Thursday, January 4, 2007

A Plan for Getting a Poor Man Back on His Feet

I recently came across a series of interesting pieces on the cost of living in NYC in New York Magazine. I don't normally read New York Magazine because its target audience is pretentious, holier-than-thou snobs, but it occasionally has some interesting articles.

The one that caught my attention was an article about a 31-year-old guy who lives in NYC and makes $338 a week as a security guard. I suggest you go and read this article before you read further.

OK, keep reading it.

OK, I'm going to assume you've read it now. Do you feel sorry for this guy? I sort of did. I'm not a cold hearted capitalist, so I do feel bad for him. The guy does not have things easy. But in a way, didn't he bring it on himself? I think we can learn a ton from the mistakes he made. What did he do wrong?

1) Dropped out of high school in his senior year, presumably to sell drugs

He tried this for a year or two, then moved out to the sticks and started working on a community college degree. I think this was a fantastic move. Get yourself completely away from the bad situation, live the hermit lifestyle for a while, concentrate on your studies, set yourself up for a good job... But then he made another huge mistake.

2) "Near the end of his freshman year, he learned that his girlfriend in the Bronx was pregnant with his baby. Soon, she and the baby and her two daughters from a previous marriage moved upstate to be with him."

I felt the need to quote that. He LEARNED that his girlfriend in the Bronx was pregnant with his baby. Why didn't they say "he took trips down into the city, and on one of those trips, he got a girl pregnant?" This was a choice he made.

3) He took on $4,500 worth of credit card debt and $6,600 of student loan debt

Another bad choice.

There were some other mistakes he made, but I won't get into them here because they were minor in the grand scheme of things. OK, so giant mistakes aside, how could this guy fix his problems (In theory. I don't know everything about him but I will make some educated guesses)?

The first thing he should do is to drastically cut back on his spending. He blew $20 at a movie that he slept through on payday. He could have bought 20 hot dogs with that kind of money. He needs to take a year or two and live like a monk. There is simply no other way. He has had his fun, but now its monk time. This means going to work, spending as little as humanly possible, and coming home to read a book from the library and go to sleep. No spoiling his kids (when he gets out of debt they will thank him for this), no movies, no extras, just the ascetic lifestyle.

By doing this, he should be able to save $50 every two weeks, conservatively, and pay that towards his credit card bill. He's not paying rent. He can probably knock the balance down by about $1,250 in a year that way.

Second, he needs to look for a higher paying job. I know for a fact that there are union doorman jobs in Manhattan that will pay him quite a bit more than he makes right now. Those jobs will give him benefits, vacation, tips around the holidays, and a pension. If not, he can take other civil service tests such as those for becoming a court officer, possibly a policeman, or some other similar kind of city job.

Third, he should open up a new credit card with a zero interest balance transfer option, assuming they will let him do this. He should transfer the balance over, but immediately cut up the card.

If he can't get a new credit card, he needs to call his credit card companies and ask for a break, whether it be in the interest rate he is being charged, the amount he owes, forgiving past fees/interest etc... He needs to be persistent, but not antagonistic when he does this. He needs to explain that he intends to pay it off. This $4,500 in credit card debt could really spiral out of control if he doesn't focus on containing it.

Fourth, he should try to get a second job, part time. No offense to this guy, but he only works 8 hours a day, and he can easily be doing 11 hour days like most professionals put in. He could get a job stocking shelves, bagging groceries, painting houses, or something similar for 8 hours on Saturdays (if that's his day off). This could bring him an additional $50 or more per week, or about $2,500 in a year. He should put it all towards his credit card debt as he makes it, or the temptation to spend it will be too great.

In a year and a half, if he focuses, he can pay off the credit card debt. By that time, assuming he has gotten a new job, he will be making enough to pay off the student loan in another 1-2 years. Three years from now, he could conceivably be debt free. If he does everything right, gets a real second job, and works even more than I assumed, he could be out of debt even faster.

I know you're thinking a life like that takes its toll. Speaking as someone who works 55-60 hours a week (which is more than the 48 hours a week he would be working under my plan), I can assure you it does take its toll. But you know what? When you're working for something, when you're making progress, and when your situation is improving, you feel like it is worth it.

So when he pays off his debt, what does he do then? He can do one of two things . Note I am assuming it takes him 5 years to get out of debt and he will be 36 years old at that point. This is the longest I think it should take him. I think he could do it in 3.5 years if he really applied himself.

The first thing he could do is to continue working at the "better" job that he has found, assuming it is stable and will provide for him and his kids.

