Wikinvest Wire

Dealing with budget problems in different ways

Tuesday, October 07, 2008

Tales of woe are collecting in the mainstream media at an alarming rate. Once wealthy families along with state and local governments are all grappling with being less wealthy after the housing market, stock market, and many other markets have headed south.

In some ways, you can't blame people for spending beyond their means - it had become conventional wisdom to do so and, in many cases, those who didn't were shunned or made to feel foolish and old fashioned by those who did.

After living large in California for many years during the housing bubble, things have changed dramatically in the Golden State. The sham of a budget that was just passed 90-days late is already dripping red ink as detailed in this report in the LA Times.

Emergency session may be needed as budget plunges into the red
The state budget approved only weeks ago is already falling into the red, and lawmakers may be forced to return to Sacramento this month to make emergency spending cuts and take other measures to keep California from running out of cash.

The financial pressures on the state are numerous. Revenue is dropping precipitously as the economy falters. The global credit crunch may make it impossible for officials to obtain billions of dollars in short-term loans that they typically rely on at this time of year.
Assembly Speaker Karen Bass (D-Los Angeles) said Monday that an emergency legislative session within weeks is "a big possibility." She and other leaders will meet Wednesday with Gov. Arnold Schwarzenegger to consider whether to call the Legislature into action.
IMAGE"The governor is watching the financial condition of the state very closely," administration press secretary Aaron McLear said. "With revenue coming in lower than expected, a special session is something he will discuss with the leaders."

Legislative staffers who are tracking the state's cash flow say that in the month of September, revenue was about $1 billion below the amount projected in the budget that was just enacted. They expect the trend to continue, as the economy shows no sign of recovering.
This BusinessWeek report on paying college tuition gives the impression that community colleges will packed to the gills in the years ahead if markets continue their trek south.

Those who still have home equity left (and still have a willing lender) are at a decided advantage to those who have to pay for college with current earnings.
Some unlucky investors like Dino Macaluso are feeling the double whammy of the market meltdown: They are watching their investment portfolios shrivel while college tuition payments loom.

Macaluso, from Albany, N.Y., is considering a line of credit on his house to pay for his son's college so that he doesn't have to liquidate investments until they bounce back. "I have set aside enough cash to cover the first year's tuition, so I am looking to buy myself more time for the next three years," says Macaluso, who expects to spend more than $50,000 on college tuition annually.
Even before the market swooned, families with college-bound children started to buckle down. According to preliminary results of a survey of more than 2,000 parents being conducted jointly by and Next Step magazine, a majority of families with college-bound teens redirected their child's college search in the past six months to more economical options, including four-year public colleges, according to the preliminary survey data. In addition, parents say they are cutting discretionary spending to save more for their child's college education.
And finally, this sad, sad story about a family in Porter Ranch, California, an area not far from where we used to live in Southern California and the home to a number of friends over the years.
Father kills family and himself, despondent over financial losses

Karthik Rajaram had fallen hard.

The 45-year-old Porter Ranch financial manager who once made more than $1.2 million in a London-based venture fund had lost his job. His luck playing the stock market ran out.

On Sept. 16, he bought a gun. He wrote two suicide notes and a last will and testament. And then, sometime between Saturday night and Monday morning, he killed his wife, mother-in-law and three sons, and took his own life.

"This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair, somehow working his way into believing this to be an acceptable exit," said LAPD Deputy Chief Michel Moore. "It is critical to step up and recognize we are in some pretty troubled times."
IMAGEIn a letter addressed to police, Rajaram blamed his actions on economic hardships. A second letter, labeled "personal and confidential," was addressed to family friends; the third contained a last will and testament, Moore said.

The letter to police voiced two options: taking his own life, or killing himself and his entire family. "He talked himself into the second strategy," Moore said. "That that would be the honorable thing to do."

Authorities believe Rajaram killed his family and himself after seeing his finances wiped out by the stock market collapse, according to a source familiar with the case, who spoke on condition of anonymity because the investigation is ongoing.
Unfortunately, there are many, many more stories like these yet to play out.

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Anonymous said...

Hmmm nice always having buget problems and this post made me realise a couple of things..

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Pool Shark said...


What happened to just jumping out the window?

Anonymous said...

i can understand killing yourself to escape debt, but killing your family?

i dont understand that.

was he maybe resentful of his family for "forcing" him to go into debt in order to afford their "luxuries" pimp my ride lifestyle?

John said...

Mr. Macaluso's son may have to get an actual job and pay his own way through college. That's what I did. On the plus side, without easy money, colleges and universities will no longer be able to get away with 50K a year tuition. Ivory tower faculty are about to get their first lesson in economic reality.

Suja said...

Really Tragic. RIP Rajaram family

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