Author Dawn Handschuh Archive

If the water company turns the spigot off, does the need for water go away?

As the recession lumbers on, credit card companies have tightened up credit limits and made it much more difficult for borderline applicants to access credit, even if they had no problem making purchases on credit in the past.

Now that consumers can no longer assume easy access to credit, does that mean they’ll simply stop spending? No.

The Houston Chronicle reports that some rent-to-own stores are enjoying a big spike in business, as families who now lack a credit card are resorting to other means to buy everything from bedroom furniture to flat-screen TVs.

“Aaron’s Inc., the nation’s second-largest rental retailer, had a record-breaking first quarter, with a 12 percent increase in same-store sales and nearly 60 percent earnings increase,” the newspaper reported. Aaron’s operates 1,600 stores across the country. Its most popular item is big-screen TVs.

Rent-to-own customers pay “rent” on a weekly or monthly basis, typically for a fixed period of between seven and 30 months, the Chronicle said. At the end of that period, the customer owns the merchandise, but if they miss payments, the store repossesses the item.

However, according to a survey by Policy Matters of Ohio, rent-to-own customers typically end up paying as much as 4.5 times the retail price of brand-new merchandise; even worse, they’re frequently paying for used merchandise.

It makes me wonder what happened to the old-fashioned way of making purchases: saving up your money until you can afford to buy items outright. Perhaps basic necessities can’t wait, but big-screen TVs and some furniture can. Given the high cost of renting to own, would you consider rent-to-own if you lost all your credit cards?

If you haven’t visited the Big Apple recently, New York’s street-food vendors are selling much more than hot dogs and pretzels these days. Without setting foot in a restaurant, you can have your pick of fancy cupcakes, chicken-Thai basil dumplings, vegan tacos and other culinary offerings.

New Yorkers may stand to benefit from an even greater selection of upscale street foods soon because the City Council will consider a proposal this fall to increase the current number of food vending permits from 3,100 to 25,000, says the New York Times.

Rising unemployment has struck white-collar workers as hard as anyone else, leading more white-collar workers with former six-figure salaries to try their hand as food-cart vendors. But they’re unwittingly clashing with more traditional hawkers of gyros and kebabs. Most of the veteran vendors are immigrants, and many have occupied a certain street corner for decades; in some cases, they’ve even handed down their location on a certain block to future generations within the same family.

The city’s Health Department charges $200 for a two-year street permit, which can be renewed indefinitely, but the city doesn’t regulate where vendors park their carts, aside from enforcing parking regulations and barring street-food vendors from certain streets. Because demand for a limited number of permits is so high, the black-market value of these permits can be as much as $15,000.

Upscale food merchants new to the street-vending scene have been cursed, had their lives threatened, seen their tires slashed and otherwise been told that they’re not welcome. This street-level bullying comes not just from other vendors, who view their presence as “an unfair advantage in a desperate economy,” but also by brick-and-mortar restaurants, according to the New York Times.

Although you might think that a hungry customer looking for lunch will still head for the hot dog stand instead of the cupcakes, many vendors see it differently, believing that if someone has $5 in their pocket, each of two vendors has a 50/50 shot at getting the customer.

What’s the solution — should the city step in and start assigning street-cart locations when permits are issued? Or should we leave it to the vendors themselves to duke it out in the kind of turf wars more commonly associated with drug lords?

Mortgage giant Fannie Mae issued new lending rules earlier this month that will make it harder for workers facing job-related transfers.

Job-related transfers typically involve one spouse who’s moving to stay with the company while the other spouse has to give up their current job and find a new one, often only after the move takes place. Under Fannie Mae’s new rules, the income potential of the “trailing” spouse will no longer be considered in the mortgage application, even if the second spouse is a high wage-earner. The result? Families transferring with their employers may have to trade down to less house than they were accustomed to based on two salaries, or they may end up having to rent.

In the past, lenders usually counted at least a portion of the trailing spouse’s income when processing the mortgage application, but they’ll do so no more, given the state of the economy and particularly the unemployment picture, the Washington Post reports.

More than 800,000 relocating families could be affected each year, according to Worldwide ERC.

