FAMILY LIFE IN THE RECESSION : Staying Afloat : Hard times are here, and money is tough to come by. This could be you. : Opportunities and an End to Extravagance
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 newlyweds Dan and Tonya Osborne, the recession has meant sacrifices such as brown-bag instead of restaurant lunches at work. But there has also been a benefit. The developers of their new $165,000 lakefront townhouse in Rancho Santa Margarita made them an offer they couldn’t refuse: $4,000 off their closing costs, $2,000 in decorating allowances, free air-conditioning and upgraded appliances--a financial incentive package totaling $8,000.
“We had decided to hold off because we thought things would get a little tighter, but they just made it too tempting, so we went ahead with it,” Dan said. Their monthly payment, thanks to an adjustable interest rate now at 5.5%, is $965.
The Osbornes--they’re both 22--were married in December. Dan is an account executive for a specialty advertising company in Santa Ana; Tonya, who graduated last May from San Diego State University with a degree in real estate finance, is a sales assistant for an Irvine mortgage banker.
Tonya said it wasn’t difficult landing her job last October, “but it wasn’t like people were knocking down your door to give you a job. You had to go out and get it.” She considers herself fortunate--many of her college friends still haven’t found work.
The Osbornes, who expect to earn a combined total income of at least $90,000 this year, acknowledge they’re in a comfortable position, especially for a young couple.
Still, as Tonya says, the recession “does matter because both our industries are tied to the economy.”
And, said Dan, “I’ve had to work harder to make the same amount of money as I have in years past. Now I’m having to really go out and beat the bushes, so to speak, for it, whereas business just seemed to be there before.”
Although Dan began scaling back his spending about a year ago, the need to save to buy their new townhouse provided the incentive for a major lifestyle change.
The couple also own a one-bedroom condominium in Rancho Santa Margarita that Dan bought two years ago for $108,000. Because its market value has not risen and they don’t want to lose money on a real estate agent’s commission, they plan to hold onto it for now; they’re renting it out for $650 a month, about $300 less than their monthly mortgage payment on it.
Holding onto that condo didn’t help them qualify for their new home. “We just eked through, to be honest,” Dan said.
To qualify, they began a crash savings program last summer.
“We had zero savings last summer and lived on almost nothing: Top Ramen basically and lots of spaghetti,” Dan said. “One thing about the recession is it’s a lot easier to do that because our friends haven’t been going out a lot either. So it’s much more in fashion to do things like rent videos or go on a picnic to the beach.”
They also stopped going out to dinner four or five times a week and cut down on weekend trips. And they virtually stopped buying on credit, cutting up nine of their 11 charge cards.
“We paid most of them off last summer--about $15,000 in credit cards--so we really lowered our overhead,” Dan said. “It’s just ridiculous to pay 18 to 20% on something like that. We have a lot of friends that are in deep hurt. They ran them up and can’t pay them off, unfortunately.”
The couple have made other lifestyle changes. When they bought two cars last May, they bought used instead of new: A 1984 Mercedes 190 and a 1987 BMW 325. Said Dan with a laugh: “That’s very recessionary.”
Says Tonya: “One of our philosophies is that buying a new car is a waste.”
Scaling down their expenses appealed to both of them.
“It’s an absolute change in lifestyle in the last six months compared to the late ‘80s, when we were traveling everywhere and spending whatever we wanted to,” Dan said. “To be honest, I like it a lot better this way. You’re not so stressed out having to make your credit card payment or paying off that incredible Am-Ex bill, and I’m tending to enjoy things that cost less money and not going on big vacations and stuff.”
Tonya thinks cutting up the credit cards was a wise move.
“To be our age and have a lot of debt is a bad start,” she said. “We have set certain goals, and in order to meet those you just can’t have a lot of debt.”
They plan to have all their credit cards and the two cars paid off by the end of 1993. That will put them in better position, Tonya said, to achieve one of their biggest goals: to build their own home when they’re 25.
INCOME FOR 1991: $78,000 combined
MORTGAGE PAYMENTS: $965 for townhouse; $950 for condominium
MAJOR EXPENSES:
Auto Insurance: $220 a month combined
CAR PAYMENTS: $650 a month combined
SAVINGS: $3,500
INVESTMENTS: Townhouse and condominium
RETIREMENT ACCOUNTS: None
