U-T: “Caught in the Middle” – making ends meet on $50K/year

[powayseller]

Sunday’s U-T story by Jenifer Goodwin, Caught in the Middle, profiled two median income San Diegans who are counting pennies for groceries, substitute biking for driving, and even stopped watering the front lawn.

San Diego’s median household income, according to Census data, was $51K in 2004, and after paying for housing, gas, health care, etc., there is hardly anything left for unexpected expenses of saving for retirement.

The story is very good, and it profiles a single man who has part-time custody of his 2 kids, earning $51K/year, in a $190K condo. There’s a couple w/ one teenager, earning $75K/year, in a home purchased for $385K (downpayment made, so I don’t know how high their mortgage is). This couple can’t afford to fill up the tank of their motor home, so it has sat idly for 7 months. Meanwhile, their HELOC has almost doubled, from $157 to $337. Their front lawn is brown, because they can’t afford the water bill.

These people are pretty frugal. They didn’t overextend on debts, and they took out mortgages within their means. One earns the median income, the other is 50% above the median income.

Having kids sure does raise expenses. We spend $900 – $1100 per month just on activities, so with clothing of $500/mo plus school expenses and food and extra airline ticket expenses, I would say that without kids, I would easily have an extra $2500/month to sock away in savings. Another point is that San Diego is a very expensive city to live in. We earn more than the median, but we are always stretched thin. Mainly it is the high cost of housing, and then of course the fact that schools don’t cover all the educational expenses they used to, so you end up having to pay for any sports, music, or other activities yourself. Gone are the days when you could play softball for free after school…

This article was a real eye opener to me, and I wish to commend these folks for opening their personal lives up like that, for all to see. I especially admire the single dad, who chooses to use his extra $95 at the end of the month for his daughter’s softball, instead of a date. He is a role model for parents everywhere, to put his kids first.

This article really shows that people who took out ARMs to get mortgages at 5-14x income, are really going to be in trouble… Now I can see why people have been using credit and housing ATMs to fund their spending. If you can’t live in SD on $75K/year, then you really need the appreciation of your home to cover the shortfall between living costs and expenses.

How does this bode for our city’s future? How are you all making it, if any of you are under the median income? What could these people do to “make it”, to have a little left over for retirement?

[Anonymous]

I’m not sympathetic to the folks. I know this is California, where anyything goes. But, the single Dad had two kids by two different women, with two sets of child support payments. The married couple was a reconstituted family: both spouses were divorced with kids from their previous marriages. Kids are expensive — we have two — but divorce is even more expensive, especially to the children, emotionally.

Get married and stay married; that’s the way to save money.

[Anonymous]

The best way to save money is don’t get married at all unless your spouse makes really good money.

Frankly, as a single person, I have no idea how the average family makes ends meat in San Diego with the high cost of housing and other things. This has always perplexed me since well before the housing boom got so out of hand.

If I already had a family and was living outside of California, there is no way I would move to San Diego because my quality of life would most certainly go down (unless I was a multi-millionaire)

[PD]

Studies show that married couples save significantly more money per person and end up better off than if they stayed single.

[Anonymous]

Studies have indeed shown married couples save more, but realit y has shown the opposite for me.

[Anonymous]

I want to take issues with this statement in the story:

“With so many costs fixed, spending on food is one of the places middle-income San Diegans try to control. Cell phones, home computers, Internet and cable TV have come to feel more like necessities than luxuries. Cutting down on gas can require major lifestyle changes.”

He is putting entertainment (cable TV) in front of food. In my frugal minds, I would cut these things you can live without before I rationalize on the food and kid activities. Things like cable TV, cell phone, internet, home computers and cut down on gas in that order.

We Americans are spoiled rats 🙂

[JES]

My hunch (and I wish I had some stats to prove this) is that families make due here by taking out home equity loans and using the house as an ATM. For most young families with kids who are not wealthy or making $100,000+/year, the best advice is to leave the area IMO.

[powayseller]

It’s hard to make it here on $100,000+ per year, too. If you have kids…

Based on my own situation, I am convinced now that people are living off credit. We used to think that everyone else was so rich. We saw their big houses, new cars, boats, vacations, and couldn’t figure out how everyone in Poway made so much money. Well, if you check foreclosure.com, you find your answer!

[studenteconomist]

As some posters already mentioned, the secret here is divorce. All the couples mentioned were divorced, and the monetary costs of divorce (for the middle class) is enormous. You usually end up having each parent live in separate apartments, whereas before they shared the same one. In San Diego, where housing costs are the biggest cost of living, having to pay two rents is the difference between making it or not for these people.

