Living paycheck to paycheck gets harder

The rich are doing much better so no doubt they must spend quality time assessing what new and exciting toys to buy and where best to invest their savings. I suppose they can hire someone to do the investment job if they are not interested themselves.


Living paycheck to paycheck gets harder
By ANNE D'INNOCENZIO, AP Business Writer Sat Oct 20, 6:10 AM ET
NEW YORK - The calculus of living paycheck to paycheck in America is
getting harder. What used to last four days might last half that long
now. Pay the gas bill, but skip breakfast. Eat less for lunch so the
kids can have a healthy dinner.


Across the nation, Americans are increasingly unable to stretch their
dollars to the next payday as they juggle higher rent, food and
energy bills. It's starting to affect middle-income working families
as well as the poor, and has reached the point of affecting day-to-
day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven
Inc. and Family Dollar Stores Inc.

Food pantries, which distribute foodstuffs to the needy, are
reporting severe shortages and reduced government funding at the very
time that they are seeing a surge of new people seeking their help.

While economists debate whether the country is headed for a
recession, some say the financial stress is already the worst since
the last downturn at the start of this decade.

From Family Dollar to Wal-Mart, merchants have adjusted their
product mix and pricing accordingly. Sales data show a marked and
more prolonged drop in spending in the days before shoppers get their
paychecks, when they buy only the barest essentials before splurging
around payday.

"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family
Dollar. "It seems like to us, customers are running out of food
products, paper towels sooner in the month."

Wal-Mart, the world's largest retailer, said the imbalance in
spending before and after payday in July was the biggest it has ever
seen, though the drop-off wasn't as steep in August.

And 7-Eleven says its grocery sales have jumped 12-13 percent over
the past year, compared with only slight increases for non-
necessities like gloves and toys. Shoppers can't afford to load up at
the supermarket and are going to the most convenient places to buy
emergency food items like milk and eggs.

"It even costs more to get the basics like soap and laundry
detergent," said Michelle Grassia, who lives with her husband and
three teenage children in the Bedford-Stuyvesant section of Brooklyn,
N.Y.

Her husband's check from his job at a grocery store used to last four
days. "Now, it lasts only two," she said.

To make up the difference, Grassia buys one gallon of milk a week
instead of three. She sometimes skips breakfast and lunch to make
sure there's enough food for her children. She cooks with a hot plate
because gas is too expensive. And she depends more than ever on the
bags of free vegetables and powdered milk from a local food pantry.

Grassia's story is neither new nor unique. With the fastest-rising
food and energy prices since the 1980s, low-income consumers are
stretching their budgets by eating cheap foods like peanut butter and
pasta.

Industry analysts and some economists fear the strain will get worse
as people are hit with higher home heating bills this winter and
mortgage rates go up.

It's bad enough already for 85-year-old Dominica Hoffman.

She gets $1,400 a month in pension and Social Security from her days
in the garment industry. After paying $500 in rent on an apartment in
Pennsauken, N.J., and shelling out money for food, gas and other
expenses, she's broke by the end of the month. She's had to cut
fruits and vegetables from her grocery order — and that's even with
financial help from her children.

"Everything is up," she said.

Many consumers, particularly those making less than $30,000 a year,
are cutting spending on nutritious food like milk and vegetables, and
analysts fear they're further skimping on basic medical care and
other critical services.

Coupon-clipping just isn't enough.

"The reality of hunger is right here," said the Rev. Melony Samuels,
director of The BedStuy Campaign against Hunger, a church-affiliated
food pantry in Brooklyn.

The pantry scrambled to feed 5,000 new families over the past 12
months, up almost 70 percent from 3,000 the year before.

"I am shocked to see such numbers," Samuels said, "and I am really
concerned that this is just the beginning of what we are going to see."

In the past three months, Samuels has seen more clients in higher-
paying jobs — the $35,000 range — line up for food.

The Regional Food Bank of Northeastern New York, which covers 23
counties in New York State, cited a 30 percent rise in visitors in
the first nine months of this year, compared with 2006.

Maureen Schnellmann, senior director of food and nutrition programs
at the American Red Cross Food Pantry in Boston, reported a 30
percent increase from January through August over last year.

Until a few months ago, Dellria Seales, a home care assistant, was
just getting by living with her daughter, a hairdresser, and two
grandchildren in a one-bedroom apartment for $750 a month. But a knee
injury in January forced her to quit her job, leaving her at the
mercy of Samuels' pantry because most of her daughter's $1,200 a
month income goes to rent, energy and food costs.

"I need it. Without it, we wouldn't survive," Seales said as she
picked up carrots and bananas.

John Vogel, a professor at Dartmouth College's Tuck School of
Business, worries that the squeeze will lead to a less nutritious
diet and inadequate medical or child care.

In the meantime, rising costs show no signs of abating.

Gas prices hit a record nationwide average of $3.23 per gallon in
late May before receding a little, though prices are expected to soar
again later this year. Food costs have increased 4.5 percent over the
past 12 months, partly because of higher fuel costs. Egg prices were
44 percent higher, while milk was up 21.3 percent over the past 12
months to nearly $4 a gallon, according to the Bureau of Labor
Statistics.

The average family of four is spending anywhere from $7 to $10 extra
a week — $40 more a month — on groceries alone, compared to a year

ago, according to retail consultant Burt Flickinger III.

And while overall wage growth is a solid 4.1 percent over the past 12
months, economists say the increases are mostly for the top earners.

Retailers started noticing the strain in late spring and early summer
as they were monitoring the spending around the paycheck cycle.

Wal-Mart and Family Dollar key on the first week of the month, when
government checks like Social Security and public assistance
generally hit consumers' mailboxes.

7-Eleven, whose customers are more diverse, looks at paycheck cycles
in specific markets dominated by a major employer, such as General
Motors in Detroit, to discern trends in shopping.

To economize, shoppers are going for less expensive food.

"They're buying more peanut butter and pasta. And they're going for
hamburger meat," Flickinger, the retail consultant, said. "They're
trying to outsmart the store by looking for deep discounts at the end
of the month."

He said the last time he saw this was 2000-2001, when the dot-com
bubble burst and the economy went into a recession after massive
layoffs.

For now, low-price retailers are readjusting their merchandising and
pricing.

Wal-Mart is becoming more aggressive on discounting. It announced
Thursday it is expanding price cuts to 15,000 items, ranging from
Motts apple juice and Progresso soups to women's fleece tops, heading
into the holidays.

Family Dollar, whose food offerings were limited to candy and snacks
until two years ago, has expanded its mix of groceries like fruit
cups, cereal and such refrigerated items as milk and ice cream while
cutting back on shoes. This summer the chain began accepting food
stamps.

Food pantries are also getting creative. Samuels said her church,
Full Gospel Tabernacle of Faith, just started offering free cooking
classes to teach clients who are diabetic or have other health
conditions how to prepare vegetables like squash. It's also offering
free exercise classes.

"We are trying to make them health conscious," Samuels said. "It's
not right to give them just anything. Our mantra is eat well and live
well."

___

Associated Press Writers Geoff Mulvihill in Mount Laurel, N.J., and
Terry Tang in Phoenix, Ariz