Well, it has been a few weeks of really nasty economic news for poor folks. To recap, we've been told that gas will probably go to $4 per gallon (which many of us laud as a good thing, but is effectively the 'screw the poor' method of encouraging conservation), with a decent chance of shortages, that Con Ed here in New York will raise its electric prices by 12%, that a minimum of 1.1 million additional foreclosures are expected next year, that the price of food is up 12% in the US (and more than 25% in poor nations where people already spend 60% or more of their income on food), that in Boston 8,000 people stand to have all their utilities cut off for non-payment and that pretty soon the Southwest is going to choose between having power and water to drink. Plus, of course, there's the IPCC mitigation report, which does not quite add up to "we're all gonna die" but given that the world target figures of even the most ambitious nations don't come near making the full cut in in the full amount of time, are not good news. Oh, and guess what - clean coal, always an illusion, just got a little more illusory, with coal peaks in the next 10-20 years according to two seperate analyses
A few months back, I wrote an essay about how likely it is that many of us will not have grid-supplied electricity in the future, not because I'm prognosticating the apocalyptic end of the grid, but because we won't be able to afford it. The essay is here:
anyone is interested. Unfortunately, I think this is one of the predictions I've made that is turning out to be right - as energy costs rise, a (at first) small but increasing number of people will be priced out of fossil fuels altogether in the US, just as many of the poorest people in the world are losing their access to fossil fuel due to rising prices. Most of the people who read this blog probably haven't been affected yet. But give it time.
You must be wondering why I'm going on about utilities when this post is titled, "how to keep your house." But the two are connected. When people lose property to foreclosure, they've often already gotten themselves in deep in other ways as well. And sometimes, the problem ends up being that you have to pay so many other high priced bills that you can't pay the mortgage. But there are ways to reduce the sheer number of bills you have to pay, including turning off your utilities.
Now on to the official subject - what happens if you are one of the million (s) of people who stand to lose their homes in the next year or two, due to rising interest rates, a stumbling economy and inflation for everything else? Even if you don't think you fall into this category, you may yet be surprised. So far, job growth has merely slowed - we're not seeing large scale layoffs. But it doesn't take much to tip the economy into a real recession, and most of the major economic figures are now starting to predict one. Given the confluence of unpleasantness facing us, do you really want to bet your life that you'll keep your job? And how long could you keep up your mortgage payments without a salary? Or what if your employer drops health insurance and other benefits - how long before the costs of meeting basic family needs made it impossible for you to keep up with everything else? Americans are very poorly prepared for the coming crisis - they are overwhelmingly in debt, have little or no savings (the average Baby Boomer has less than 10K saved for a rapidly approaching retirement - and they have more than the rest of us), and has a large mortgage. American national savings rates are at -.5, but that's actually misleading - the savings rate doesn't count in the costs of housing, which are wildly inflated. So the amount we're overspending our income, some analysts estimate is really more like *5%* annually - that is, Americans are spending significantly more than they earn every single year. With the dollar falling, we can expect to see prices rising for a good long time. That's the makings of a real mess. So none of us should be too complacent about what we have.
First of all, I hate to say this, but you should think seriously about whether your house is worth saving, or savable. That is, before I offer any suggestions on how to avoid being foreclosed upon, take a clear eyed and hard look at your life and think about whether you want to even try. Because there are some people who are going to lose their houses anyhow, and others who may be pouring good money after bad to keep something they don't need.
The questions you should ask yourself are these. Did I buy my house at the price peak? Because if you did, sorry to say, there's a good chance you'll never regain your equity. So you need to ask yourself, do you want to spend 30 years paying off a house that cost too much? Will you be able to pay it for the next 30 years? Can you afford this house? Think seriously about this one. But, you say, I can't get my house price back. Well, but if this is a long term decline, you won't be getting it anyway. Are you prepared to see equity drop even further, to stay in your house for a decade or more, or to take an even bigger loss? Sometimes it is better to cut and run.
Did you put much money down? Do you have an ARM (adjustible rate mortgage, or g-d forbid, an interest only loan?) And how much of your income goes to this mortgage? If it is more than 1/3 of your household income, and you absolutely need both jobs to pay your mortgage, while having little or no equity, you should start looking for a buyer today. Because the odds are good that sooner or later you'll lose your house - or be trapped in it forever, scrimping and struggling to own a property that will never be worth what you paid for. It is always better to get out on your own terms than to have the bank foreclose on you. Even if you lose some money, it is better than your losing everything you've paid into the house up until now.
Remember, banks don't really want to own houses. They don't like foreclosing (although they don't dislike it so much they won't do it, unfortunately.) And they also know that the longer they can keep you paying for something, the better off they come out in a foreclosure situation. So they are likely to be extremely "kind" for a good while, offering to lower payments or help you out with late ones. But only you know if this is real kindness - there's nothing helpful to you about you paying a lot of money to the bank that you'll never see again, only to lose the house later. Again, if you think you will have to get out, do it on your own terms.
