Living on the Edge : Personal finance: The high cost of housing has left many Orange County residents with a slim margin of safety to cope with layoffs or a medical emergency.
Thomas M. Rickenbach has learned how to live on the financial edge in Orange County.
The 26-year-old environmental consultant--unable to afford an apartment of his own--rents a room for $475 a month in a three-bedroom Garden Grove home owned by a doctor. Besides renting out part of his home, the doctor also moonlights on the graveyard shift at a local hospital to afford $2,100-a-month mortgage payments on the property.
“I needed to find cheap rent, and he needed someone to help pay the mortgage,” Rickenbach said. “It’s a symbiotic relationship. Without each other, we’d be wallowing in poverty.”
The consultant and the doctor are typical of many Orange County residents--from the $4.50-an-hour restaurant worker to two-income families taking home $75,000 or more--who are living dangerously close to the edge of financial distress in the current recession.
Three in 10 county residents described themselves as “house poor”--with little or no money left to live on each month after making mortgage or rent payments--according to findings of a Times Orange County Poll conducted by Mark Baldassare & Associates of Irvine.
The telephone survey, which has a 4% margin of error, polled 600 residents in Orange County who were interviewed during the third week of March.
In a county where the average new home sells for $236,000 and a typical two-bedroom apartment rents for about $775 monthly, it is no wonder that so many people believe that their household budgets are being stretched thin.
Often strapped by hefty rent and mortgage payments, four in 10 county residents said they lack enough savings to cover such unexpected events as the loss of a job or a medical emergency.
Four in 10 residents said they do not regularly put away savings. And of those residents earning less than $35,000 annually, six in 10 said they do not regularly set aside savings.
Those living on the edge range from the house poor, who put most of their income into providing shelter, to young professionals who have little or no savings and a mountain of debt, to blue-collar workers who must put up with high rents to live near their workplaces.
“A lot of people are just making it here,” Baldassare said. “I think this tells us the cost of housing here creates incredible pressures on middle-class families.
“People who would be viewed as affluent by national standards find it difficult here,” he added. “Among younger consumers, there may be an attitude of, ‘Spend it all and then some.’ There are certainly a lot of temptations for consumers in Orange County.”
Michael Cohen, 34, a father of four who works as a finance administrator for a Huntington Beach car dealer, knows the costs of living on the edge.
Temporarily laid off from his job for six weeks in February, he recently returned to work--but at one-third his previous salary, or about $65,000 a year. His wife, Janice, 36, was also laid off as a psychiatric technician at a mental health clinic.
“Of course I wish we had savings and were a little more prudent,” he said. “I made it back to work after the just-in-time point. I’m not one to borrow money, but I did have to hock the family jewels.”
The Cohens not only sold some of their jewelry but also a car. And they have tried to cut utility bills by installing devices throughout their home to save water and energy. They also make lunches for their children to take to school, saving $50 monthly.
“I’ve never run into this kind of financial situation at any time in my life,” Cohen said.
The survey indicated that three in 10 Orange County residents have no money to spend for such leisure activities as a movie or vacation. Regina Garlington, 20, a document processor at a mortgage bank in Mission Viejo, is one such person.
After landing a $20,000-a-year job two years ago, she ran up several thousand dollars in credit card debt. To force herself to stop buying things on credit, she finally gave her cards to a friend for safekeeping.
“It was getting to be too much,” Garlington said. “Now I’m paying off the debts and trying to save.”
Garlington is not the only one who relies on plastic. Four in 10 county residents said they are making monthly interest payments on credit cards. People making $50,000 to $75,000 a year were the most likely to be paying off credit card bills, the survey found.
Couples with two or more children living at home feel the most vulnerable to a financial emergency: There’s little money left after paying monthly housing bills, 42% of them said.
Janet Lawyer, 33, an unemployed legal secretary and mother of two living in San Juan Capistrano, said she considers her family to be house poor. After leaving the job market for several years to stay home with her children, she is looking for work to supplement her husband’s $3,000-a-month salary. Her husband, a home remodeler, also works odd jobs and does carpentry work in the evenings.
Even so, the $1,400-a-month mortgage payment on the couple’s four-bedroom house eats up nearly half of her husband’s salary.
The Lawyers have put off plans to buy a new car and canceled a vacation to Lake Tahoe this year.
“Life is no fun right now,” Lawyer said. “I wish we could crawl into a hole and stay there.”
Although they do not have to contend with big home mortgage payments, working families who rent apartments or homes also face financial pressures.
Nohemi Barrera, 27, a legal assistant at a Santa Ana law firm, said she and her husband have little or no savings from their combined annual income of about $20,000.
More than half of the family’s monthly income goes to paying such fixed bills as the $625 monthly rent on a Santa Ana apartment. Barrera sells vitamins part time to raise extra cash.
The family has postponed plans to buy a VCR and take a Hawaiian vacation. With little savings, they would have to rely on credit cards to meet unexpected financial emergencies, Barrera said.
Tracy Salchenberger, 26, is also hoping for better times. The wife of a Camp Pendleton Marine stationed in the Persian Gulf, she and her two children are scraping by on her husband’s $1,160-a-month military salary. They pay $700 a month for a partly subsidized two-bedroom duplex unit in San Clemente.
“If something were to happen to our car or something else, I don’t know what I would do,” she said. “I was working part time, but I quit a year ago because we couldn’t afford the child care.”
The Salchenbergers have no savings. They have cut back on spending and no longer visit their parents in Northern California and Arizona. In the last month, she and her children have eaten out twice. --at Taco Bell.
Disneyland admission prices are out of the question. She takes her children to the beach or parks for recreation.
“Thank God,” she said, “for the free things in life.”
Consumer Confidence “As far as your own situation, would you say you (and your family) are financially better off or worse off than you were a year ago?”
Same Better off Worse off March ’91 35% 33% 32% Sept. ’90 31% 49% 20% March ’88 22% 62% 16%
“Looking ahead, do you think that a year from now you (and your family) will be better off, worse off, or just about the same as now?”
Same Better off Worse off Don’t know March ’91 40% 50% 6% 4% Sept. ’90 36% 52% 7% 5% March ’88 36% 56% 5% 3%
Source: 1990 Orange County Annual Survey, UCI, September 1990 and Times Orange County Poll, March 1988. Questions from the University of Michigan’s Consumer Confidence Survey. Standard of Living “How would you describe your current standard of living?”
March ’91 Sept. ’86 More than comfortable 19% 26% Comfortable 61% 61% Not quite comfortable 12% 8% Struggling 8% 5%
Source: 1986 Orange County Annual Survey, UCI, September 1986. Questions from Money magazine national survey. ‘House Poor’ in Orange County “Would you describe yourself as being ‘house poor’--that is, having little money to live on each month after paying the mortgage or rent?” Yes: 31% Orange County on a Budget “Do you think you have sufficient money set aside for special needs, such as a loss of income for three to six months, or a medical emergency?” No: 40% “Do you have enough disposable income to pay for the things you want to do for fun--such as going out for entertainment or taking vacations?” No: 29% Savings and Debt “Not counting money going into retirement accounts, are you able to regularly put away money into savings?” No: 40% “Do you currently have any credit card debts, causing you to make monthly interest payments?” Yes: 42% Cutting Back on Expenses “Comparing today to six months ago, are your credit card debts more or less, or are they the same?”
All Under $35K $35-$49K $50-$74K $75K+ More 13% 17% 13% 14% 11% Less 26% 21% 25% 31% 29% Same 61% 62% 62% 55% 60%
Source: Times Orange County Poll
