FAMILY LIFE IN THE RECESSION : Staying Afloat : Hard times are here, and money is tough to come by. This could be you. : Selling the Business, Making Career Switch
Frugality seems to be the byword. Whether they’ve lost their jobs and had to tap their savings to stay afloat or have simply trade dinner and a movie out for staying home with a pizza and videos, many Orange County families are being forced by the recession to downscale their lifestyles. The lingering economy slowdown, now officially in its 22nd month, has disabled the Orange County economy more severely than that of any other county in Southern California, according to a recent economic report by Cal State Fullerton. Even those who haven’t experienced layoffs, cutbacks or long unemployment lines have been sobered by the times. It’s the painful morning after the free-wheeling buy-now-pay-later binge of the 1980s and it’s causing many families to rethink their priorities.
For Tim and Andrea McGinley, the recession hit home about 18 months ago. That’s when Tim, owner of an industrial lighting business, began noticing that a growing number of his accounts--retail stores, restaurants, shopping centers and office buildings--either weren’t paying their bills on time or weren’t paying at all.
“The people that used to pay in 45 days paid in 60 days, and people that used to pay in 60 days took maybe 90 to 120 days to pay, and I had more people file Chapter 11 in the past year than in the past six years combined,” said Tim, 37.
The result: What had grown to a $350,000-a-year business in 1989 had become a $280,000-a-year one last year. And the impact on the McGinleys, who live with their three young daughters in a 2,800-square-foot house in a gated community, was substantial: Tim’s annual pay dropped from about $115,000 in 1989 to about $85,000 last year.
He recently sold the business for an amount he declined to disclose and is now working as a mortgage consultant for an Irvine broker.
“I think the big worry has always been the business,” said Andrea, 34. “When you have a certain amount of cash flow in the business, you can kind of maintain your personal lifestyle. We haven’t gone hungry or anything, but we’ve just basically scaled back everything.”
This year, for example, instead of taking their usual weeklong family ski trip to Utah, which would have cost $2,500, the McGinleys spent $800 for a weekend in Mammoth.
“In the past,” Tim said, “we’d do whatever we wanted without thinking of the cost down the road.”
Eliminating “extravagant vacations” is just one way the McGinleys have cut back. Whereas Tim once thought nothing of spending $500 on clothes for himself on a shopping spree at Nordstrom, he said, “now I either wait for sales or just get what I need at the time.”
They’ve also cut out what Tim calls “extravagant dinner dates” a couple of times a year in Los Angeles or at the Ritz-Carlton in Dana Point. In fact, instead of going out to dinner two or three times a week, the family now goes out maybe once a week.
“That’s another thing,” Andrea said. “If you go to a movie and dinner and have a baby-sitter, it’s like a $60 evening. Now we do more things with friends that are just like game nights. The other night we had casino night with our little quarters, and it was a cheap evening.”
Even with the present uncertainty, Andrea said she worries less now than when she and her husband first started their lighting business in 1986.
“If it was just the recession and times were tough, we would have just weathered it, but Tim was ready for a new challenge,” she said, adding that her husband never pictured himself still in the lighting business at age 45. “But within the last year, when things have gotten tougher, I think he kept his eyes and ears open.”
Andrea, who helped start their lighting business but who no longer works outside the home, is as confident as Tim that he will do well in his new career.
“He’s so ready for this new thing that I really don’t have any huge concerns because he’s so excited about it,” she said. “I don’t feel like we’ve painted ourselves into a corner where we don’t have other options.”
So, she added with a laugh, “I don’t feel too desperate. Just mildly desperate.”
Since the recession began whittling away their income, the McGinleys also have had to cut back on how much they try to save each year--going from about $15,000 a year in 1989 to about $5,000 last year.
And that’s another thing, said Andrea.
“You get to this stage in life and you start panicking about your children’s college education,” she said. “There’s so much to panic about.”
INCOME FOR 1991: $85,000
MORTGAGE PAYMENT: $1,967 a month with taxes
MAJOR EXPENSES:
Health insurance: $450 a month
Charge cards: About $150 a month
CAR PAYMENT: $488 a month
SAVINGS: $10,000
INVESTMENTS: None
RETIREMENT ACCOUNTS: Two IRAs totaling $13,000.
