Jessica Booth, a stay-at-home mom, plays with her son, Shane, at their home in Kenmore. She and her husband, Kenny, who works for an environmental consulting firm, had already cut back on their home budget before the economic downturn started.
Barbara Reininger, owner of My Kids Cookies, poses for a picture in her Bainbridge Island shop with her husband Len, daughter Molly and son Daniel. Barbara started the cookie business two years ago before the economy started slipping.
Steve and Camille Burton watch their family Nora, 19, Alison, 6, Simon, 9, and Olivia, 15, play a rock band on the family's Wii game console at their Bothell home Monday, Dec. 1, 2008. Steve is a Boeing machinist and Camille a self-employed hair stylist. They have been through ups and downs of family finances over the years and said they have learned to adapt to the changes.
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Tips from Some Experts
How to Rein in Daily Expenses Marcia Brixey’s first piece of advice is to write down everything you buy for at least two weeks. “Make it a game with the family,” says Brixey, adding that just having to stop and think about what you’re buying long enough to write it down will help reduce spending. Brixey uses what she calls a “Checkout Checklist,” a list of questions to help people make better spending choices. “It reinforces the idea that it’s my choice – I control the money, it doesn’t control me,” she says.
The six questions on the checkout checklist are:
• Do I really want this? • Do I need this? • Will I use this? • Am I buying this just because it’s on sale? • How many hours will I have to work to pay for this? • Do I really love this?
Brixey suggests printing the list out and putting it in your wallet as a reminder to be a more conscious consumer.
Next, Brixey advises creating a spending plan. “I don’t like the word budget – it reminds me of diet,” she says. “I tell people to create their own spending plan.” Brixey emphasizes the importance of including children in the process as a way of teaching them about money. “I think many of us are in a predicament today because we never learned about handling money,” she says. “I think it’s good to include your kids and let them ask questions.”
Brixey recommends reviewing your monthly bills from top to bottom. “Make sure you’re not paying for services you don’t need,” she says. If you can live without call waiting, get rid of it. Do you really need HBO, or can you cut back to basic cable? Check your auto and homeowner’s insurance deductibles and see if you can negotiate any changes that will lower your premiums. Same goes for credit cards: You’d be surprised how many creditors are willing to lower your interest rates if you call and ask.
Other “money wise” tips:
• Have your savings and investments automatically deducted from your paycheck. • Ask your credit card company to waive any annual fees. • Wait 24 hours before you buy anything that costs more than $100. • Save your change each day and deposit it at the end of the month – it adds up!
What about Long-Term Investing?
Michael Malone, a financial services professional with State Farm, says that many of his clients are gun-shy about investing in this bear market, but he cautions people not to let fear drive their decision-making. Loren Winter, a financial advisor at Edward Jones in Kirkland, agrees. “I’ve been hearing a lot of fear,” he says. “I think that’s one of the driving factors in the market going so low.”
“As long as you’re in a well-diversified portfolio that’s professionally managed, it’s a good idea to stay the course,” says Malone. He advises his clients to stay focused on what their original goal was for their investments, though he anticipates some continuing market volatility over the next year and a half.
“We can’t control Wall Street,” Malone adds, noting that it’s good idea to scout out investments that have a long-term history of riding out economic downturns. Eventually, markets recover, he says, and those who stick to their original game plan when things get ugly are usually pretty happy that they hunkered down and waited for the recovery to restore value to their investments. Winter reminds his clients that they need to think in terms of “time in the market” rather than “timing the market.” He sees his role as being there to help balance his clients’ emotions during times of volatility.
Malone’s advice:
1. Stay focused on your goals. “Most of the people who are panicking don’t have a plan. When you don’t have a plan, all you can do is react to the current market conditions instead of being proactive.” 2. Have someone you can trust to give you some advice. 3. Pay yourself first. “If you don’t pay yourself first, you’ll never pay yourself.” 4. If your company will match contributions to your retirement plan, take advantage of it. Otherwise, you’re basically saying no to free money. 5. If you qualify, invest in a Roth IRA. You can take out your original contributions at any time without tax or penalty, and you can direct your investments to a variety of things, from stocks and mutual funds to bonds and real estate. “When you retire you want to have several pools of money,” says Malone. “Your 401(k) will be taxed when you access that, but the Roth has already been taxed, so that’s tax-free money available to you. You want to have choices.” That means if you want to withdraw from a Roth IRA to put a down payment on a home or pay for college, you can do that.
Helpful Resources:
Solid Ground Financial Skills Education – Formerly the Fremont Public Association, Solid Ground provides comprehensive human services and offers financial skills and homebuyer classes. www.solid-ground.org.
