Economic Meltdown: How To Cut Back

Like many if not most couples, my wife (Pam) and I thought we had a plan. Although I'd had to come out of retirement after four years for economic reasons--translated as, The money ran out-- and found a lucrative hard labor truck driving job in Colorado, we weren't discouraged. A beautiful 35 acres had persuaded us to move from Montana, and we'd eventually be able to build there. We just knew it. For two and a half years, we held to that illusion.

But, as all too many of us have discovered during these hard months (this is being written in early March of 2009), sometimes Life likes, as stated in the Willie Nelson song, to make us start all over again. In our case, my seriously psychic wife claims to have seen it coming, but she also knows I do better if she lets me try what I want to try. So, not seeing the crash coming in any way whatsoever, I began to expand my money making efforts in August of 2008 by making plans to buy a specialty truck for hauling water in the gasfield boom of western Colorado.

By mid-October of 2008, I had set up a transportation corporation and had found a great truck through an online broker, been approved for a lease-to-purchase loan, and was ready to fly to Miami, Florida, to pick up the truck...but the lender suddenly went out of business before funding the loan.

Perhaps you, the reader, are a lot quicker on the uptake than I am. No, really. Some folks might actually think, well, since we were then--just prior to the election of our now-President Barack Obama--in a widely publicized Economic Meltdown, we should have logically stepped back and revaluated...right? Right. But that's not what I did. For four more months, despite loan after loan falling through at the last minute, despite my credit rating steadily declining from all those additional inquiries adding up, despite the gasfield boom fading until it was either a slowdown or a bust, depending on viewpoint....I persisted....

In late February of 2009, we got our first truly hard news: My employer, which is an outstanding local trucking company, had to this point escaped the worst of the gasfield un-boom (well, people are still arguing whether it's a slowdown or a bust, but it's surely not a boom, so...un-boom...). We had actually gained work, at times, as other companies declined. Now, however, denial finally became impossible: There would have to be cutbacks.

A company meeting was scheduled on the morning of February 27 to give us the word. I was calmly waiting for the meeting to start when my cell phone rang. At that hour (6:00 a.m), it could only be Pam. Although disabled and home alone (not counting the three cats and one leopard gecko), she does not call frivolously. Later we would realize that her sense-things-ahead-of-time ability nearly killed her. I could not make out one word, but her desperation came through clearly. Just prior to our first meeting in Tonopah, Nevada, in 2006, she had spent nearly three years homeless. A true survivor, she is nonetheless automatically traumatized by the threat of economic downturn.

And why shouldn't she be? Any long term intensive struggle for survival when the outcome has been in doubt day after day, year after year...ask those who lived through the Great Depression (as our own parents did).... still, she survived once again (as described in the following song lyrics), and then it was time to find out what we were actually facing....

Okay, done said all that to say all this: The first step when faced with Big Trouble in the World of Money, otherwise known as keeping a roof over your head and groceries in the fridge, is...what exactly are we up against? Nothing is as counterproductive to survival in any situation as a head-in-the-sand refusal to recognize the situation without sugar coating. Thus, now that we're actually getting to the "How To" portion of this Hub, here's Step #1.

Step #1: Evaluate your circumstances and conditions as honestly and accurately as possible. In our case, by simply asking, I learned that our company was going to institute a cutback in the work week from five days to four days. In the oilpatch (or gasfield, essentially the same thing), contractors such as water haulers like us tend to work twelve hour shifts. This means that we will now be looking at keeping our jobs (at least for now), but losing a huge shift of pure overtime every week. Net result in our case: A reduction of roughly $600 in take-home pay every other Friday.

Since we had "always" been "on the edge", living paycheck to paycheck, that was pretty scary. There were some places we could cut back a little but not very many places we could cut back a lot. And quite frankly, we needed big expense reductions. Of that type, we could think of only two, and the first one was definitely painful but both necessary and immediate.

Step #2: If a place to cut is obvious, DO IT NOW. In our case, that place to cut was simply abandoning the land purchase that had drawn us to Colorado in the first place. I called Elizabeth, the courteous, friendly, and highly professional lady who monitored clerical processing for that land development. She is sending me a form to sign, a Special Warranty Deed, that will return the land in its entirety to the original developer. In return, the developer will not place any adverse information on our credit report, and if we come back to them later--if money allows repurchasing the same acreage or another--they will credit us for at least some of the money paid in over the past 30 months. Yes, making the move hurt emotionally, but it also meant that one of my two monthly paychecks would remain in balance. One down, one to go.

Step #3: Home mortgage refinancing, highly publicized, can be a strong move...but BE CAREFUL. With mountains of publicity surrounding the recession, scammers are ecstatic and the Internet is their preferred playground. Not to say that there are not solid companies represented there, but a local Realtor we totally trust advises using a local mortgage broker if at all possible. They're easier to check out (through friends who may have actually used their services, for example), and they actually know the specific market conditions in your area. Do check them out, though; the two percent rule still applies.

