Families scrimp and save to attain financial security

By Tyrone Beason

The Seattle Times (MCT)

Published: Sunday, June 3 2012 7:57 p.m. MDT

Sarah and Jack Walters play with their son, Jack III, at their home in Kent, Washington. The family lives on a tight budget limiting their home furnishings and other aspects of life. (Ken Lambert/Seattle Times/MCT)

Ken Lambert, Mct

SEATTLE — The two-bedroom apartment Lance Miller shares with his wife, Jen, and their 4-year-old son, North, looks out over the loading docks of Fred Meyer in Seattle's Greenwood neighborhood.

It's not a pretty view. You wouldn't invite friends over to admire the industrial scenery.

In the living room, you won't find a big-screen TV or expensive sofas or a cabinet full of fine dinnerware. But you will perhaps stumble over North's Matchbox cars, because the cramped space also serves as his playroom, as well as Lance's office, which comprises a computer resting on a file cabinet, and what passes for a dining room — a small table with chairs.

But it's home. And it's the family's launchpad for something bigger and better — a middle-class life in the city they love.

Lance takes his son to school each day by bicycle. Jen, who uses her maiden name, Lincoln, takes the bus to work. After holding off on buying a car, the couple recently purchased a used one for road trips and urgent appointments.

It sounds like a fine, eco-friendly urban existence, and Lance is the first to acknowledge his family isn't suffering.

But there's a huge chasm between doing all right and living the American dream.

The life they lead is actually the result of multiple trade-offs and calculations.

The fact is that as renters, the family has had to inch farther and farther away from downtown to find affordable housing and services they can walk to. The apartment Lance and Jen used to rent in Fremont was just a 20-minute walk to the video-streaming company where they both work. Now they live farther from the office but only a short walk to their son's school. By not owning a car, they were able to put more money toward savings for their first home.

Jen and Lance have considered buying a condominium in the suburbs, rather than in Seattle, but doing so might necessitate having two cars, depending on bus service, badly cutting into the household budget.

Like many families struggling to maintain a middle-class lifestyle during the most prolonged economic crisis since the Great Depression, they don't have that luxury. They have to pick and choose which aspects of that dream they can afford. The white board on their kitchen wall lays it out plainly, their itemized monthly budget scribbled in marker, right down to the penny.

"We've done these strategic little things that make it work," Miller says, "all the little tricks that you have to do in the city. If you're above a certain monetary line, you don't have to master those things."

But if the American dream is about aspiration, about wanting to do better than your parents and wanting your children to do better than you, then the family appears to be on the right path. Lance, for instance, grew up poor in the suburbs of Little Rock, Ark., but his son enjoys better circumstances.

The bigger issue for his family, and the rest of us, is whether the American dream, that gauzy notion of middle-class comfort and financial security, can stand up to the realities of a transformed economy.

While Jen and Lance dream of moving on up, extended joblessness, decreased property values, debt and the rising cost of living have pushed many families in the opposite direction.

More than 40 percent of Americans qualify as low-income or are just getting by (a finding based on household incomes below $45,000 for a family of four), according to one recent study.

Lance Miller, 50, says his household's income is well over $50,000 a year and that on paper, at least, his family already fits snugly into the middle-income bracket.

What does it mean, though, to fit into a once-comfortable income bracket that may no longer support your goals?

The couple's solution is strict financial discipline and delayed gratification.

Their older-model TV cost $50 on Craigslist. Both Lance and Jen give themselves $50 a month in allowance, or "fun money."

Jen and Lance have significant savings in the bank, which will go toward the first home. They're prepared for that big leap, but they are in no rush.

These baby steps represent a conscious decision, which is entirely appropriate considering the halting state of the economic recovery.

During Jen's pregnancy in 2007, they both went through a "paranoia phase," worrying about what would happen if one or both of them got laid off. That's when they started saving in earnest, and that flush savings account today provides peace of mind.