Freddie Mac still factors in the trailing spouse’s income, but with strict limits; self-employment income can’t be included, and the trailing spouse’s income can’t represent more than 33% of the total qualifying income.

In addition to ending consideration of a trailing spouse’s income, Fannie Mae will also start relying less on the value of stocks, bonds and mutual fund investments as part of a mortgage applicant’s financial reserves, something that lenders routinely look at as part of the mortgage application review process.

Due to stock market volatility, the value of stocks, bonds and mutual funds that’s counted as part of the applicant’s financial reserves will now be discounted by 30%, while only 60% of the value of retirement accounts will be considered as part of the applicant’s financial reserves.

Do you think tighter lending standards could cause some couples to change their minds about a job-related relocation?

TJX Companies, parent company of clothing retailers T.J. Maxx and Marshall’s, will pay $9.75 million to 41 states to settle a case involving a huge data breach in 2005 and 2006 after computer hackers gained access to the credit and debit card account numbers of 50 million store customers.

The settlement comes just as most states are grappling with escalating budget deficits. You might think that this little windfall could be used to help save the job of a firefighter or two, or maybe get the potholes filled in your hometown. Alas, after deducting roughly $1.75 million for expenses incurred by the investigations of the 41 attorney generals and $2.5 million, which will go toward creating a data security fund for states, the actual settlement money heading toward the states is just $5.5 million, or about $134,000 per state, if the money were evenly divided. (It’s not.)

Oh, and the bad guys? Of the 11 people indicted, two pled guilty to the original charges, and two others have pled guilty to related charges. I guess that seems like a partial victory, but there are far too many scammers ready to take their place.

In April, I shared with you my ambitious plans for a vegetable garden and promised to keep you updated on how my own personal recession-buster project was progressing.

Thanks to an incredibly cool and rainy spring, we got off to a slow start, with practically every seed-sown crop failing to germinate. A five-foot row of snap peas produced maybe three plants that grudgingly emerged from the soil. The easy-as-can-be, cool-weather radishes seemed to flourish, judging by their leafy green tops. They’re quick growers, maturing in about 25 days, but when I pulled one after 30 days, there was no bulb, just a long, stringy-looking root. Week after week, I’d pull another “test” radish and get the same disappointing results. How embarrassing for a lifelong gardener. This past weekend, I saw the radishes were starting to go to seed, signaling the end of their lifespan. So I decided to rip them all up to make room for something else, and lo and behold, I got about a half-dozen radish bulbs!

I picked some red and green lettuce, along with baby spinach leaves (another very slow starter), and together with the radish tops, I marched into the house to make a salad on the spot. Those little radishes had none of the bitterness of store-bought varieties. They were quite mild and crunchy, not unlike a water chestnut.

So, back to the garden. The red potatoes are doing quite well, and I’ve already hilled them over (to prevent the tubers growing below from turning green) several times with pine mulch. Still, I have these nasty cutworms that mow down entire stems of potato plants overnight. I painstakingly covered the base of every stem with tinfoil, but still, those little suckers managed to get around it. That’s it. I’m getting diatomaceous earth, a natural dust made of crushed-up seashells. You spread it around your plants like a protective moat, and it’ll kill slugs and any other soft-bodies creatures that attempt a crossing.

I also see cucumber beetles are gnawing numerous tiny holes on the potato plant leaves, but I have plans for them, too. I’ve mixed a blend of onion, garlic, cayenne pepper and dish soap in water, and the pungent brown concoction, sprayed on my veggie plants, should act as a natural bug repellent. That is, if our torrential rains ever stop.

Yellow wax beans and string beans have emerged, but they, too, have been cruelly mauled by slugs, which I pick up and fling away when I find them. The garlic is growing like gangbusters, as are the tomatoes, which are sporting a few small blossoms. The bell peppers have been ravaged by what I suspect are slugs. Inexplicably, the zucchini, acorn squash and spaghetti squash seed I planted ages ago never germinated, so I replanted again yesterday, hoping there would still be enough time for the plants to mature.