Money Wise Women Conferences – This non-profit organization leads low-cost conferences that teach women from all walks of life how to take charge of their finances, from debt-reduction to investments. www.moneywisewomen.net.
Choose to Save – Choose to Save is a national outreach program aimed at promoting the importance of saving. The Web site has online calculators and tips for saving for retirement and other long-term goals. www.choosetosave.org.
Annual Credit Report – Keep an eye on your credit rating by obtaining a free copy of your credit report once every 12 months at this Web site. www.annualcreditreport.com.
JumpStart – JumpStart is a national coalition of organizations working to improve the financial literacy of young people from kindergarten through college. www.jumpstart.org.
Women’s Institute for Financial Education – Founded by finance pros Ginita Walls and Candace Bahr, the Women’s Institute for Financial Education has a wealth of tools and advice for anyone looking to improve their financial situation. www.wife.org.
The Crunch: How Local Families Are Coping With the Economic Downturn
By Jennifer Donahue
Each year on New Year’s Day, like millions of other people, Marcia Brixey makes a resolution. She used to resolve to get in shape, but the weight always seemed to come back, and she’d find herself making the same resolution the next year, back at square one. Now she makes resolutions that help her on the path to financial fitness, taking one step at a time.
Of course, financial fitness is also Brixey’s business. After 26 years of working for the Social Security Administration, Brixey made a mid-life career change and embarked on a mission to educate women about their finances. “I meet women all the time who don’t have their financial act together,” says Brixey, of Silverdale, Wash. “Women are nurturers, but we take care of everyone but us.”
Author of The Money Therapist: A Woman’s Guide to Creating a Healthy Financial Life and founder of the Money Wise Women’s Educational Services, Brixey teaches women to get their finances in shape through conferences and seminars that focus on basic principles and solidly practical advice. “We are a nation of unconscious spenders,” says Brixey. “That’s our No. 1 issue.”
In the current economic climate, there are plenty of people who want to hear Brixey’s message. Keeping track of the family finances can be stressful at best, especially when reports of falling home prices, layoffs, and a plummeting stock market are dominating the news. Because of declining tax revenues, the state is facing a $5 billion budget shortfall for the 2009-11 biennium. Unemployment is rising – it’s more than 6 percent in Washington and 6.5 percent nationally, a 14-year high.
Amid all the gloomy news, however, life does go on. Seattle’s Child talked to three local families who shared how they’re managing to stay afloat. Here are their stories:
Jessica and Kenny Booth
Like many families, Jessica and Kenny Booth are cutting back. Kenny Booth works for an environmental consulting company, while Jessica Booth stays home with the couple’s toddler son. The Bothell couple has been taking steps for more than a year to prepare for a downturn in the economy, from tightening up their household budget to lowering the amount they put away for their son’s college education.
“Having seen food costs and gas prices go sky high recently we have had to get even tighter on our budget in the last few months,” she says. “The few fun things we had left, like eating out, going to movies, and buying clothes and house decorations now are on their way out of the budget completely.”
The Booths are renting a house and also saving to buy a home. They’re not in a hurry. “Our hope is to buy our ‘forever’ house when we do buy. Se we are waiting for just the right time, place, price and house,” she says.
They’ve found ways to supplement their income without forcing Jessica Booth to go back to work full-time. The former elementary school counselor now provides part-time child care while watching her own son. Even with some extra income, the Booths are mindful of their spending. “I find myself thinking twice about the fundraisers that are going on left and right,” she says.
The Booths have gotten more conservative about the way they save as well. They moved most of their savings out of mutual funds into much safer CDs a year ago; they liked the notion of setting money aside with the guarantee that, after a certain amount of time, they’d get it back plus a bit of interest – even if it wasn’t much – as opposed to mutual funds, which rise and fall in value along with the stock market.
They’ve also recently moved most of his 401(k) from mutual funds to treasury bonds, which grow much less than stock-based investments during good times and fall much less during bad times. The Booths also are contributing 50 percent less to his 401(k) fund and their son’s college fund. Burton says they won’t risk re-entering the stock market until they feel secure that the economy is improving. “We’re content not to have to time the bottom perfectly and can wait for the worst of the risk to pass before getting back into the market,” she says.
Barbara and Len Reininger
Barbara Reininger has days when she wishes she didn’t know so much about the economy. That’s a hard wish to fulfill, since her husband, Len, is a credit manager for Federal Home Loan Bank of Seattle, and keeping an eye on the economy is his job. The Bainbridge Island couple has a 14-year-old daughter and a 13-year-old son, plus a brand new cookie business that they’re trying to grow.