Do you want to live in this house for the long term? If you bought this house in the hopes trading up, if it has no yard, or is in an area with restrictive covenants and high property taxes, if it is house that shows off your lifestyle more than meets your needs, perhaps getting out and buying a much cheaper property somewhere else is worth it.
Remember, there are areas of the country that are not overvalued. And even if that means changing jobs or careers, you might have a better, more secure life if you lived less on the financial edge. We tend to think that our jobs and careers are non-negotiable - "I have to live here - that's where the jobs are." But there's no need to fetishize your job - it is, presumably, mostly how you manage to keep body and soul together, not the whole reason for your existence. And if that is true, consider carefully whether you might not be able to live as well somewhere else, being paid a bit less or doing something somewhat different. Obviously, this won't work for everyone, and there are those for whom a job is a passion. But if your job isn't your life, and you live in an expensive place, and are already concerned about keeping up, think seriously about going somewhere cheaper. Salaries will be lower, but then, so will costs.
But assuming that you do want to stay in your house, but that you are already struggling or forsee difficulties, how do you do it? Of course, the first thing is to get the heck out from under any other debt you have if possible. If you can see this coming while you still have an income, then the first thing you do is cut *WAAAAAAYYY* back on everything. That means no more meals out, no more cable, no more keeping the heat and a/c at 70, get rid of the car with the payment and replace it with a junker or take the bus, buy everything used that you can, and don't buy much of that. Get rid of the dryer and line dry your clothes Plant a garden and eat that instead. For many of us, this isn't news. For the rest, this will be hard. You won't die from it, though. Divide the money you save (track it!) into two funds - one savings, one debt reduction. Pay off the highest interest rates first. Consider consolidating to a short term 0% interest credit card, and then paying it off diligently.
Are things more urgent than that? Are you starting to feel the pinch already? Well cut back some more - sell the computer, and give up the internet - go to the library instead. Find a carpool and give up your car. Dump the tae kwon do for the kids, and teach them to cook from scratch and play pick up soccer instead. Go vegetarian. Give up luxuries like coffee and beer. Make your fun at home. Turn the thermostat way down (or up, depending on whether we're talking about heating and cooling), cut the water bill by limiting showers to 3 minutes. Again, use the money to pay down debt and build some savings.
But what if you are already in trouble - the utility people are threatening to shut you off, the mortgage people are threatening to foreclose, the bill collectors are calling day and night? What then?
First of all, the bill collectors can't call you if you tell them not to. Tell them not to. And don't panic or go into denial. It is easy to feel that you "just can't deal" with all of this, or to be so ashamed that you can't focus on fixing it. Right now, people are getting poorer - real incomes are falling, inequities are rising. If you are one of them, you should not buy into the notion that you are a bad person, who is making bad choices. And if you have made bad choices, remember, all of us have. So forgive yourself, resolve not to do it again, recognize that this isn't your fault, or wholly your fault, and get your butt in gear and concentrate on ensuring yourself a stable place to live. One of the most remarkable things about American culture is how much we blame poor people for being poor - we isolate them, tell them it is a moral failure and that they are scum. DON'T BUY IT! This is the beginnings of a systemic failure, and if it is hitting your before your neighbors, that's probably mostly bad luck. Even if you made mistakes, everyone does - yours just hit you harder.
Second of all, if things are that dire, make an order of priority. First is food. Get the cheapest healthy food you can - don't live on ramen noodles. But buy whole grains and beans and live on bread and bean soup, along with the dandilions from your yard and produce you buy at the very end of the day for bargain prices at the farmer's market. Second, is needed medicine. Every state now has insurance programs for poor children - get your kids on them. Check out drug company programs if you are genuinely dependent on some medication. But also think about whether you really need what has been prescribed for you - we are the most overmedicated people on the planet. Yes, I know that you are about to say that you really, really need your drugs. And maybe you do. But think about whether if you could rest more or live differently or relax a little more you might not be able to get away without things. Remember, Americans use the health care system more and take more drugs than anyone in the world - but other places have longer lifespans and higher qualities of life. It may be that a little less medication would help. Or perhaps you could choose a cheaper, older drug. Talk to your doctor about this, and don't mess with it on my advice alone, of course.
The next thing should be your house - the reason you should keep your house (assuming it is worth keeping as above) is that the land you are on allows you to grow food, the house is shelter, etc... So you need to keep your home and garden going. Make sure you are planting every inch of lawn with fruit trees, bushes and gardens. You'll want to eat that food. Call up your extension agents and ask if they can help you find sources for divisions and inexpensive seeds, or hook you up with a garden mentor. Every dollar you don't spend on food is one you can put towards the mortgage. If you are older, and can't do as much, call your local garden club or 4 H and explain your situation - tell them you need to garden, but can't put one in, could some nice strong teenagers help you out.