"We want to be able to live for two years on our savings," Lance says. "If the economy super-tanked (again), we wanna be able to survive."

Their solution is not rocket science. They've simply borrowed well-tested principles, used by millions to survive and rebuild after the Great Depression, and applied them in an era when financial risk-taking and living beyond your means have been the norm.

The example of Jen and Lance offers a rough sketch of what the future might look like, a possible template for a new American dream.

Maybe from the ashes of the Great Recession, a new architecture for the middle class can rise for all of us, one that is slimmed down, for sure, but also more sustainable — and built to last.

Sarah and Jack Walters, and their 4-year-old son Jack III, offer another variation on the American dream story.

In May they moved into their first home, in Kent, Wash., on a quiet street that is the picture of suburban living.

Emily Howell, their representative at Zip Realty, summed up their vision of the American dream this way: "They desired their own safe space to call home, a nice yard for their little boy and a neighborhood for him to grow up with friends/schoolmates."

There is nothing grandiose about the Walters' vision for their family, nothing that feels even daunting. The couple, both of whom work in the technology industry, took out a Federal Housing Administration loan with a 3.5 percent down payment, and by the end of May they were moving into a two-level house with a backyard and plenty of room for Jack-Jack, as they call him, to run around.

But there's a catch. As Sarah, a 35-year-old who works from home, gives a tour of the upstairs not long after moving in, she sheepishly explains the glaring lack of furniture in the living room, where there's a dining table and hardly anything else. They spend most of their time in the furnished family room downstairs.

"We're building slowly but surely," she says. The couch, chairs and lamps will come eventually. The main thing is they have the house.

Like Jen and Lance, the Walters family strategized before making the big purchase: They would buy a house with a mortgage manageable with just one income, should either Sarah or Jack lose a job. This was an especially crucial factor because the couple racked up a combined $120,000 worth of college debt while studying for their technology degrees, which also needs to be paid off.

Plus, they already know the terror of layoffs. Between 2006 and 2008, the year their son was born, Jack lost jobs several times because of downsizing, and the couple bumped along near relatives in Kansas City and in the Seattle area.

"We were sitting there having to pick and choose which bills to pay," Sarah says of that time. "It was a shock — having to ask my parents for support after we graduated, and we're almost 30 years old. It was really humiliating and degrading. Our credit was going down, and down and down."

In late 2008, after moving back to the Seattle area from Kansas City, the family moved in with Jack's sister, who had just purchased a home and needed help paying the mortgage. The plan was to rent space there for two years, all the while paying down bills that were in collections and working toward their dream of owning a home.

"For two years, all we did was pay our bills and pay off our collection accounts as we could," Sarah says. "It was really difficult to save and, in fact, we didn't. Everything went to bills and collection payments."

After realizing they made too much money to qualify for a first-time homebuyer loan with low upfront costs, the couple resolved to bear down even harder and save for a different kind of loan through the FHA.

Sarah took a $4,500 early withdrawal from her IRA account to get things started, and the couple saved another $3,000 in two months.

The loan application and homebuying processes were grueling, and incredibly time-consuming. Didn't matter.

"We wanted this house so bad," Sarah says while chatting at the dining table in her otherwise barren living room. "I didn't care what I had to go through."

"It's just nice to know that we have our own little piece of the pie," she says, noting that her father bought his first home when he was 21, much earlier than she.

But the delay and tribulations have taught the Walterses valuable lessons about finance and what's important in life.

"I really didn't feel like an adult until we bought this house," Sarah says. "We plan on being here for 10 years, 15 years. ... This is a long-term thing."How many times can you see flashes of happy families in big houses behind white picket fences in the movies, or more recently, paycheck-to-paycheck families in half-million-dollar homes they somehow got loans for and hope to flip for a profit, before starting to believe that that is exactly how life should be? The American dream is so cheerily unrealistic, a film-studio back-lot illusion, one that we dutifully play into and invest years of earnings to make real. Thinking big is at the core of who we are in America.

