U-T Special Report Ripple effect: Rising gas prices reshape our lives As $7 a gallon gas looms, big changes are in store for family finances, regional lifestyles and the national economy. The San Diego Union-Tribune introduces a four-day series on the impact of rising oil prices.
Part 1: Gas costs squeeze middle-class families in San Diego County trying to make ends meet.	Part 2: The price of gas is changing commuters' attitudes on what they drive and even where they live.
Part 3: Soaring fuel costs take huge bite out of grocery, farm budgets.	Part 4: We may be heading back to 1970s-style “stagflation,”.

Saddled with payments on a gas-guzzling truck and SUV and facing escalating food and gasoline costs, the Poway couple expect they'll be left with few options to economize should gasoline prices continue their rapid ascent. For now, their $925 monthly rent is reasonable, but any increase could be financially debilitating.

“We probably wouldn't lose our housing, but we'd probably lose our vehicles,” said Jacqueline, 25, a stay-at-home mother of two young children. “I'd probably have to get a job working nights, which really would hurt because family time is very important to us. It does scare me.”

Determined to pay off debt while also struggling to make ends meet on a monthly income of $2,100, the Gonzaleses are among a growing number of households trapped in the financial vise of rising costs, most notably fuel.

JOHN GASTALDO / Union-Tribune Already on a tight budget, the Gonzales family of Poway struggled with the cost of fueling two vehicles, so David Gonzales, center, started carpooling with a co-worker. He joined his wife, Jacqueline (right), and one of their daughters, Sarah, in saying grace before a dinner of eggs and waffles. Graphic: San Diego gas prices Online resources   Springboard nonprofit consumer counseling: (877) 947-3752 or credit.org   Money Management International, nonprofit credit counselors: (866) 889-9347 or moneymanagement.org   Budgeting tools and tips   Budget calculator Fuel costs & you

Forecasts that prices at the pump could spike as high as $7 or $8 a gallon in the next few years are leading some experts to predict financial calamity for the lowest-income households.

In extreme cases, some could even face homelessness, financial counselors fear, as surging oil prices snowball into higher costs for everything from utilities to a carton of milk.

Less calamitous but still worrisome is the economic fallout facing middle-income families, many of them unaccustomed to adhering to strict budgets after the high-flying times of stock-market and housing bubbles.

Undoubtedly, sacrifices will be made, from cutting cable and phone bills to forgoing vacations and dinners out, as households look for ways to adapt to higher fuel costs, economists say.

What were once seen as household necessities – think cell phones, lattes and 80 television channels – soon will be regarded as luxuries, even among a generation of consumers who believe it's their birthright to have it all.

Frugality already has taken hold, as restaurants report a slowdown in business and consumers head to secondhand stores for clothing bargains.

Jacqueline Gonzales never goes to the grocery store now without a calculator and a food budget, and her husband recently started carpooling with a co-worker.

Not everyone is willing to forsake the good life, financial advisers agree.

“We still have people who feel that this is their lifestyle and that their lifestyle can't change, that 'all it takes is one more credit card and then I'll be OK,'” said Manuel Navarro, a Chula Vista-based counselor with Consumer Credit Counseling Service of San Diego. “If gas prices go to $7 a gallon, there are people who are not going to make it. They'll go broke.

“You'll see increases in bankruptcy filings. It will literally destroy lives. And you'll see some who are homeless, because right now they are living from paycheck to paycheck.”

Ordinarily, Navarro recommends that people spend no more than 40 percent of their income on housing; 25 percent on groceries and household supplies; 20 percent on their vehicles, including gas; 10 percent for savings; and 5 percent for miscellaneous expenses. But with gas prices rising rapidly, those figures are no longer realistic, he said.

“If your income is not going to go up to match this, something is going to have to change, like cuts in groceries or medicine,” said Navarro, who spends much of his time counseling struggling homeowners facing foreclosure. “And you talk to people about savings, and they say, 'What savings?' ”

Incomes in San Diego County have not kept pace in recent years with inflation, and worse, the average annual wage for workers last year – $45,210 – was nearly 6 percent below the 1972 peak when adjusted for inflation, according to the San Diego Association of Governments.

Complicating matters for cash-strapped consumers is a shortage of savings to shield them from a worsening economy or unexpected emergency. In 1980, Americans were putting away 10 percent of their income for savings. Last year, the savings rate was 0.6 percent, according to the Bureau of Economic Research.

