Evaluating the Foreclosure Landscape in Your Life
One key activity for a person/family when the word foreclosure begins to surface in the mental processes is that of taking inventory of the financial landscape. I like to start this process by evaluating my FICO score, which provides great information about your situation with credit card companies. Evaluating your entire financial situation, the landscape if you will, is very important and should be done before the situation escalates to a Notice of Default or contact is initiated by the loan lender. This process is fairly simple and anyone can do it if you can add and subtract. I will outline the process simply and then explain each step in more detail as we move along in future posts.
Simply put the process of taking financial inventory involves three simple steps. First, being honest with debt obligation per month and year. This step asks and answers the question “how much do I owe in total?”. This first step includes an acknowledgment of all debt not just the home loan. Second, taking financial inventory of expected monthly and yearly income(s). Like step one this step is very similar except one is measuring their income. Step 3 follows after the above homework has been completed and you have these two figures organized on paper. It’s just simple addition and subtraction, really it is just a matter of simple math. The question in step 3 is “do you owe more per month than you can make?” The answer to this outcome and the severity of it will send your financial journey in several possible directions. Let’s briefly look at a few of these outcome scenarios.
If you are making more money than you owe per month. This is a simple matter of financial restraint. It means you are poorly managing your money by spending it lavishly or frivolously without a plan on various wants throughout the month. For many Americans this is a common problem. We spend more than we can on meals out, entertainment, DVD’s,birthdays and gifts, travel, etc. To be successful in your quest to stop foreclosure from happening to you or your family you must cut back on this spending. This category of spending is called flexible spending, whereas monthly required debt is called fixed spending. When you find you have a positive income to debt ratio you need to get on a budget first and foremost. If you end up with a negative income to debt ratio things will become a little more tricky. You will need to brainstorm regarding such a situation. The steps to dealing with negative income to debt ratio will be included in our next post.
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Tagged With Financial Inventory, Financial Landscape, Financial Restraint, Fixed and Flexible Expenses, Mortgage Foreclosure Fear, Negative Income/Debt Ratio, Steps to Avoid Foreclosure
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