I’m guessing the cold start to the growing season has also stymied other gardeners here in the Northeast. According to a Washington Post story, the demand for vegetable seed has skyrocketed this year, up 75% compared to last year at one longtime seed grower.  Contributing to the gardening mania are fears about salmonella outbreaks, rising food prices and concerns about pesticide use.

Some seed growers have even reported runs on certain staples, like beans, potatoes and lettuces, while certain varieties of other vegetables, like carrots, beets, onions and spinach, remain in short supply. Plants like melons, which require a lot of water and space, are not selling well.

My harvest to date? About three servings of lettuce greens with baby spinach and radishes. A paltry output, but hope springs eternal.

It’s a familiar scenario — a diligent, even workaholic, career-bent employee unexpectedly gets laid off from his job. Pity the poor jobless person who suddenly has nowhere to go and countless hours to scour want ads in her pajamas … right?

Wrong!

Get that image of a depressed and downhearted job seeker out of your mind.  Think about replacing it with a 30-something young woman relishing the ocean breezes while sipping a margarita.

Some laid-off employees, particularly those in their 20s and 30s, are quickly transforming sudden unemployment into “funemployment,” according to a June 4 Los Angeles Times story.  Others arrive at that happy state by voluntarily quitting their jobs.

While the “funemployed” may have outwardly appeared to adopt the work ethos of older generations who accepted the bonds and limitations of traditional employment, more young people today are skipping what they believe will be a fruitless job search and heading straight for the beach, golf course or travel abroad.

One young person interviewed by the Los Angeles Times put it this way:  “The rat race puts blinders on you and makes time fly, and then the next thing you know, you’ve missed the chance to be your more exciting self, or to push yourself in a gutsier direction.”

Instead of slinking away to a hole somewhere and expecting everyone to forget them, today’s unemployed often blog or twitter about their new lives of unemployment quite happily.  And instead of taking a temporary sabbatical from work, some people are opting out of the system entirely, with no desire to return to corporate America. (Of course, it helps if you have substantial savings or generous parents.)

Everyone deals with a crisis in their own way, and it seems to me that if you’re forced to deal with a layoff, it’s better to make the most of your newfound time instead of wallowing in self-pity. Still, if you’d prefer to return to the workforce as hastily as possible, we’ve got a 16-step guide to help you get back on course.

When the world’s largest public corporation (and largest private U.S. employer) tinkers with its highly successful business model, it’s hard not to take notice.

According to Wal-Mart executives who recently concluded a shareholder meeting, a recession is no time for wimps.

And it’s no time to rest on one’s laurels, even if the laurels include hitting the $400 billion mark in sales for the first time during its last fiscal year, according to a New York Times story.

Sales have been robust for the retailing giant during this recession, but the company’s head honchos have set out to build long-lasting relationships with its new, more affluent customers. Many of them set foot inside a Wal-Mart for the first time during this recession seeking refuge from higher prices elsewhere, and Wal-Mart’s betting that the sea change in consumers’ attitudes about spending will be a permanent one.

The company’s retention strategies include a new store design and remodeled layout that would make shopping — and checkout — a more pleasant experience. This means wider, more easily navigated aisles with lower shelves, as well as expanded food and electronics departments, two product categories that are selling briskly. The most popular items, including groceries, pet supplies, health and beauty goods, and baby products, will be located closer together so customers don’t have to schlep all over the store. There’ll be fewer brands, and the take-out food and deli areas will be relocated closer to store entrances to accommodate customers who want to eat on the go.

While many smaller businesses have already closed or are struggling to stay afloat, Wal-Mart has leveraged its massive buying clout to deliver on its mantra of low prices. (“Save Money. Live Better.”)

What’s your take? Does this bode well for consumers?

With the unemployment rate flirting with 10%, personal and commercial bankruptcy filings are again spiking higher and are projected to reach 1.5 million this year, according to a USA Today report June 4.

Personal bankruptcy filings occurred 6,020 times a day last month, not quite as bad as the 2 million filings in 2005, but startlingly higher than 2008’s 1.1 million. Corporate bankruptcies are occurring at the rate of 376 a day, compared to 255 a day in May 2008.

