Things happen! That expression has been around for years, and it's very true. Many people have unanticipated financial setbacks, and in my experience it's often medical bills, divorce, job loss and, unfortunately, substance and gambling addiction. However, it might just be that people are living longer; everything is far more expensive than before; and Social Security just won't cover most people's bills. Let's look at ways to reduce debt and, more importantly, a way to keep your home when times get tough.
Before going into this, be very cautious that there are many predators who offer self-benefiting, short-term propositions. For someone seeking a long-term solution, these propositions might do more harm than good. Some examples are a hard money loan with ridiculously high origination fees and interest with a three-year due date, or worse yet, a joint equity partner who requires a power of sale at a predetermined date unless his share is repurchased at a ridiculous amount, as specified in a legally binding signed agreement. Be careful with hard money loans with a balloon payment and joint equity loans.
The best way to conquer a financial problem is to recognize it as early as possible and take action early. Seek advice from a qualified financial advisor. But these are a few suggestions:
1. Pay off and consolidate all high-interest loans and credit cards.
2. Quit charging things on your credit card unless you can pay the bill in full within the non-interest billing period.
3. Stop the trips to Starbucks or the like, and stop eating out for lunch.
4. If you must drink alcohol, do so moderately at home, and limit what you consume and spend.
5. Consolidate your cable and home services to the best available package.
6. Attempt to reduce your utilities by using less light, heat and air. Be conscious about consumption, and use your thermostat. Don't leave lights burning, and quit the 15-minute showers.
7. Shop for deals for household goods, food, entertainment and clothing.
8. Avoid interest late fees and penalties.
9. Try to land extra paying work: a part-time job, overtime, pet sitting, child care or whatever you are qualified and able to do.
10. Use your car less, and consume less gas if possible. Keep your car tuned up to avoid unnecessary, costly repairs.
If you are far beyond all this and deep underwater, there are some other possibilities. In California, for example, you could actually go up to five years without paying property taxes before potentially losing your home in a tax sale, but I would leave this as a last resort. And even then, how are you going to bail yourself out without eventually selling and then paying huge penalties? You might consider a reverse mortgage, and it might be possible to refinance your loan. With the funds from the refinance, you could pay off high-interest loans and credit cards.
I suggest having a very good plan, as opposed to just buying yourself a year or two. If you have already explored the reverse mortgage and the refinance and been met with no success, please call me. I will help you try again because these may be your best solutions. It might be necessary to downsize and find a smaller home, a less expensive location or a rental, which would allow you to pay off debt and have huge equity to invest for income.
There is one other solution that comes to mind to increase your ability to meet financial pressures, but it's not for everyone. You might rent out a bedroom or bring in a paying roommate. Needless to say, this is a big infringement on privacy, but it does help when the financial issue is not extreme. To discuss these and other potential solutions, email me at [email protected] or speak with a financial advisor with credentials.
For more information, please call Ron Wynn at 310-963-9944, or email him at [email protected] To find out more about Ron and read his past columns, please visit the Creators Syndicate webpage at www.creators.com.
Photo credit: geralt at Pixabay