A recent survey conducted by the Pew Research Center highlights the growing financial distress experienced by America's middle class, especially in high-cost areas such as San Diego.

According to the nationwide poll, nearly one-quarter of middle-class residents of high-cost communities said they have just enough money for basic expenses. A sizable number also foresee troubled times ahead. About 27 percent said it is likely they will have difficulty paying their bills in the coming year, the survey found.

“Some people are already going into debt month by month, and now if their expenses were to increase substantially and they're paying twice as much for their gas, something will have to give,” said economist Dean Baker, co-director of the Center for Economic Policy and Research in Washington, D.C.

“People will give up discretionary spending, and there's evidence they're already doing that. They'll be looking to take on additional jobs. And in some cases, they may move from a two-bedroom place in a nice area to a not-so-nice area. So that's a big decline in living conditions, and it's a step before you're homeless.”

Enrique Rodriguez's livelihood depends on his being able to drive. His means of transportation is a 10-year-old van that has logged 276,000 miles. Rodriguez, a mobile locksmith who lives in Chula Vista, frets that if gas prices rise much higher and business gets much slower, he'll soon be sleeping in his van.

Each week he is spending roughly $350 to fill his tank as he travels around the county for locksmith jobs that earn him roughly $3,000 a month. Out of that comes $600 a month for a shared rental and $750 in child support. Rather than buying groceries, Rodriguez subsists on fast food – mainly burritos, sandwiches, hot dogs and hamburgers.

“It hurts me every time I go to the gas station – $50, $80, $100 a day,” said the divorced father of four. “I used to go see my mom or do other personal errands, but now I don't because gasoline is killing me. I'm struggling real, real bad. I feel like all my money's going to gas.

“If gas keeps going up, I don't know what I'll do. Maybe I'll have to sleep in my van.”

Jeanne Renner's financial consulting business is devoted to households that have found themselves financially adrift in a sea of burgeoning debt, higher prices and stagnant wages. Renner worries about how they will be able to cope in a world of radically higher gasoline prices.

In the meantime, she is shepherding clients through financially trying times by stripping them of their credit cards and putting them on budgets that include only nominal spending for entertainment.

“I have people who come to me right now and say, 'We're headed back to the hills to live off the land,'” Renner said. “People are learning to do without the things we believe are necessities.”

If fuel costs eventually were to hit $7 or $8 a gallon, middle-income families would have to nix the guitar and piano lessons for their children, cancel cable TV, transfer their children out of private school and make fewer trips to the veterinarian, Renner said.

“They may even have to have their pets euthanized if they cannot pay for major vet bills,” she said.

As expenses mount, debt-inclined consumers may no longer find a lifeline in credit cards to support their conspicuous consumption because of increasingly tighter credit standards.

Yet some academics speculate that even as energy prices inch upward, “me generation” consumers, be they baby boomers or millennials, will resist Depression-era survival tactics, still choosing to spend beyond their means.

“I don't think behavior will change that much, because living beyond one's means has never stopped the American public from continuing to do so,” said On Amir, an assistant professor of marketing at the University of California San Diego's Rady School of Management. “People adapt to a certain level of consumption, and changing that is really very hard.”

Maria Franco acknowledges that her family fell into that dangerous trap after her husband, Juan, lost his well-paying job as a physician in Tijuana. They failed to rein in their lifestyle, continuing to send both sons to private school, regularly eating out and indulging in designer purchases, racking up nearly $40,000 in credit-card debt, Franco said.

She and her husband, who is practicing medicine again and earning roughly $80,000 a year, sought the help of a consumer credit counseling agency to manage their debt. Counselors are increasingly seeing more and more consumers saddled with credit-card debt.

Franco, who commutes from her home in Tijuana to her job as a claims representative for the state Employment Development Department in Chula Vista, said she had considered carpooling with a co-worker because of the high cost of gas, but her colleague opted out.

Franco said she has become more frugal in her clothing purchases, and she and her husband have put off buying a new car, but change comes slowly.

If gas prices climb significantly, “I don't think I'd be in a situation where I'd have to cut a lot of things,” Franco said. “Obviously, we all have to adjust, but I'll probably still get Starbucks.”

 Lori Weisberg: (619) 293-2251; lori.weisberg@uniontrib.com

Monday: The price of gas is changing commuters' attitudes on what they drive and even where they live.

Tuesday: Retail food bills are up 20 percent since 2006, largely because of oil prices.

Wednesday: Economists warn that we may be heading back to 1970s-style “stagflation.”