still a very active memeber, and in no way have let our personality clashes wave my testimony. If it were just me that had a problem I wouldn't even of mentioned it, but everyone that I've heard that has the same oppinion as myself is from the part of the ward that I am.....not in that gated subdivision. Go figure.

[mominzion]

"So we were in the "ghetto" part of town now " I meant to say the Ghetto part of the ward...if that clarifies anything.

[MarginOfError]

Fortunately, we are not in a situation where we will end up in need. Working in health care (research) has given me good job security. My current wage manages to pay the mortgage, utilities, and just enough to that we can save a little money. Unfortunately, I have a hard time seeing how the check book could stretch enough to accommodate 3 kids. But, since we only have one at the moment, I don't have to figure that out just yet. I'm keeping my eye out for others less fortunate though.

Question of the day to anyone buying up gold because they think money isn't going to be worth anything: how much of your gold are you willing to give up for some of my wheat?

Regarding the home ownership question, I have to agree that it's better to be paying a moderate amount of interest on your mortgage than primarily principle. The only reason I say this, however, is because of the tax code. You can deduct the interest paid from your taxes. One of the men I work with in my scout troop is very close to paying off his mortgage entirely. He did the math and found that he had more disposable income when he was paying more interest than he does now that he's paying almost entirely principle. In fact, he's considering paying off his mortgage and buying another house just to get the tax benefits.

There's some warning to be taken with this though. In the early stages of the mortgage, you're probably paying so much in interest that you can't regain it all through tax deductions. Being at about the 50/50 split is probably optimal. It's a big balancing act. However, if you aren't confident that you'll have long term job stability, it's better to own your house. If your paycheck is secure for the long term, it may work to your benefit to do the balancing act.

[angela]

I am absolutely in a situation of need. I am a single mother to 3 children and I work for my family's construction business (owned by my mom and one of my brothers). The day after the first financial bailout bill failed to pass we received a call from the company that we had been working for. We were supposed to start a new project the next day, but the bank pulled the funding and the project came to an abrupt stop. So, now we are scrambling to make even enough money this month to pay our overhead and keep the company from folding. This means that all of the family members that work for the company are going to have to skip paychecks in November - there are 4 total. Our next scheduled project doesn't start until Dec. 4th - so it could be a very sad Christmas at our house, unless we are able to find some work before then or the project we were supposed to start gets funding elsewhere.

I do not own a house. But, I do have rent and all the other expenses that comes along with living. I have very little savings so I have nothing to fall back on. I have applied for food stamps from the state in hopes of easing some of the financial burden next month... and I feel somewhat ashamed that I need the help.

I am not sure that the church will help me. There seems to be a lot of people in this area that are struggling. I just don't think that I will be high on the priority list. (I guess I always feel like I am being judged for being a single mom... like I did something wrong, and that I deserve to struggle.)

Anyway, the financial "crisis" as the media describes it is VERY real to me. It's not about my savings or house... it's about the money that I need to survive.