Everything I know about recession, I learned in Ecuador

**Cross posting from a previous blog, this post is helpful for understanding how I came to be a recessionista.

My generation is coming of age during the most unprecedented economic downturn in modern history. Unemployment is creeping toward 9 percent, the stock market tumbles everyday, prices for food and gas and health care are rising. Our neighbors, friends, and relatives are losing the houses they live in. Violent crime is climbing upward. This might be the worst time to graduate college in the past 3 decades; this might be the worst time to search for your first job. But I have been through recession boot camp. Everything I know about recession, I learned in a small invasion town in southwestern Ecuador.

10. Crime happens. A lot. (But if you're smart it might not happen to you)We were 11 out of possibly 20 North Americans living in Duran. We stuck out. And yet, we rode the buses, worked at schools full of street children, visited prisons and public hospitals and walked down the streets of Ecuador's most dangerous metropolitan area. But... we didn't wear fancy watches, we didn't wear nice jewelry, we carried $5 or less for the bus and Pura Crema.

And I am not about to deny the fact that we lived in a gated compound with 24-hour guards. That helped. Some of the guys did get robbed on the bus. But the difference between our potential as targets of crime and the actual occurrence of crime was great. This was because we were prepared and we knew our neighbors.

9. Know your neighbors.As strange as it was, being artificially inserted into a neighborhood in a slum in a foreign country, getting to know our neighbors was easy. We were pathetic at first. Unfamiliar with the language and customs. Barely able to buy supplies and cook for ourselves. Everyone wanted to know the new "gringos," everyone wanted to help us out, teach us new things, introduce themselves and have us over for dinner. Because they knew us and they knew everyone else, our greatest protection for ourselves and our guests was their presence.

In our country it is much more difficult to get to know your neighbors. (though much like our start in Arbolito, it will be equally awkward) But knowing and caring about the people on your street, in your building, at your work and at your church, expands the safety net of people who care about you and will look out for you. Having a big web of people who care about you is social protection, in a time when we (slightly individualistic Americans) are having a hard time protecting ourselves.

8. Lunch is the most important meal of the day. After I pay all those things I am obligated to pay: rent, loans, insurance, and taxes, the next and most important expense is food. Ecuadorians, at least my fellow residents of Arbolito, don't eat large breakfasts, in fact sometimes breakfast is just called "cafe" or coffee, since it probably just a cup of instant coffee and a roll or two. Additionally, by law Ecuadorian employers are obligated to provide one meal per 12-hour shift to their workers. Lunch is a pretty good investment. Lunch, whether at work or in the home, is the biggest meal of the day. Most moms I knew would also save portions of lunch for a light dinner (dinner is almost always light) and stretch lunch into two meals. The conclusions of this are: eat lunch, eat free lunch when at all possible, make lunch count, and save your money on the other meals of the day. As an American, where dinner is bigger, you can reverse this thinking a little and take leftovers from dinner for lunch. But even this saves money.

7. Be clean. And iron.No matter how poor the family in Arbolito, everyone has an iron. It doesn't matter if a kid slept on the floor or didn't eat that day or couldn't afford a notebook- that kid looks like a million bucks when she walks out of the house in her school uniform. I ironed more in Ecuador than I do now. But ironing more would save me money in dry cleaning bills. And while having Armani is nice, in tough times, looking sharp in whatever clothes you've got is key. You look good, you feel good and all of that helps you get a job or keep your job and no one has to know that your clothes aren't new. There's no shame in being broke, but there is pride in looking clean and pressed.

6. Work hard.The official wage earner's work day in the U.S. is 8 hours. And if you get sick and you can't work all 8 hours, chances are good they will pay you for the hours you do work. That's not to say that the labor/wage system in the U.S. is perfect, but it has improved considerably since the dawn of unions and the Department of Labor. In Ecuador most wage earners must work a full 12 hours to earn their pay. A good monthly salary? $160 a month. Everyone works hard and long. And then some of them come home and work on construction on their house or do laundry by hand or don't go home at all because they live in the house or factory they work in. So if you have a job work hard, if you don't have a job work as if finding a job were your full time job. And if you have to work two jobs, you are the same as 82 percent of the world's population. Give thanks for labor laws, social security, sick days and ERs that treat you even when you can't afford insurance.

5. There are free or at cost clinics out there. They're not perfect, but they work.The clinic I worked at to charged $1 for an adult visit and $0.50 for a child visit to see an M.D. or an OB/GYN or a dentist. We sold prescriptions at cost. We served very poor people and had to treat injuries and diseases that most North American doctors will never see. It was right down the street and all the volunteers went there for our checkups and parasite tests. But our little clinica wasn't the only one out there. If you don't have health insurance, it won't help your major health problems, but you can be seen by a doctor, get basic lab tests, and get generic prescriptions at cost. I have seen outright medical miracles worked by a nurse, a doctor, and the guy who guards the door.

4. Eat with other people.This is along the lines of the lunch lesson. But if you eat with other people, chances are that they will share in the effort of putting food on the table. The potluck is the ultimate social recession survival meal. It's not always meat and potatoes, but it is a lot of food in exchange for the one dish you had to bring. Sitting down with my community we not only shared in the same pot of locro de papa but in each other's struggles and experiences. We shared in the preparation of the meal, eating it, and clean up. Too many people think that to save money they have to eat less and eat alone. But sharing in the cost, effort and then the meal itself is a deeper community experience. In hard times I have to bring back my rule from college. I have to eat at least one meal a day with other people.

