This is what happened when I drove my Mercedes to pick up food stamps

http://www.washingtonpost.com/posteverything/wp/2014/07/08/this-is-what-happened-when-i-drove-my-mercedes-to-pick-up-food-stamps/?tid=pm_opinions_pop_b

by zonotope • 11 years ago

43 69 11 years ago

washingtonpost.com

r721• 11 years ago

Previously discussed: https://news.ycombinator.com/item?id=8010723

IanDrake2• 11 years ago

Poverty is a circumstance, not a value judgment

Really? All I see is someone who lacks good judgement when I read that article.

I had a Mercedes once and sold it when things got tight. Holding onto an asset like that when you're impoverished is just foolish. I can't imagine being unemployed that long either. I'd be raking leaves for money after two months.

Zigurd• 11 years ago

A 2003 C230K, which is what it sounds like the author was driving, could be worth in the low single-digit thousands, depending on the miles. You might find a similar vintage Subaru for hundreds of dollars less, but the risk of swapping an old car you know for one you don't to extract a few hundred dollars makes no sense. One repair could wipe that out several times over. Moreover, this car is probably paid for. They might have to finance a replacement at very unfavorable rates.

fnordfnordfnord2• 11 years ago

In the article she says the Mercedes was paid off; and anyone who has ever owned one knows that their resale value as a percentage of the original purchase price is among the worst of all car makes.

DiabloD32• 11 years ago

Honestly, this is the correct thing. Cars, once they're about 2-3 years old, have no real value. They all drop below $10k around here no matter the make or model (Maine winters are hard on vehicles, though, again, no one drives Mercedes around here either).

Buying a car is a sunk cost. Once you own it, getting rid of it before it cannot be driven anymore is wasting money. Once she bought that Mercedes, once it got too old, swapping it for a newer used vehicle would just give her a worse vehicle that would cost her more money in the long run.

I am poor. I've never been rich. I have a few nice things because I force myself to do the math on things. Other poor people hate me and threaten to report me to "the authorities" for owning nice things because somehow I cheated to get them.

I may not own many things, but the things I own do what I need them to do, and will do so for a very very long time. What this woman did, in my opinion, was the right thing.

Selling only makes sense if you can actually profit from it.

tootie• 11 years ago

The mistake was buying it in the first place. A Honda Accord would last 10 years for half the price.

bryanlarsen3• 11 years ago

They have a reliable $5000 car. Given they have two babies, they need reliable transportation. What could they buy for significantly less than $5000 for reliable transportation? A bicycle would work for an adult, but they had two babies...

Delmania3• 11 years ago

That's pretty much a knee jerk reaction. The car in question is over a decade old, but is fully paid off and in good repair. It was also the couple's only car at the time, as her Honda has broken down. Reliable transportation is a key component to escaping poverty. The author isn't perfect, she and her husband did make some poor choices, but keeping the Mercedes is not one of them.

techsupporter2• 11 years ago

The author isn't perfect, she and her husband did make some poor choices

Unless I missed something, I don't see where the author and her husband made any poor choices. Keeping the paid-off vehicle is prudent[0]. They were making a combined income of $120k, according to her, when they chose to have a child. Only after the pregnancy was her husband laid off and they couldn't have easily foreseen that the babies would have health problems. They bought a house but the timing wasn't their fault and it's almost impossible for a layperson to predict. In short, they discovered the true meaning of "shit happens."

0 - That's one thing people might want to keep in mind when they see someone talking on an iPhone while paying with food stamps. It's far easier to keep what you have than to sell it--usually at "fire sale" prices for quick cash--and try to replace it with something cheaper. If I ever lost my job, two of the last things to go would be my paid-off vehicle and my dirt-cheap unlimited data mobile plan with smartphone.

zoidb• 11 years ago

This is not a new article, should probably add 2014 to the title.

jacquesm14• 11 years ago

Inability to adjust your spending and lifestyle when things get tough is one of the reasons plenty of people end up in real trouble, sometimes more trouble than they can solve by themselves.

kedean2• 11 years ago

I don't think anything in this article implied that they were living above their means.

criley23• 11 years ago

The Mercedes was far above their means. A fully paid off, expensive, imported luxury vehicle.