If that job isn't enough, he can start taking night classes and get his degree, or learn a trade.

I know you might think my projections are overly optimistic, but this guy needs a plan, and this is the best plan I can think of, knowing what I know from having read the article.

I do not know if he has a drug problem that would impede his job performance. I do not know if he drinks. I do not know if he does anything else that would get in the way, but I hope he doesn't.

He actually has a lot more hope of escaping poverty than most poor people.

I would love to hear if anyone else has more thoughts on this plan, so please, I invite you to comment. Have you been in his situation? What would you have him do?


Anonymous said...

My thoughts exactly. Reading that he passed out in a movie theatre sleeping through a movie he couldn't afford shows that this fellow has no plan.

Stop getting woment pregnant! Save your money! Stop thinking about what could have been; it's irrelevant.

Anonymous said...

if he had the capacity to conceptualize a plan similar to yours, he would never have been in this predicament to begin with.

CGZX said...

Right on! I agree with you on your points there.

There's a time for compassion ... and there's a time for pragmatism. If he expects to just work 8hr days, splurge as he did and others to dole out mercy on him, he's going to be in some debt again soon ...

Living the frugal life is not hip anymore huh? :)

Anonymous said...

I think you've described his options pretty well. You put into words exactly what I had been thinking when I read the article.

Why is he buying lunch with his last $4.41? He could eat lunch all week on coldcut sandwiches for that much money.

A ticket to a horror movie and buying a hotdog and soda? And he slept through it? He could rent a dvd for $3. If he needs time away from the kids, watch it at a friend's place.

Seriously, unless he realizes where he's wasting his cash, he'll never be out of debt.

If he can just give himself enough breathing room to never use a check cashing place, it would make a noticeable difference.

One difference of opinion I have with you though...rather than eliminating all temptation and pay everything left to the credit card, one must pay oneself first.

As someone who's been in a debt position and got himself out, it makes a huge difference just having some funds available in the bank. Just paying oneself a little bit every week adds up and does something for your attitude. You know that you *can* blow it on something without actually having to succumb to the worse temptation of using the credit card.

Not only that, but it eliminates the need to use a payday loan if a sudden need for cash appears.

Anonymous said...

He could get off his ass and get a job.

I was in the same position a few months ago and I looked for a job in my field. Guess what... I got a job. Guess what... I can pay my bills again.

guyhawke said...

I like the plan. The problem is sticking to it as always. I was eaually apalled when I read about the 20$ spending on a movie thru which he slept. That is absolutely ridiulous. And he had a gun once. WHere did he get that from? I am guessing the kind of life he lives preys on your mind. And thats where he is working well with te BUddhist theme. Stay sane and think. And then act and achieve. I sincerely hope he does well enough and gets out of all the problems he has. But the story in nymag doesnt really make me feel too sympathetic. There is a deliberate attempt to make you feel sorry, but considering all the facts, you actually shouldnt.

Anonymous said...

"No offense to this guy, but he only works 8 hours a day, and he can easily be doing 11 hour days like most professionals put in."


Yeah right.

Professionals come in at 10 leave at 4 spend 2 hours at lunch, 1 hour at the gym and 3 hours on the phone making personal calls and then delegate all their work to their assitant who are denied overtime.

This country is headed for a two class society, those who have more then they need and those who don't have enough to live.

On January 2nd most CEO's and VP's made their underlings entire yearly salary In the first 3 hours of the new working year.

This guy represents nothing more than the now diappeared American middle class. We now only have the working poor and the insanely rich.

Anonymous said...

How could he tell at the age he was what he was going to bring on himself?

It's good this post brought me to the original article. Unfortunately your post is a waste of both the writers and readers time.

I live in NYC. He'd be smart to move to another city and state entirely. Some place with a booming economy that can take him with it. In NYC the money stays at the top.

paintist said...

Financially, your plan is viable. But I think you've ignored a somewhat vital aspect. He has a child. Specifically, a child in the most crucial developmental stages. In 3.5 to 5 years he might physically pay off his debt but it will cost him in rather more "important" areas, or rather end up costing his child.

Basically that just means eliminating the second job as a viable option. He could get a better job and still go to school (doing a telecourse like the Universiy of Phoenix) in order to credentials toward better jobs.

Secondly, isn't this all somewhat assuming that his financial needs remain fairly constant? I could see his entire paycheck going to new needs within the next few years.

deepsat said...

his mistakes are as human as anyone's! he is living in NYC and why not, he will have the inclination to be or to do what he sees around!!
one thing i learned from it - if he can live his life, most of us should stop cribbing!!!