3. Enjoy simple pleasures.A long nap before dinner, a guanabana flavored Pura Crema on the bus, a coffee break at Lupe's house, lounging at Francisca's house watching novelas and getting our hair braided, movie night with AJS, blogging during recess at Mundo. All of these things were simple pleasures and except for the $0.25 Pura Crema, they were all free. We didn't have the money to go out to clubs often and we didn't have the lifestyle to go to the beach on the weekends. But we found simple pleasure's everywhere. If you look closely, you will probably find that the things you take the most pleasure in are simple things like a phone call home, a pizza with your roommate, a long walk or a chocolate-banana-peanut butter smoothie. (I highly recommend this last one)

2. The world can be conquered. It was a day when I was walking back from the dispensario. Past Patricia's shell house (it's a big brick house with bedrooms now, but at that point it was sad lean-to crudely assembled from the remains of their first house) Patricia and Diana were doing laundry. Scrubbing the harsh soap out of the jeans and T-shirts of their family, standing in the sun, rinsing by hand with the precious water from the tank. "Doña Patricia, que hay?" I called out. She looked up wiped the sweat from her forehead with a sudsy thumb and said, "Can't you see? We're conquering the world." And then she threw he head back and laughed a hearty, joyful laugh. From a pile of laundry to the job hunt to your thesis paper to paying off your credit card, the world can be conquered, but only one step at a time. Or as the great Billie Holliday once said "The impossible will take a little while." Which leads me to the most important thing that Ecuadorian people taught me.

1. Poco a poco.Call the U.S. economy a super tanker, a air craft carrier, a Mack truck...and it's still the same. The thing can't turn on a dime. It doesn't get better overnight, even if it gets bad all at the same minute. You can't learn Spanish in one day. You can't get a good manestra de lenteja right your first time. You have to go poco a poco. And this theory of little by little only works if you have hope. You have to believe that it will get better even if the increments are so small you can't even see or sense them. As North Americans go I am on the high end on a scale of impatience. I want immediate change, instant gratification. Most of us are like that though. We'd like the Dow to hit 14,000 again tomorrow. We want the kind of quick returns that hedge funds offer. We run up our credit cards, we don't want to save, it takes too long. But the truth I saw in Duran is that improvement DOES take too long. But we can only shoulder the burden of change with hope and go forward poco a poco.

Divide and Conquer

So today I took the first step toward paying off my credit card debt. I opened a new credit card. 

I know, I know, sounds crazy. But this new credit card has zero percent interest on balance transfers for a year. So I will be taking half of the monstrous debt on my Visa and transferring it to the new card. Half is what I think I can reasonably pay off for the 12 months that the interest is nothing. Once the transfer is complete that card goes into a drawer never to be seen again. The interest rate will hopefully go down on the other card and I can make lower payments on the Visa, while maximizing payments on the new zero-interest AmEx. 

Elizabeth Brokamp at the Motley Fool offers some good pointers:

What you need to know:

• You have a tough competitor. Credit card companies aren't making these offers out of the goodness of their hearts. They are gambling that they'll win, based on experience and hard numbers. "Winning" for them means that you'll fail to pay off your balance or neglect to switch your balance to another credit card before the grace period is up.
• There are few guarantees. Just because you're offered a teaser rate, it doesn't mean that you are guaranteed that rate, especially if your credit history is anything but spotless. Make sure that the 0% offer stays at 0% when your card comes in the mail.
• Look for 0% on both balance transfers and purchases. Some cards offer 0% on balance transfers but not on subsequent purchases. In addition, they require that you pay off the balance transfer amount first, leaving the new, higher-interest-rate charges buried underneath. For example, if you transfer $10,000 to take advantage of a balance transfer offer, and then charge $15 on the new card for that cute shirt you saw on sale, your payments will go toward the $10,000 first, while the $15 is accumulating interest charges at the normal (translation: outrageously high) interest rate.
• It pays to be choosy. Don't let the teaser rate make you turn a blind eye to the card's other features. You'll still want to shop for a credit card with no annual fee, for example, as well as looking at perks like cash-back plans and fraud liability coverage. If you decide to hold on to the card when your balance is paid off, you'll be happy you shopped around.
• Make sure "free" means free. Some credit card issuers charge fees for each balance you transfer to their card. Again, you'll want to check the fine print on the offer.
• Pay on time. Pay late even once and your low teaser rate will take a hike, leaving you with a new and much less desirable rate. You may also be slapped with a nasty penalty fee. To be absolutely sure you hold on to your good deal, you may want to set up automatic bill payment. Be sure you're paying more than the minimum monthly payment, however, so you can whittle down the balance.
• Stay organized. Take note of the date your 0% deal will end and mark it on your calendar. Now back up six to eight weeks and make another note on your calendar to shop around for another balance transfer offer just in case you haven't yet paid off the balance. Don't rely on the credit card company to remind you.
• Know when to fold 'em. Credit card companies know that you're trying to outfox them and will recognize a pattern of hopping around. That may hurt you in the long run by damaging your credit or causing all those low-introductory-rate offers to dry up. Credit card issuers simply won't want to waste their time on someone with a proven track record of cutting and running.

 

She works hard for the money

"Hi Dad, I need to borrow $200." 

Thus began my quest to become a financially responsible adult. No self-respecting 25-year-old should ever have to say those dreaded words. But after 17 calls from a debt collecting agency in Hyderabad after one missed Macy's credit card payment, I was desperate.  I had wiped out any small savings I had set aside last month registering my car at the DMV. If I wanted to close this card and get the ever-so-persistent-Hindi-speaking debt collectors to stop calling me, I was going to have to go to the bank of last resort- Dad. 

The mortification at the realization of having only achieved semi-independence was too much to handle. If anything motivates a change it's having to tell your father that you've maxed out your first credit card. So this is it. 

On this blog I will do my best to record the trials and tribulations of paying off my debts, cutting corners, managing my money, and being fabulous in a time that is somewhat less than fabulous. Please comment with your own experiences, tips and advice as no true recessionista operates alone.