According to USA Today, Nevada, Michigan and California had the largest increase in bankruptcy filings per capita last month, higher than anywhere else in the nation. (Think real estate bust and ailing car makers.)

Bankruptcy laws were rejiggered in 2005 to reduce abuse of the system and make it harder for individuals to file for bankruptcy. But rising joblessness is putting the squeeze on many families, who then follow a predictable downward spiral of exhausting savings, depleting retirement accounts and turning to credit cards to pay the bills before resorting to the worst-case scenario — bankruptcy.

What’s the best defense?  Follow these strategies to protect yourself if you fear a job layoff could happen to you.

Consumers are still stubbornly clinging onto their hard-earned dollars, so much so that marketers of many national brands are working harder than ever to convince consumers it’s still worth parting with them.

Procter & Gamble, the New York Times reports, plans to selectively reduce prices on brands it believes are perceived as being expensive compared to its rivals.  But it will also try to position its products as being a better value. 

Consumers, we’re told, are looking more closely at the spread in prices for different brands offering the same product and making individual choices about what’s best for them — the dirt-cheap brand, the middle-of-the-road brand or the premium brand.

As the Times pointed out, “value” means different things to different people, and people may differ in their willingness to pay a premium for value for certain purchases.

It reminds me of the old L’Oreal hair coloring commercials that justified the higher price with the tagline, “Why? Because I’m worth it.”

Some might insist on paying more for good-quality clothing, while for others it’s a top-of-the-line plasma TV. I guess it really comes down to personal priorities and what’s important to you.

 Are there certain high-end brands you’re still willing to pay extra for, or has the recession put all things on the table?

While the 30-year fixed rate mortgage loan has long been the traditional choice of homebuyers, recent data show a growing trend by home shoppers to opt for a 15-year mortgage.

The number of 15-year mortgages rose by 43% in February compared to the previous month; in dollar terms, 15-year mortgage loans more than doubled from February to March, and this pattern is expected to continue amid the current refinancing boom. 

What’s the allure of the 15-year mortgage? Homebuyers may be experiencing a growing abhorrence of debt, understandable in the current recession, and want to pay off their debt as quickly as possible. That’s a good thing, because it sets the stage for disciplined mortgage holders to enjoy their retirement days free of mortgage debt.

Still, the 15-year mortgage is not a slam-dunk decision for everyone, since 15-year mortgages will command significantly higher monthly payments compared to a 30-year loan at the same interest rate. In the long run, though, the 15-year mortgage holder would pay $194,000 less in interest over the life of a $400,000 mortgage than on a 30-year loan, according to a New York Times story on the subject.

In the New York Times example, a borrower taking out a $400,000, 15-year loan at 4.375% would have monthly payments of about $3,034 a month, compared to about $2,056 a month on a $400,000, 30-year fixed-rate loan at 4.625%.

Taking on the higher interest payments of a 15-year mortgage also carries added risk should you lose your income. Indeed, some economists predict we’ll soon see a “third wave” of foreclosures as many of those with good credit and prime loans lose their jobs. (The first wave was foreclosures induced by speculators, and the second wave occurred when low-interest introductory rates expired and the rates shot higher, resulting in prohibitively expensive monthly payments.) 

That’s why it puzzles me to see consumers willingly take on such added risk in a climate of continued high unemployment.  There’s a perfectly workable alternative that allows them to pay off their mortgage as quickly as they could with a 15-year mortgage — but without the greater burden they’d face if they were laid off.

Simply take out a 30-year mortgage, but make the higher payments you would make as if it were a 15-year loan. This way, you have the flexibility of stopping the higher payments in the event you lose your income; when your income returns to normal, you can resume the higher payments. The only shortcoming here is that you won’t benefit from the lower interest rate associated with a shorter-term loan. Still, assuming you held onto your job for the duration and that you have the discipline to continue the higher payments, you’d succeed in paying off your loan in just 15 years, with built-in flexibility and safeguards. (Just make sure there are no pre-payment penalties in your loan contract.)

In the end, it’s an individual decision that balances the value of the savings you’d gain from the lower rate of a 15-year loan versus your confidence in your job security and how things would go if you lost your job.  It’s your call.