Consider adding more people to your house - allow a friend, college student or relative to come live with you in exchange for a small rent. Or perhaps you could take in a local elder who can't live independently, but can meet most of their own needs. Those giant houses we've been building all these years of the boom - the problem is that there aren't enough people in them
If you have children, talk to them about what's going on, and enlist their help. Any child over 10 can work to meet some of their own needs, or even give a little money to the family to help. I know, you don't want to do that - you don't want to worry them, you don't want to ask your kids to help support the family. Well, I'm going to be blunt. First of all, they already know things are dire - they aren't stupid. What they may not know is exactly what's wrong, but unless you are very, very gifted at denial they've already felt your fear, seen your stress, heard you fight, etc... So sitting down and talking to them (at an age appropriate level) can only make it better, and help them work out their own anxieties. And giving them something productive to do, while valuing their contribution, is actually good for them. I don't mean that your kids should quit school, but saying, "It would be a big help if you would mow lawns for your snack and activity money" or "If you could watch your sister so that Daddy could look for a job, we'd be grateful." One of the real problems our society has is that children don't do enough work, and they don't feel valued. Let your kids help you out of this one. You may worry it will scar them to have to give up activities and go to work - once upon a time, we used to call this "building character." I suspect we will again.
Sell stuff. Don't just turn off your freezer, sell it. Get rid of the big appliances. Get rid of fancy, newer stuff and replace it with cheaper older stuff. It may not seem like selling those new sofas would be worth it, but if you can get $250 off of Craig's List, and then get another for $50, you are $200 ahead. To be blunt, the whole nation got into an economic mess by looking at pretty pictures and thinking "I want that. I should have that." Well, we need to go back to houses that reflect our real standard of living - poorer. That's no shame and we'll have to get used to it. And while we're at it, stop reading the catalogs, the magazines and watching tv - don't look at the pretty pictures that create desire.
Because mortgage payments and property tax assessments are such a large part of your costs, the idea is to cut back wherever you can elsewhere. You may be able to reduce your tax assessment if property prices have fallen in your area. Consider requesting a new assessment.
And you can (you may not like it much) cut back in a myriad of ways. That is, it is perfectly possible to continue living in your house without electricity or heat in many cases. It won't be easy. But if you consider you consider your house worth it, think seriously about it. The average American could save more than a thousand dollars a year by giving up utilities. First you minimize, but if things get tough, turn it off. You can keep cool by sitting outside in the shade with your feet in a 5 dollar kiddie pool, and turn off the a/c. You can keep warm by bundling up, moving around a lot and drinking hot tea. There's no reason for anyone to ever die of heat stroke or cold in a house - I know it happens all the time, but it doesn't *have* to.
Most people who die of heat stroke are elderly, small children or disabled, and they don't realize they are becoming stressed and confused. But with simple attentions, things as basic as cool cloths and a footbath can keep someone from overheating in very hot weather, and warm clothing, moving around, hot stones or hot water bottles and blankets can keep you more than adequately warm in the cold. It takes preparation and thought, but you do not need either heating or cooling to live - as evidenced by the billions of people who live without them.
You do need water, and that may mean electricity. It also might mean a hand pump, if you can get ahold of one. They cost a few hundred dollars, but can pump water up from 200 feet down by hand. Or some rainbarrels (food grade only), or even a hand-dug cistern (dig a deep hole, line it with stone or cement, let the water wash off your roof into it. Don't drink it without filtering. Consider a handmade composting toilet. John Jenkins's _The Humanure Handbook_ is available for free download online - google it, and try building one. It really requires only a bit of scrap wood and a five gallon bucket, and is easy to do. I would reccomend being quiet about it, though.
And *do not* skimp on water for washing hands - your health depends on this, and you can't afford to get sick.
I'd keep lights and a stove as long as possible, but it is possible to do without even these things. A simple solar cooker can get you through the summer, and you can build an outdoor oven for the winter - make it with bricks or cement, and use little bits of wood and kindling to get it hot enough to bake/cook stews and casseroles in.
Get a push mower for your lawn, so that the neighbors don't complain too much, if you can, or quietly go to a neighbor and work out a barter arrangement to borrow their mower. I mention this not because I care about your lawn - personally, I'd rather see it turned into food plants - but because your neighbors are more likely to remain your allies if they are aware you are paying attention to their property values.
This will not be easy or pleasant. The one thing I would do is caution you to avoid letting people know that you have turned off your utilities. There are a few cases of over-zealous social workers taking children out of homes without power because this is a necessity. A Mennonite family I know approached a social worker in my state about wanting to adopt disabled kids, and were told that they could lose their own children for not having running water. Later on, they were told this was not true, but this isn't something you want to mess with. Try and avoid making a big public thing about this.
On the other hand, feel free to make use of support programs and other resources if necessary. If your kids need school lunches or breakfasts, get them. If you can't buy clothes, check the free bin. If you need food, don't be ashamed to use the food pantry. Just remember - pay it back and then some when you can. Because the next time, it will be your neighbor.
Ultimately, the moment you know your house is in danger, you should go into triage mode - first, decide whether to keep it. If you are going to keep it, make your focus ensuring that that can happen, and recognize that everything else is secondary. You can do this - the life you are changing towards is likely to be familiar to many of us in time. And it is eminently doable.
I hope this helps someone.