They made a choice: Sell the Mercedes (likely for $8,000 - $12,000 in cash) and support their family by supplementing their income for six month to a year on that, less after buying a $3000-$4000 daily driver. When you're in food-stamp-hyper-frugal-mode, $8,000 cash can keep your family alive for some time!

They chose to get food stamps and keep the luxury car instead.

It was their choice, but when you're driving around your "emergency fund" and your bank account is hovering at zero while Uncle Sam puts food on your table, some would suggest your priorities and means are a bit confusing.

jacquesm14• 11 years ago

I think we're going to have to disagree about that. To me living above your means is when the equation (monthly expenses > monthly income) is true. As soon as that happens you're on the skids and the longer you take to recognize that the longer it will take you to get back out of it (if you'll manage at all). I've been both fairly wealthy and (for western standards, I hasten to say) fairly poor and the only reason I never went bankrupt or needed assistance in the form of social security or loans is a ruthless cutting of costs when that was a necessity.

To me having two vehicles when you have no income and two children with health issues is absolutely way above your means.

Of course that situation sucks and it sucks even more that this happened in a country where healthcare is anything but free and getting around without a car is difficult but that does not change the cold hard facts. Feel free to shoot the messenger but better heed these words if your life situation ever should change for the worse in a short time, your future depends on your ability to adjust rapidly in situations like that, ignoring it or trying to postpone the inevitable will not help at all.

bko2• 11 years ago

The weeks flew by. My boyfriend proposed, and we bought a house. Then, just three weeks after we closed, the market crashed. The house we’d paid $240,000 for was suddenly worth $150,000. It was okay, though — we were still making enough money to cover the exorbitant mortgage payments. Then we weren’t.

I don't understand how a mortgage payment can go from (presumably) reasonable to exorbitant with just an adjustment of the perceived value of the home. My impression is that in the past people put less stock in the financial value of their home and just continued to pay their mortgage regardless of the underlying market. Now it is more common to walk away if you're under-water or refinance if you're in the money or want to take out some equity.

Tloewald3• 11 years ago

The quoted lines do not state that the mortgage became exorbitant because the value of the price dropped -- you're reading that into it.

On the other hand, a lot of people bought houses on 3-5 year fixed interest mortgages during the housing bubble, on the grounds they expected to be able to resell or refinance when the fixed interest rate expired and the mortgage suddenly got a lot more expensive and -- because their properties were now underwater -- they could not sell or refinance.

Back in the days when people just paid their mortgages, real estate was seen as a safe but boring investment, and interest rates were at 5-6% (2-3% above inflation).

It's a bit rich when a mortgage lender lends money to a high risk customer and takes out insurance on their defaulting or the property losing value (PMI) and charges the customer for that insurance and then gets annoyed if the customer walks away from the wreckage.

bko2• 11 years ago

The mortgage was 240k. Even with 0% down payment, a 3.92% rate would result in mortgage payments of ~$1,100 a month. The couple was making 120k a year combined. I think this is more than reasonable.

I couldn't understand the gut negative reaction I had to this story. I understand why these programs exist and am not necessarily opposed to them. But I feel that people (within their means) should structure their financial affairs to not have to rely on these programs and not use them unless they have to. Unemployment for college educated workers barely crossed 5% at its worst so the two should not have been unemployed for years.[0]

I would be hard pressed to accept food stamps even if I qualified but I would likely accept unemployment insurance. In that sense, it's funny that food stamps are faux pas, unemployment insurance is acceptable and tax minimization is applauded. Even knowing that, I can't help but hold those same biases though.

[0] http://www.economicpopulist.org/content/what-happens-when-pr...

FireBeyond3• 11 years ago

Right, so they got a much better deal than they usually would, didn't factor in a contingency, took a bet... and lost.

kaitai2• 11 years ago

The couple lost their jobs -- that's why they weren't able to pay.

