Patrice Lucas had good credit and paid her bills on time.

Then she lost her research job at DuPont Pharmaceuticals when Bristol-Meyers Squibb Co. bought the company in 2001. Soon she was draining her 401(k) savings to "get through some tough times." As she fell further behind, she let an out-of-control credit card go into default.

"I've gone from a high-paying pharmaceutical job to a low-paying animal hospital job," she says. "Now I've got no savings. I'm living month to month, paycheck to paycheck."

Like Lucas, an increasing number of Delawareans are living close to the edge. Many are employed, but have little, if any, savings. The price of gas, health care and food have soared, while wages have stagnated, making it harder than ever to get ahead. The growing fear of recession and resulting job cuts exacerbate the problem.

Economist Dean Baker, co-founder of the Center for Economic and Policy Research in Washington, D.C., who sees a recession coming in 2008, says: "I think people are really hitting the wall."

Indicators are popping up everywhere:

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• Holiday retail sales came in far lower than expected, showing consumers are scaling back on spending.

• Credit card debt shot up by 11.3 percent in November — a six-month high — indicating shoppers relied heavily on cards to finance holiday purchases.

• Banks are bracing for dismal earnings reports, and have upped their reserves for soured loans as more 30-day and 60-day delinquencies ooze into default.

• AT&T is seeing a slowdown in sales, largely from unplugging home phone service for nonpayment.

 

All of this adds up to hard numbers seen in a recent Online Resources Corp. survey of more than 1,000 U.S. households. One out of four households was late on at least one monthly bill by 30 days or more. Forty-three percent say it's harder to meet their financial obligations than it was a year ago.

The survey was conducted online in October, drawing on what Online Resources Corp. calls a nationally representative sample of 1,006 households.

To be sure, the Chantilly, Va.-based company helps provide online bill paying for its customers, and plans to use the survey results to show prospective clients that people are more likely to pay late bills if they can do it online. But the survey also maps out a wider trend in America's bill-paying habits: "Households are being forced to prioritize among their bills," the report says. "They are managing their delinquency by creating, in effect, a 'delinquency budget.' "

"We're concluding that consumers are getting more used to planning for delinquency status," says Robert R. Craig, executive vice president and general manager of Online Resources' eCommerce Services. "They're getting used to managing things and they might revolve their delinquencies around several different billers."

'We can't lose our jobs'

More than a third of households (34.5 percent) said they would let their credit card bill slide in order to pay more essential bills, such as a mortgage, the survey said. That creates a ripple effect in Delaware, where 15,498 people are employed in the credit card industry.

Credit card issuers do collect late fees and big interest payments, but that won't cover the ultimate loss. "Credit card issuers are built on the model that consumers pay their bills," says Bruce Cundiff, a senior analyst with Pleasanton, Calif.-based Javelin Strategy & Research. "If they can't pay their bills, they can't pay their interest."

It's an easy choice for consumers. Just look at West End Neighborhood House in Wilmington: An increasing number of its clients have gone beyond defaulting on credit cards and are in full-blown crisis, having to make choices between paying rent or buying food, says Barbara Reed, West End's director of housing and financial management. Demand for assistance from the organization's crisis alleviation program, which helps people with basic necessities such as food, clothing and shelter, increased 118 percent in 2007, Reed says. "That's horrifying."

As West End struggles to help society's most desperate, most Delawareans struggle to get by on their own.

Tony Croce, a refrigeration technician in Newark, is up to date on his bills, and says the money he and his wife earn is enough to send their two children to private schools.

But they don't have enough left over to put into savings, and holiday spending recently ran up the balance on one of his credit cards. Without two salaries, the family wouldn't be able to cover the monthly bills, Croce said. "So we can't lose our jobs."

If savings are any indication, the Croce family situation is common. Personal savings as a percentage of disposable income slipped into negative territory in November, dropping to minus 0.5 percent, according to the most recent figures from the Bureau of Economic Analysis.

A recent report by New York-based public policy group Demos found 21 percent of middle-class families have less than $100 per week left over after paying essential living expenses. Excluding home equity, more than half of middle-class families have no financial assets at all, or debt levels that exceed assets.

'Deliberate choices'

The rising cost of energy is one factor increasingly putting families into the red.

Gasoline prices bumping up against $3 a gallon are hurting virtually anyone who has to drive. The cost of natural gas, propane and heating oil continues to rise, making it tough to keep the thermostat up. Residential customers of Delmarva Power in Delaware, who saw electricity bills spike 59 percent after the state removed price caps in May 2006, are finding it harder to pay their bills. By the end of 2007, 11 percent of Delmarva's 467,000 residential customers in Delaware, Maryland, and Virginia had fallen behind in their monthly payments, said utility spokeswoman Bridget Shelton.

Rising fuel prices are definitely pinching Lucas' budget. Aside from the increasing cost of commuting to her animal hospital job in Pennsylvania, her home garbage pickup is becoming more expensive because the trash company is tacking on a fuel surcharge.

In the Online Resources survey, 58.9 percent of households pointed to rising energy costs as a cause of trouble meeting their financial obligations.

"If people are not budgeting, they're not prepared for these increases," said Nina Heck, director of counseling at Consumer Credit Counseling Service of Maryland and Delaware Inc. "They're just trying to deal with them, and they use the credit cards to cover the shortage."

Even Delawareans who describe themselves as financially secure are feeling the crunch.

Susan Dobraniecki of Hockessin says she's not struggling. The 61-year-old mother of four (and grandmother of three) says her children are grown and educated, her house paid off, and her expenses are manageable. Still, she feels the pinch of rising prices.

"The price of food and gasoline really puts a dent in the budget," she says.

When she gasses up her Mercedes, she fills the tank only halfway, because she doesn't like to see a $50 receipt. "I kind of fool myself," she says.

She has also begun to realize that if she and her husband want to travel and enjoy themselves in retirement, they may have to work beyond 65 to keep up with the rising cost of living. "If it's going to continue to escalate as rapidly as it has, we may need to reassess our retirement goals," she says.

That means for the moment, Dobraniecki, too, is watching her budget. During the holidays, she wanted to make a blueberry pie. But blueberries were more than $2 a box. That meant a $10 pie.

"I'm not going to do it," she said. "You start making deliberate choices."