
This is what happened when I drove my Mercedes to pick up food stamps - zonotope
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
======
r721
Previously discussed:
[https://news.ycombinator.com/item?id=8010723](https://news.ycombinator.com/item?id=8010723)

------
bko
>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.

~~~
Tloewald
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.

~~~
bko
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...](http://www.economicpopulist.org/content/what-happens-when-president-
outsources-job-creation-multinational-corporate-executives)

~~~
Tloewald
You're assuming the mortgage was for $240k (e.g. they may have paid $240k then
pulled out equity on an inflated valuation -- a lot of people did this,
although it was a silly thing to do) and that the interest rate was _very_ low
(interest rates on 5/1 ARM loans pre-bubble were fixed at 5-6% and suddenly
went up to 7-8% when the fixed period expired.

If they paid 0% down then they may also have been paying PMI of around 1% on
the loan (high risk borrowers effectively get punished twice on interest
rates).

~~~
woobar
I am not sure where you get the rates for ARM loans that suddenly went up.
Most ARM loans define the rate after fixed period as "An Index" \+
"Margin"(2%-3%). The rates for pre-bubble 5/1 ARM mortgages after five years
of fixed APR either remained the same or went down.

Just look at the LIBOR Index (most popular index for ARM mortgages) in 2008
and 2013.

Jan 2008 - 4.18750%

Jan 2013 - 0.84250%

~~~
Tloewald
Where do I get these rates? Personal experience. I bought a house in 2006 and
already had a house purchased in 2004.

Also your figures seem wrong to me:

[http://www.hsh.com/natmo2007.html](http://www.hsh.com/natmo2007.html) \-- in
2007 a 1 year ARM was over 6% for most of the year, longer ARM loans would
have been higher. Most people in 2008 didn't have loans taken out in 2008, but
more likely in 2004-2006 when the market was hot and rates were higher.

Incidentally, while the real interest LIBOR rates right now are close to zero,
actual mortgage rates are considerably higher, especially on 30y fixed (we got
a 15y fixed mortgage because with the difference in interest rates our
mortgage payment was only about 40% higher than the 30y option).

~~~
woobar
Ok, so in your personal experience, what was the "margin" portion of the
adjustable rate mortgage that you had?

My numbers look wrong to you because you are comparing them to your APR. You
shouldn't. As I've mentioned before APR = Index + Margin. If index goes down,
and margin is fixed, what happens to the APR?

You are correct, most people did not get their mortgages in 2008. But the
family we are discussing here did. And for anyone with 5/1 ARM taken out in
2004-2008 the rate would have gone down after the fixed period.

------
jacquesm
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.

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

~~~
criley2
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.

~~~
bsclifton
So a $30,000 car (or less if bought used) when you make $120k is living
outside your means? If you have no debt and you have the ability to buy the
car cash or pay it off within 1-2 years, how exactly is this bad- especially
since you'd enjoy it? Sure, the boring thing to do would be to put all the
money in savings... but if you think a 30k is outside your means, then you're
probably so cheap you don't take vacations

~~~
criley2
>So a $30,000 car (or less if bought used) when you make $120k is living
outside your means?

You realize that their means change when they lose their job and apply for
government benefits right? That we should reevaluate our priorities and
budgets when our means change (we lose our job and become unemployed for a
long period of time!)

If you make 120k/yr and you receive government benefits like food stamps, I
have some harsh words regarding your clear abuse of our safety nets.

>then you're probably so cheap you don't take vacations

Some offense intended: Just how young are you? Too "cheap" to take vacations?
We're talking about losing jobs in a dual income family situation. How boring
am I? Boring enough to budget and successfully raise a child.

How immature are you? Because it clearly sounds like you are WAY WAY WAY too
immature to raise a child. "Too cheap to take vacations"!! The audacity of an
entitled young twenty-something! You sound like someone who is too immature to
successfully put food on the table for your child because you're too busy
spending your money validating your entitled luxury lifestyle to save your
money and prepare your family for the unknowns of life.

~~~
bsclifton
Woah there internet tough-guy

So now being able to take vacations (even if you're in financially good shape)
is off limits? I'm not justifying anything that the lady in question did...
but I think a 30k car and one vacation a year is reasonable on a 120k salary.
Sounds like two people, yourself included, have said no- that is not
acceptable (and that makes you entitled for thinking so). I know some
extremely thrifty (or smart if you will) people that don't place any value on
emotional experiences that might "recharge your batteries" that would argue
it's a waste (even if you have more than enough money). Looks like you're one
of them.

When you lose your job, you're right- the "means" change and you need to re-
evaluate things. I'm not questioning that. I was questioning how is a 30k car
out of the means of $120k/year person, especially if they can buy it in cash.

~~~
deelowe
I think, given the context (accepting food stamps), it's somewhat reasonable
to expect the family to cutback on luxuries until they get their finances in
order. No one is saying they can't buy a car or take a vacation, but if they
don't have any savings and are taking tax payer's money to support themselves,
it's perfectly reasonable to claim that's irresponsible.

~~~
bsclifton
I can definitely see that now, I look like an ass, my bad

Yes, you should absolutely do whatever it takes to support the family,
including selling the Benz.

I misread that original comment as "Benzes are only for rich people, not for
peons that make $120k or below" and made a Jackie Chan face

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

------
jkot
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.

~~~
FireBeyond
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.

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

------
snarfy
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.

------
IanDrake
>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
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.

~~~
DiabloD3
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.

~~~
jacquesm
A car is not only something that costs money to buy, it also costs money to
maintain and run. That cost can be cut and if you are in trouble financially
the _first_ thing to go should be a vehicle that you can no longer afford to
own and operate. It's a luxury item.

~~~
fnordfnordfnord
With the exception of cities like New York, a car is not a luxury item in the
US; it is a necessity. We might quibble about the kind of car but, without
learning more about hers I'm not sure we could come to a consensus.

~~~
jacquesm
It's their second vehicle. You can do a lot of fixing on a Honda for the cash
value of that Mercedes, alternatively, trade both for a reliable one that is a
lot cheaper to own and operate.

A Mercedes is a reliable car _if_ it is maintained well and if you're living
on food-stamps and are unemployed that value will drop very rapidly because
you can no longer afford to maintain it. Once it stops running its resale
value is nil, so better sell it before then.

See: [http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-
sm...](http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-
people/)

