Monday, February 26, 2007

Friends Without Money

I don't talk much about money with most of my friends, except for one of them, who I'll call Mortimer, just because I think being called Mortimer would really bug him! We've been friends for about 15 years now, and for some reason, we started off being open about money issues early on. When Mortimer moved to his first studio in Manhattan, after years of living with roommates in Brooklyn, we were neighbors for about a year, so discussion of how much rent we were paying was a natural topic. Then when my partner and I started looking to buy a place, we discussed it with Mortimer. Mortimer had a good amount of money saved at that time-- he's kind of like me, in that he's very frugal in some ways and not frugal at all in other ways, except that we're exact opposites in what we spend money on-- he has a big TV with every cable channel because he's a rabid sports fan, and a lot of computer equipment for freelance work he does, and two cats, but he doesn't spend much money on clothes or food or household stuff. Anyway, at the time, we asked Mortimer why he didn't just try to buy a studio instead of renting one-- this was back when buying was definitely cheaper than renting, and his studio wasn't even rent-stabilized. He kind of sighed and brushed off the question, saying that he just didn't want to commit himself to something so permanent.
I think he regrets the decision now-- his rent kept going up, so he ended up following us to Park Slope where he scored a relatively cheap rent-stabilized studio. I think it was about $900 or so, compared to the $1400 or $1600 or so that they now wanted for his place in Manhattan. So Mortimer was managing, making maybe $50-60,000 and living within his means... until he lost his job.
Sometimes no matter how much you think you can prepare yourself for something, you just can't. Mortimer knew his small company was for sale, but the suddenness of his lay-off was still a surprise. He got a few months worth of severance pay, and should have been fine, but unfortunately he just kind of lost his way. He has some health issues which flared up at that time, probably because of stress, and he sank into a severe depression. He barely tried to look for a job, because he could barely leave his apartment. His doctor, who I really had my doubts about, got him hooked on Valium-- at least that is how it seemed to me. I knew it was really bad when he called me one day and asked if I'd come over and help him sort through some bills and walk with him to an office where he could pay his phone bill, as it was about to be shut off. He was afraid to cross the street without company because his medications made him so out of it.
If this all sounds pretty bad, it gets worse. He was unemployed long enough that his COBRA health insurance ran out, and when he eventually got a job, it was a long-term freelance assignment where he didn't get any health coverage. So he kept paying for individual coverage himself, with the cost going up every year, to the point where it was over $900 a month.
It doesn't take too many years of that to wipe out a person's savings. He eventually did get healthy again, and found a job with insurance, but the damage was done. He had run up some small credit card bills, but was paying them off when he had another stroke of bad luck-- his landlord started proceedings to un-rent-stabilize his building. The tenants tried to get together and fight it, but they lost. Oddly enough, his rent wasn't raised right away, but to make a long story short, now he's facing eviction and has to find a new apartment. He makes about $65,000 a year, and though his current rent is under $1000, he decided he could allow himself to spend up to $1200 or maybe even $1400 on rent. His search is making me realize how lucky I was when I found my old studio-- he wants to stay in the area he's lived in for years, but there's barely anything to be seen at $1200, partly because there just aren't that many studio apartments in the neighborhood. Even at $1400 it seems like there are just small, unrenovated, dingy one-bedrooms that are well outside the main part of the neighborhood. And he'll probably have to pay a broker's fee to even get one of those.
It's just hard to see a friend go through these things-- of course, his life could be worse, and it's not like he's at poverty level. But of course I feel a little less comfortable talking about money with him these days-- years ago, we made very similar amounts and were in similar financial positions, but since then I've gotten raises and promotions and kept my net worth growing, while his fortunes have gone in exactly the opposite direction. Of course we still sometimes talk about work, and he knows when I get promoted, but I think it's been a while since I told him exactly how much I was making. But our friendship still seems to work, I think because our difference in financial status doesn't change the fact that we have similar financial philosophies in some sense. But sometimes the best intentions can't help when life throws you a few curveballs.


Escape Brooklyn said...

This is so sad! Getting by is already so hard in NYC, given the extreme cost of living and constant pressure to get ahead. But then having health issues and a layoff on top of it all totally sucks.

Would Mortimer consider cheaper neighborhoods? $1,200/month is tough to swing on his income. If he's open to living further in in Brooklyn, I'd recommend Ditmas Park or Kensington. Here are some listings that I just noticed on craigslist:

mapgirl said...

Looks like one of my friends is going to get canned in 90 days if he doesn't "shape up". (I put it in quotes because it looks like a purposeful hatchet job, not because he does nothing.) Anyhow, I worry that he doesn't have the emotional resiliency to deal with the blow, let alone the finances. (Luckily he has a sickly cheap mortgage and lives with a family member.)

You just can't predict what's going to happen. Reminds me that I can't slack off adding money to my emergency fund. I hope your friend can find a place he likes and can afford.

Madame X said...

Escape from Brooklyn-- thanks for posting those listings. He definitely is starting to consider further-out neighborhoods-- he doesn't have much choice.

Anonymous said...

I don't get it..I make $55,000 a year. I pay $1,285/month mortgage plus association fee of $225/month and another $350/month for property tax. I defer 22% of annual my income into a 401K plan. I also save $500 every month into an online savings account.
I do freelance work a little bit but that's only the most $2,000 per year earned.
Oh, I donate every month $30 as well to a charity.
I do feel the pinch..but not that much that my friends (all of them earn more than $100,000/year) can't discuss with/to m about their financial life/stresses/achievements. I appreciate the fact that my friends, like me, have money problems as well as goals.

I even hang out with them once every couple of months or so at their expensive gatherings...last one being the $125/head new year's eve party.
I wish I earn $65,000 like your friend!!! I do hope all the best for him.

Anonymous said...

Money talk is the last taboo (okay maybe not THE last).

There are only about 2-3 people (other than wife, accountant, lawyer, fin'l planner) who I've ever told how much I make:

I would share that info with family, but it would create too many issues, since I am by many orders of magnitude the most prolific earner. After years of secrecy, they know it is classified info.

Re lending to a friend, I've only done it once, and think it's a guarantied way to screw up friendships.

Anonymous said...

To anonymous who makes 55,000 a year:

How is it possible to spend almost $35K a year a as you say on your home payments and 401K when making $55K a year before taxes? Would you have anything left after paying income taxes?

It doesn't seem to add up.

Anonymous said...

Probably in part because the housing expenses are tax ded, and the 401K contrib is also pre-tax.

Also, maybe they have a roomate/significant other sharing the housing costs.