The two percent rule? Oh, that's the rule that states only two percent of any profession are at the top of the game. You want a two percenter on your side, the real trick being how to identify one.

At any rate, we intend to refinance but have not done so yet. This is being written in the predawn hours of March 4, 2009. I meet with a local mortgage broker (in Rifle, Colorado) later this morning for our first consultation. Once our own refinancing is fully completed, I promise to edit this Hub with an update, providing I pick up a few more clues that could be helpful for you-the-reader. (And there are bound to be some.)

Step #3A: According to our (highly trusted) Realtor, now (March 2009) IS the right timing for at least some refinancing moves. She has informed us that the stimulus package contains several new refinancing programs that take effect next week (meaning around March 9, 2009, or shortly thereafter).

Step #4: With the big possibilities handled, then yes, the little stuff does add up. My wife is truly focused in this area. She reminds me (and I'm grateful for it) when I leave lights on unnecessarily, and I leave the thermostat adjustments up to her. She has to limit those for health reasons (hers), but I simply add or take off extra levels of clothing for insulation (or cooling) as needed. We do consume quite a few TV dinners, since she is unable to cook and I am often jammed for time, but we shop for sales and go to the super-cheap brands wherever we know the meal itself is not too bad. The possibilities are numerous and mostly common sense.

Step #5: Continually monitor the overall situation and be emotionally prepared to see reality for what it is, not what you wish it to be. In our lifetimes (I'm 65; Pam is 57), we have observed one truth: Nothing ever stays the same on the financial front. I'm reminded of a former father in law of many years ago. A kind and good man, he worked for the same company his entire working life, for more than 32 years. Starting right after high school, he worked his way up in his employer's company to the position of Treasurer and carried responsibility for all computer work in an era when computers were just beginning to become important in the business world.

But. It was a family corporation. A couple of children grew up. The owner wanted their esteemed Treasurer gone, to be replaced by the younger adult family members. They demoted my father in law and cut his pay by thousands of dollars per year. He did not adjust well. It took more than three years of this sort of intense pressure before he finally gave up and retired, and by then he was a disillusioned if not a shattered man. It did not help that he was also a widower during this period, although he did eventually remarry.

Point being, quicker adjustment to even a difficult reality is nearly always better than a slow one. My own six-month delay in facing the inevitable during the current recession was not exactly speedy, but it could have been worse. Bottom line: Will the changes we are making (giving up the land, refinancing the home, turning out unnecessary lights) prove to be enough? We hope so. But if not, that brings us to the final point of this Hub:

Step #6: Think about what you will do if it turns out you have NOT hit bottom yet. One very important study took a hard look at survivors of situations that would kill most people--lost in the Antarctic, years as prisoners of war, years in death camps, a host of others. The researchers wanted to discover what these extreme survivors had in common, and they found one thing: Every one of these people had rehearsed what they would do IF they ever faced those exact circumstances. In our case, let's say (for instance) that the gasfield situation worsens until I am not just working fewer days but actually lose my job. What will we do then?

Pam and I already know. On the employment front, I have a number of skills but will not refuse unskilled labor if that's what it takes to put bacon on the table. If we can't afford a table, well, we've lived in a tent before. Our vehicles are free and clear, and we will continue to protect those jealously. We're not recommending that you-the-reader need to prepare yourself for homeless living...but we are recommending a habit of thinking ahead.

Thanks for reading,

Ghost32

P.S.: Step 7: If all else fails, RUN! A quick update (typed 5/2/09) to this Hub...by mid-March of '09, it became obvious that we had not hit bottom yet. In fact, the numbers showed no mercy. If we stayed where we were, no matter how close to the bone we trimmed expenses, we were going to (at best) lose the small reserves we had on hand.

So we gave notice to the company and prepared to move to southeastern Arizona. Pam has longstanding roots there, her health does better there, and her (adult) son lives there. About our Colorado home (bought new in March of 2007) there was no option: We abandoned it to foreclosure with barely a grimace. Our Realtor MIGHT still get it sold in time to stop that, but the odds (in this economic climate) are not good. Bye-bye, housie!

I made a fast run to Arizona and made a deal on some acreage--bare land--with payments of $500 per month, as opposed to the Colorado house payment of $1904. In early April, I decided to apply to take my Social Security payments (I'll be 66, full retirement age, in November), and the Agency miraculously deposited my first payment in my bank account on May 1st. We're living on the land in a 21 foot camp trailer I've owned for many years. Well, Pam sleeps there and I office there, but I actually sleep in a Rent To Own 8' x 12.5' steel shed; Pam needs her own bedroom! We bought a 40 foot semi trailer (1970 model) for storage, have Satellite Internet, our cell phones, and for power we currently use a generator.

And, of course, I'm looking for work to add to the Social Security payments...:D