When Barbara Reininger decided to quit her job to start My Kids’ Cookies two summers ago, her cookie shop and online cookie business, she didn’t realize the economy was on its way down. Luckily, she’s had pretty consistent sales. She started out by renting space in a commercial kitchen, but eventually found that she needed space of her own. “I decided to build my own kitchen and then rent it out to people who needed it,” says Reininger. “One reason was to support my business, and the other was to have another stream of income.”
But now Reininger is feeling the effects of the sagging economy. “Online business has slowed down since the economy has started to get tightened and pinched,” she says. “I am worried. … I’m just basically going to try to stay afloat over the next year. I have a good business plan; it’s just a tough economy.”
She is worrying about money for the first time in her adult life, which is unnerving. “Right now it’s pretty much front and center,” she says. “If I have a slow day at the shop, it affects my mood.”
The high cost of doing business makes it even harder for her to make ends meet. She’s invested $50,000 in her commercial kitchen, and it costs her about $2,600 each month to run it, including rent, equipment leases and insurance.
When Reininger left her job to start her business, the household income went down by 40 percent, so her family has learned to cut corners wherever they can. “I used to shop at higher-end stores,” she says, “but now I go to Target. We’ve become huge WalMart and Coscto shoppers.”
They spend Saturday mornings hitting the island’s yard sales. It’s their time together, and it’s cheaper than dinner and a movie. Reininger called her credit card companies to ask for lower rates, and is shopping around for a lower price on propane to heat their home. “If we can switch companies to save money, I’ll do it,” she says. “I don’t have customer loyalty because I can’t.”
The Reininger kids have had to cut back too. “They have seen how we’ve tightened our belts,” says Reininger. “Now we pinch where we can and they are definitely in the loop that we all have to give. That’s good for them.”
Steve and Camille Burton
Camille and Steve Burton of Kenmore have weathered a few ups and downs in their 21 years of marriage. She’s a self-employed hair stylist, and he’s a Boeing machinist, so their financial situation isn’t always stable – all it takes is a layoff or a strike to upset the balance. As a union machinist, Steve Burton was on strike for 57 days last fall. Because they knew the strike was likely, both tried to work overtime in advance so they could put some money in the bank. Their savings went fast, though, and they were relieved when he returned to work.
Even though the strike is behind them, the Burtons don’t see their family’s financial picture getting rosy anytime soon. They have five children ranging in age from 6 to 26, and they’re relying on tried-and-true tactics that have helped them weather economic hard times in the past.
Camille Burton keeps a close eye on the family’s debt, and favors camping trips over vacations to exotic locales. School shopping is limited to basics only. “I start with the necessities – socks and underwear if they need them.” Burton calls her youngest daughter, 6-year-old Alison, the Hand-Me-Down Queen. “You let go of the social part of it,” she says, although she admits that it can be tough convincing her teenagers to shop at thrift stores and Target instead of at the mall. “You think about things like watering the plants and replacing light bulbs,” she says. The family has found that making a habit of being budget-conscious makes it easier to adjust when the money isn’t there.
When a Boeing strike is rumored, she goes into high-savings gear, clipping coupons and scouting for deals. Weekly menus are based on whatever’s on sale. When layoffs are looming, the Burtons make sure everyone has been to the doctor and is up-to-date on their dental appointments because the family can’t afford to purchase private insurance. They know the risk – while he was laid off a few years ago and they eked by without insurance, Camille Burton had to undergo emergency gallbladder surgery. They were left with an $8,000 hospital bill that decimated their savings. They’re still struggling to pay some of those medical bills.
Both Burtons work extra shifts when they can to bring in supplemental income. They owe $175,000 on their 4-bedroom house. Luckily, they can manage their fixed-rate mortgage payment and utilities on her income if necessary and only have one car payment. It’s the extras that make it hard to get ahead.
With the economy in decline, Burton worries about being able to maintain her client base. Regular clients that she’s used to seeing once a month will stretch it and start coming in every six weeks. People will give up what they see as indulgences and may try coloring their hair at home, for example, or just stop in to get their bangs trimmed instead of springing for a haircut. Burton understands that people need to stick to a budget, but these cutbacks affect her bottom line.
Still, life goes on. When gas prices were high over the summer, the Burtons considered cancelling their annual trip to the beach. They knew it would be a big expense, but decided there are some things worth struggling for. “You can’t just stop everything,” she says. “You still have to live your life.”
Jennifer Donahue is a freelance writer and mother of two, who lives in Kenmore.