But when misfortune strikes, that illusion can vanish in an instant.

Karol Kinney has seen the American dream come and go and come again. She teaches — history, yearbook and special education — at Seattle's Cleveland High School, having earned her master's degree in education in her late 40s. She's 56 now.

Before that, she lived "a good middle-class life ... nice home, nice friends," with a successful husband and four kids in the Everett area. But in the fall of 2001, her marriage fell apart, and Kinney found herself needing to make it on her own as a single mom. She couldn't find a full-time job, even with her college degree in graphic design.

"I think at one time I was working five part-time jobs — you name it, I did it," she says.

"I did everything right; then it all blew up," she says of her previous life. "So you start over, you reinvent yourself."

Her solution was to go back to school and study to become a teacher, a field she always had an affinity for.

The prospect of going back to college made her "scared to death," a feeling that was not assuaged at all by the $40,000 in college debt she eventually accumulated.

But five years ago, she went ahead and purchased a town house in West Seattle. By the fall of 2010, though, her expenses proved overwhelming, her bank refused to refinance and the place went into foreclosure.

This was not how second-acts are supposed to turn out.

"I picture myself traveling the world," Kinney says of this stage of her life, but adds, "I don't see that happening in the near future."

Here's what Kinney and visitors to her West Seattle home can see: A picture-perfect panorama of Puget Sound from the small beach-side apartment that sits among expensive houses with million-dollar views like hers.

A stack of travel books rests on a shelf in the living room, reminding her of a wanderlust that may be sated one day, if she's lucky. Kinney seems content with life and insists she won't try buying a house again.

She has managed to make a soft landing after her personal financial crisis, and in this economy, that's no small achievement.

"I told my mom that this is the first place I've been truly happy," Kinney says of the place she rents.

"The 'dream' changes," she says. "My dream right now is a job I love, good health and my home."

On the other side of fear is hope. On the other side of failure is redemption. And on the other side of the recession are examples like Tonya Walters of Tacoma, Wash., a 23-year-old who had been saving up to buy her own home since she was a teen.

She was so enterprising as a child that her family nicknamed her "Tonya Warbucks," and her odd early financial discipline has reaped dividends.

While most of her peers were switching college majors and fretting about the future, she was looking at real-estate options, with enough money already saved for a down payment. She moved into her $149,000 town house, on a cul-de-sac near Tacoma Mall, in May.

In September she married her fiance, Tylor Walters, a 20-year-old Army infantryman stationed at Joint Base Lewis-McChord, and is in the process of adopting his son, Tylor II, who's 2.

Both husband and wife are meticulous about money. Tylor says he doesn't use credit cards and opens his wallet to prove it. "I'm old-fashioned that way," he jokes.

The whole idea of buying things on credit when you can save and buy them in cash bothers him.

"We have friends who are maxed out on credit cards," Tylor says. "It's not that they don't have money; it's that they don't know how to spend it."

They're a perfect couple in that way: "I didn't have to teach him how to save money and spend money, and he didn't have to worry about me going out and racking up lots of debt," says Tonya, who's building an Internet services company and an interior-design business from home while pregnant.

When the couple goes out on a date, it might be something as cheap as a $5 buy-in at a bingo game at the Muckleshoot Casino.

For his part, Tylor says all he's wanted in life is "a nice house, a car and a balanced family — one boy, one girl."

He's about to get his third wish. Tonya was expected to deliver a girl in late February. And like the planners they are, they named her Tessa Marie Lillianna Walters months ago.

There's a handwritten sign with a phone number to call on the road leading to their neighborhood that captures the times: "Facing foreclosure? Upside down on mortgage?" it asks.

The Walterses can drive by that sign and know they're not among those struggling in such circumstances. But it's not because they are immune to economic forces or smarter than everybody else.

It's because they've chosen to live within their means, saving the gambling for date-night bingo.

Distributed by MCT Information Services

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