Anonymous said...

This is going to be a long comment, because this situation doesn't have a simple answer. You need to keep in mind that it's one thing to talk about these things in the abstract as you do in your post, but it's quite another when you start considering everything as a whole.

I've been in a similar situation but on an order of magnitude larger. I started my own company, mostly financed from my credit cards. I was living in Silicon Valley during the time of the dot-com bust. While I was able to keep the company profitable, I made dirt wages from my work. I did it mostly for the love and the experience of running my own company. But, my credit cards loved me: at the worst I was US$65,000 in debt. To be fair, some of that was on cards issued to my (unmarried, heterosexual) life partner.

Cutting costs is important, but it's important to keep perspective. Yeah, spending $20 on a movie you fall asleep at is pretty stupid. If you want to treat yourself, go to the movie and skip the overpriced hotdog and soda. Some theaters will actually let you bring in outside food, although most won't advertise the fact. Just stick a vendor hotdog in your coat pocket. But, denying yourself all luxuries is just a way to grind yourself down to the point that you don't care about everything else.

Even if he were able to cut out $50 of spending per week, it sounds like he should be spending some of that money on healthy food. He's getting to an age where the metabolism doesn't like being fed junk and he'll have a future of illness if he doesn't start eating properly.

He also has kids. In retrospect, this is probably the single biggest thing that has screwed up his finances. But, society expects him to take care of the kids since he fathered them. The best way to avoid this situation is to abstain from sex, but that's about as realistic as expecting someone to not spend any money on luxuries for a number of years.

The primary problem is where he lives. It's too expensive to live in New York, unfortunately. Rental prices are insane. Moving far away isn't really an option, since it sounds like he still wants to try to have a relationship with his children. Moving to the Midwest may work better on his pocketbook, but it'll be harder to head over to see the kids. But, even moving to the midwest isn't an answer: there are much fewer $10/hour unskilled jobs in rural Illinois, and his debt isn't going to magically get less just because he's making less.

This is further compounded by the fact that it takes so long travel from where there's affordable housing to where there are decent jobs in NYC. Reading the article, when he was working 2 jobs he was only home for 2.5 hours. Assuming he was working 16 hours per day, that means he was spending 5.5 hours commuting. That means that even a 4 hour per day second job would only leave him about 6.5 hours at home to sleep. In addition to eating well to maintain his health, he needs to get enough sleep. And, this still doesn't consider the time he will want to spend with his kids so that they don't forget all about him.

I will agree that the two things he needs to do is 1) Find a job that pays better, and 2) Cut a deal with his credit card companies. But, these are easier said than done. Looking for a job is essentially a second part-time job. He's not going to be able to pound the pavement with 100% effort while working his first job, let alone getting a second job. Especially one that requires something potentially time-consuming like a civil service exam.

Unfortunately, due to the bankruptcy "reform" laws passed recently, even personal bankruptcy can't save him from the credit cards, so he has little room for negotiation. Honestly, he's in the perfect place as far as the credit cards are concerned. Further, getting a zero interest rate card is almost certainly out of the question, since he claims the bills are ancient and he doesn't have any recent credit activity. The zero interest rate cards are only for people that haven't quite maxxed out their credit yet. Defaulting on a loan and missing payments almost certainly makes his credit score too ugly to consider.

In the end, I was lucky. I happen to have skills that are currently in high demand. I make between $10,000 to $12,000 per month in contacting work, which can be hit-or-miss. I just recently signed a 7 month contract with a foreign company that's paying me in Euros; the weak dollar helps me there. I should finally be out of credit card debt and should be able to save up a bit of a nest egg this year. Unfortunately, the gentleman in that article won't be so lucky.

Anyway, there's my thoughts. Sorry for the length, but it's something that I've thought about a lot in the past.

Anonymous said...

As long as you accept fake currency without redemption obligation, you will be poor and the people in the currency printing racket will be rich.

Go to Fedaral Reserve Bank and ask for redumption of your currency notes with food/fuel, then see who is rich and who is poor.......

James Abbott said...