[PerryChase]

Right on deadzone, don’t get married. And you’re right that SD has always been expensive.

With the RE boom, people have not yet realized how stretched they are because in their minds, they are still investing for the future. I have a friend who pays $2,600 per month to own an old house that would normally rent for $900. The house is pretty old and delapidated. But he’s making sacrifices to restore it and views his work as an investment. For the last two years, he could’ve been investing $1,700 per month risk free. I have a feeling that he’ll loose his shirt on this one. Go figure. The Real Estate industry has absolutely brain-washed people into owning.

So no, i don’t feel sorry for people who loose in real estate. I’d rather save my compassion for the migrant workers that everyone is beating up on.

[Carlsbadliving]

Good article. I wouldn’t say however, that getting married is a mistake. As it was stated both scenarios in the article involved divorce. As long as you stay married you’re much better off. Two incomes and one house works out much better. Then you add kids to the mix. I’m currently married without kids and together we bring home about 90k/year. I couldn’t imagine adding kids to it right now. We’d barely be making it and we don’t even own a home.

[BikeRider]

When I was single I didn’t hardly have two dimes to rub together. Been married 22 years and I can say, two people that work together can have more and save more, though the saving part is still really difficult. My wife and I both work, making about the same salary each. We have the same goal now that we are middle aged, still have fun, but save more for retirement. I think the hardest thing for us is to balance saving money, with trying to enjoy life by having vacations and other material things. We tried to save when we were younger, but with paying mortgage, eating and all the other things, we didn’t save as much as we should have. We are doing better now, but still have some catching up to do. Was it Mark Twain that said “life is what happens while you’re making plans”. I think that’s really true.

[speaker]

The first things that came to mind while reading this article yesterday:

ditch the cable bill and the internet. the library has free internet.

also, the married couple (name escapes my mind) took out a HELOC to buy the damn RV. bad bad bad move. Sell that thing now.

As for the single guy trying to make ends meet? what an inspiration. he did not once blame anyone or anything for his situation. he is taking responsibility. what a refreshing idea.

Being married myself with a family the Mrs. and I both work because we both have 401ks from our employers. Knowing that social security won’t be there for us when we retire this is primary source for retirement savings. My wife would love to stay home with the kids but those during those years that she wouldn’t be working we would lose out tremendously on the tax deferred gains on our 401k contribution. Raising kids is not only about providing shelter, food, and clothing. it is also about parents being able to provide themselves come retirement.

“End of line.”

[powayseller]

speaker, I agree with you, and that’s why I told my kids if they want an Ivy league education, they need to get scholarships to get there. Unless other parents, I won’t go into debt for $120k/child for an education. I think many parents, well-meaning, are using their home equity for college, and then who takes care of the parents in retirement?

As far as the people profiled, I don’t see how divorce made it harder. The guy earning $50K/year should be able to support a family. That is the median income, folks. The $435/month that he sends the ex-wife is a LOT less than what he would pay if the wife were living with him and not working.

The other couple had 2 breadwinners and 2 kids. I don’t see that divorce made their situation any worse. His son is too old to be getting child support, and neither earns enough to have alimony payments to an ex-spouse.

Both families have fairly cheap housing, and the HELOC is fairly low: $137/month.

I think this article clearly states it is expensive to live here. I don’t see that divorce exacerbated their current financial predicament, although past attorney bills could have contributed, we just don’t know.

[novice1027]

Maybe I’m missing something here, and since I don’t have kids, I probably am, but doesn’t it seem like our society spends way too much on things that we see as “necessities?”

Most kids I know have their own tv’s, dvd’s, cell phones, Ipods, and the list goes on and on.

If we cut out all of these “necessities” and got back to the basics we would all be better off?

I kinda hope that if we do have a recession/depression this will help to re-set our priorities. I can’t imagine having to place generic cereal in a glass container, because my kid would know it wasn’t a brand name. I sure would not have known the difference or cared when I was a kid. Geez my mom put toothpicks in vienna sausage and I thought that was a treat. Don’t forget the pineapple rings on the spam!

I know if I lost my job tomorrow, I could cut out at least $600 worth of expenses a month right off the top, without even having to think about it. Let alone having an RV I can’t afford to drive, and am probably making monthly payments on it.

PS, no offense, so please don’t take any, if I read it correctly, you said you spend about $500 a month on cloths. My question to folks out there with kids, what happen to the days of shopping at the beginning of the school year, and wearing the same cloths until the school year was over?

I know that is not how it works today, but why not? Would it be so bad to have to live like that? Would the kids of today not appreciate things more if they had to wait for them, or save for them. Just asking, from someone who spends WAY too much on her dog!

[Author]

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