Remake America

Yahoo is tracking six families struggling in the soft economy. So far I’ve looked at two of the stories and, to be honest, while I sympathize, you really can’t say they’re in the mess they’re in due solely to bad luck.

Let’s consider the family from Little Falls New Jersey.

The short video shows them with a stack of bills and a balance sheet showing $5700 in income and $5300 in expenses, not including food, for six people. Husband, wife, three high school age children and the wife’s 74 year old father.

They also have $350,000 in debt including three maxed out credit cards and two mortgages. The husband has been out of work since July.

I’ve having a lot of problems with this. First of all, how do you rack up $350,000 in dept including maxing out three credit cards and having a second mortgage? This didn’t happen in the six or seven months hubby has been unemployed.

Second of all, on the income side, I didn’t see any contribution from the wife’s father. He must have some income. Social Security if nothing else. Where’s his contribution? Even $300 or $400 a month would be enough to get them out from under water.

Third of all, let’s talk about the credit cards, at least one of which hubby groans he’s paying 27% interest on. He says that’s ridiculous, and he’s right, it is ridiculous. The question is how did it get that high? For an interest rate to be that high, your credit rating has to be disastrous and it’s unclear that it could dive bomb to that level in six months.

I think it’s likely the family has been in debt and was making some bad financial decisions well before Hubby got laid off. Losing his job was the final nail so to speak.

But that’s all water under the bridge, the question is what do you do now?

I have two suggestions. The first is to figure out a way to get rid of the credit card debt because 27% interest is going to kill anyone. My second suggestion would be based on the question of why grandpa wasn’t contributing anything to the balance sheet? He must have some income and a couple of hundred dollars would go a long way toward getting this family above water.

The second family is a couple that, according to the video, planned to retire at 59 but hubby had a stroke at 55. He couldn’t continue to function at his executive position so he was let go.

At that point, rather than go on long term disability, they decided to open a hardware store. And not just any hardware store, a huge affair in a strip mall. Unfortunately that business went belly up and they’re trying again with a store of more modest size.

Owning a small business is always tough and this is no exception. Sounds to me like they’re barely surviving.

Again, I’m having some problems with this. If you were planning on retiring at 59, how far away could you have been at 55? Opening a massive hardware store at that age was a high risk decision especially since, given the age of the couple, there was no obvious recovery path.

At age 55, given the health issues, extreme financial conservatism was called for not a high risk new venture.

But , again, that’s water under the bridge, now what?

Clearly these folks are in worse shape than the first family and most of my sympathy goes to them. I really have no idea what our hardware store entrepreneurs should do other than dump the store and live as best they can on Social Security. I think the problem right now is they continue to sink assets into a losing proposition.

The first two cases got me so depressed I think I’m going to skip the other four.