Whilst I agree with you that his situation is in part his fault, I do think that it is all too easy to take a constructive view of such a situation when you're not actually in it but much harder to do so when you are depressed and worn out, as he clearly is. His credit card debt is certainly something which he can only blame himself for, but most of his other problems and mistakes seem to be, or have been, out of his control. I'll give two exampels. Firstly yes he got his girlfriend pregnant, but how do you know that he didn't take utmost precautions but the contraception failed? Hardly his fault if that happened, unless you're suggesting he abstain from sex and relationships just because he is poor? Rich people face the same problems but perhaps have more money to spend on remedying them...The same goes for spending money at the cinema. I imagine that watching a film and relaxing is essential if he is to continue to work his job. I see your point about him needing to button down the hatches and live like a monk, but really and truly, do you think that is actually possible for a human being to do? Could you do it? I'd imagine after a few weeks of not seeing his kids, not relaxing (other than sleeping or reading a book) he'd probably get so fed up and low that he couldn't even work.

Martin said...

I completely agree. He would also save by buying a monthly subway card for $76. This alone would save him more than you think with all the commuting he does.

Anonymous said...

Sorry, but you ARE a cold hearted capitalist.

Anonymous said...

I've thought alot about this, since I recently got a college degree and work a rather cushy job. I haven't "upgraded" my friends, so they are constantly asking for money. The funny thing is that all of them are broke, but one of them recently "got it".

He is learning, just as I had to, that wealthy isn't about amount of money, its about not having a "poverty mentality". A poverty mentality basically says "I deserve" and puts a person in a position not to make any sacrifices at all. Also, tithing and paying off debt as fast as possible are signs that you ahve defeated poverty mentality.

If you gave the security guard guy $10000, would he be debt free in a month, or would he have nicer clothes and enjoy a few expensive meals?

Thank you for this blog post, as I never want to forget where I came from, and want to bless the poor as well.

matelot said...
This comment has been removed by a blog administrator.
Anonymous said...

Also save 11$ for the check cashing service. 62$ for the cell phone. That's a waste. Go for a pay as you go plan. And keep phone use to a minimum. Also I didn't get the fact that he is buying clothes worth 150$ every two weeks!!!

J said...

I was reading that article thinking "Man, he's got a cellphone, he went to an amusement park, got to see a new release, no rent and apparently gets to watch illegal copies of DVDs. This guy is actually kinda LUCKY". I just had a hard time feeling sorry for him. I make about 40% more than Robert, but I pay out 33% of my pay for rent and I certainly don't get to enjoy a $67 cellphone or a $19 movie each month. I also have 2 mouths to feed.

If he had $100 dollars extra out of one check to go to the amusement park, then he should normally have $200 extra a month, no excuses. Plus, being paid bi-weekly, there are 2 or 3 months each year when he'll get one extra paycheck.

I think he should put $50 in his kids college fund, $50 in his own savings (until he gets a balance of $750 - $1000, for the unexpected) and pay down his debt with the other $100.

Stash away most of those 2 extra paychecks for 2 years (roughly $1500 - $2000) and he'll be able to pay first and last on an apartment outside of NYC, with money left over to get some furniture and food for the fridge.

If he gets some part time work and/or works out a plan with his debtors on top of that, he's golden...

Carlos said...

Ok, I read the original article and I read your blog post.

Judging from the "tone" of your post you seem to come off as unsympathetic and holier-than-thou - something which you yourself say that you dislike. It may not have been your intent but unfortunately that's the way you have come across.

The point of the article was to show the desperate plight of people that make a crappy wage (but still above the poverty line).

People make mistakes. Robert has made his fair share of them; there is no denying that.

However I don't think that it's fair for you to armchair quarterback his life by pointing out his mistakes and saying, "it's all his fault."

The world (not just the US) can be pretty unforgiving to good, hard working people that have made mistakes.

I'm sure Robert has little to no financial education under his belt. This is not surprising considering that it hasn't been readily taught in school. I should know - I grew up in a suburban middle class neighborhood and my financial education (from schools) could be summed up as non-existent.

If you want to truly judge Robert you should place yourself in his shoes. Take a page from the show 30 Days. Live his life for a month and see if you see things differently.

It's easy to dispense information and make snap judgments from the comfort of your blog. Instead of doing that, why not offer your help?

You're a financial analyst after all. You could call the editor of the piece and see if you could offer your services to Robert or perhaps set him up with some financial counseling or education.

I'm sure you have connections to do so.

Picking on a man's (and he is human with thoughts, feelings, and emotions just like you) faults from your blog is no better than kicking someone while they are down.

Anonymous said...

you should ask A latino how they manage to make 600.00 a week. (Doing a Really good job and Working extremely hard)I cant not image anyone knowing English and been a citizen here in the USA and making cheap change.

think like the rich said...

those are all excellent suggestions, its monk time, i like the phrasing, i've done some monk time myself, its time well spent.