I had a friend buying a house in 2004-2005. She was getting first-time homebuyer's assistance from some semi-governmental agency: they assign you a person who walks you through the paperwork and gives advice on mortgages, presumably to prevent fraud and rip-offs. The guy was heavily pushing an adjustable-rate mortgage, though: "Look at these low rates for the first two years! And after that I'm sure they'll be reasonable." My friend was outraged, as someone who'd gone into risk management in lieu of college. "How could this guy be trying to convince me to sign up for unknown rates that will rise and could change at any time, when I could just get a 30-year mortgage like anyone else?"

Think of all the people in 2008 who didn't know not to get an ARM, and who might have been pushed into it by some "advice" they thought was good.

jwcooper• 11 years ago

"Think of all the people in 2008 who didn't know not to get an ARM, and who might have been pushed into it by some "advice" they thought was good."

They'd likely have really low interest rates [1] right now due to the federal reserve keeping the rates low, and presumably refinancing soon now that house prices have risen quite a bit (depending on your market, and loan details, of course).

The 6-month libor, which a few ARM's are pinned to is currently at 0.4%, in 2008 it was around 3%, so your ARM could potentially have a lower interest rate of around 2.6%.

If you didn't lose your job, and had a 3-5 year interest only ARM in 2008, it's possible you could have benefited from it (again, depending on your local housing market). This obviously didn't work out well for everyone, but ARM's are a risk that can pay off as well.

That being said, once rates start rising (possibly soon, according to the fed[2]), there could be another foreclosure bubble of people sitting on ARM's watching their rates climb up.

[1] http://www.erate.com/six_month_libor_index.6-months-libor.ht... [2] http://www.nytimes.com/2015/03/28/business/yellen-says-fed-w...

FireBeyond3• 11 years ago

It always frustrated me - it wasn't like people were oblivious to the fact we were in a bubble, they were just trying to enjoy the benefits of it and avoid the risk.

I mean, this was the beginning of home renovation shows that said things like "Your house was worth $200K. We did $50K of renovation. It's now worth $350K." While there is definite value to improvement, some numbers people were seeing on property were ridiculous. Like seriously, even without the above example, for people to seriously believe that the house they bought one year ago for $x should now be worth 1.5 to 2x with little or nothing being done doesn't pass the straight face test.

IkmoIkmo• 11 years ago

Why not? Exorbitant means 'unreasonably high'.

Is it strange that when paying $1k in mortgage payments to 'buy-back' 240k of value, that paying $1k to 'buy-back' $150k in value can be called unreasonably high?

Especially when suddenly you can buy equivalent property for much lower prices, and lower mortgage rates. And suddenly rent starts to look cheap in comparison to paying mortgage + the cost of $90k devaluation in a 2 year span.

I can easily see how that can turn exorbitant. However, even that it turned exorbitant you're assuming. They may have felt it was unreasonably expensive in the first place, despite it being a good move compared to renting. e.g. if you live in a place like NY, some may consider everything and anything exorbitant, just a matter of perspective. It certainly seems true that the cost of housing as a portion of income and disposable income has been one of those things (like healthcare or education) that got cheaper over time, while other things (like most technology) got cheaper.

Theodores• 11 years ago

Shame they cannot join the 'sharing economy' with Uber and that car.

jkot• 11 years ago

Just different perspective from Greece:

My father in law just scrapped 20 years old reliable Mercedes. There was new tax which charged 2.5x of its value every year. Instead we got small Fiat which breaks all the time.

jacquesm14• 11 years ago

Small reliable car about the size of that fiat: Toyota Aygo, Citroen C1 or Peugeot 107. All the same care under different hood. Fiat: looks nice, unreliable, resale value terrible.

FireBeyond3• 11 years ago

After I got separated I drove around in a 93 Civic with 200K+ miles on it. Only scheduled services. This thing started first time, every time, even in the winter. It ran smooth. It's KBB value was $800.

snarfy• 11 years ago

My wife is disabled. While at the annual group meetup/picnic one of the other disabled people mentioned how she got the dent fixed in her Z4 using her disability money. It's hard but I try not to judge. You never know the circumstances.

This is what happened when I drove my Mercedes to pick up food stamps

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