by Irene Morales Ward, Northern Virginia Real Estate
8/7/2007
The car needs a new transmission; the furnace needs to be replaced; your oldest is going off to college and you haven't even begun to think about saving; your mother is in need of long-term care; your spouse is terminally ill.
These are just a few of the millions of reasons we are forced into situations we don't want to be in - namely, to borrow against our home to make ends meet.
It's as old as time. The farmer loses his farm to the bank because he can't make ends meet and another season of drought has left him with yet another year of unharvested crops. The single mother must take a second mortgage to pay for her child's medical bills.
It seems cruel for banks in this situation to foreclose on these poor souls. The homeowner didn't foresee this! It was never their intention to get in over their heads.
However, we are currently seeing a trend that is all too familiar - especially to those who have purchased a home within the last several years. As Realtors, it is our job to identify trends - especially as it pertains to our clients.
Recently, sellers were shocked and surprised to find not only that their home was worth less than it was two years ago, but because they refinanced within 6 months of buying the home, they very well could OWE money in order to sell!
Unprecedented appreciation rates during the 2001-2006 housing market tempted millions to tap into that huge investment and start living the "good life". Vacations, plasma screen TV's, new cars, furnishings, and more became all the rage.
Why not decorate that huge home with all these fine things? Don't we all deserve to be happy and have lots and lots of things?
We have become a nation of spenders. Debt has become a part of our culture and not in a good way. We are putting everything at stake to keep up with our neighbors. Conspicuous consumption has dominated our lives in such a way as to obliterate all common sense.
The cure? It's easy. Save more and spend less. O.k., maybe not an easy task - I know. But it's certainly worth trying when you consider the possible consequences of losing your home.
Start Budgeting!
Figure out where your money is going every month. This is going to take a lot more than a little soul searching. If you have a spouse or partner, sit down and pull out at least 2 to 3 months worth of bills, receipts, and invoices.
Itemize into manageable piles - This Budget Worksheet from About.com helps you categorize your bills and income. You will quickly come to realize how much money is being spent....and where!
Have a manageable and attainable goal and stick with it. If you want to save 10% of your income and paydown all your credit cards within 12 months, then figure out a plan to make this a reality.
Remember, your home is one of the most important investments you will ever have in your life (other than your children). Treat it reverently and it will serve you well!
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