Posted: 8:16 a.m. Wednesday, July 3, 2013
During a recent appointment at the hair salon, many customers were engaged in a lively conversation about our nation’s political climate and the state of the economy.
These customers included several professional women who earn good salaries, own houses and have families. But they were concerned that the impact of federal government’s spending cuts caused by sequestration, and tax increases proposed by local leaders, could hurt their personal finances.
The lively discussion among these women made me wonder: How many other people are waiting for governments or other institutions to make changes instead of taking action on their own that can have a quicker impact on their finances?
As an example, one young woman said she was waiting for banks to add private investors to the pool of homes that qualify for mortgage modifications. Right now, her mortgage loan isn’t owned by Fannie Mae or Freddie Mac, so she doesn’t qualify for a loan modification and has a high monthly mortgage payment. Instead of investigating other possible solutions, she was waiting for others to solve her problem.
If you find yourself in a similar situation, I hope that you will take steps to find a solution to address your immediate concern, rather than waiting, and hoping, for an outside organization.
For example, if you have a home that is no longer affordable, don’t stop making your mortgage payments or wait for your lender to send you a notice of foreclosure. Contact a nonprofit credit counseling organization to discuss your alternatives.
These alternatives may include selling your home. While this may not be the solution you would like, it means that your finances will stay intact. Once you find a new place to live, you will be in a more stable financial position to determine if and when you want to buy another home.
If your home is affordable, but you are currently underwater and want a lower interest rate, speak to your lender to determine your options. Many homeowners qualify for the Home Affordable Refinance Program (HARP), which will give you a lower interest rate, and save you hundreds of dollars each month on your mortgage payment.
But if you don’t qualify, continue to pay down your mortgage. You may even want to pay an additional amount toward the principal, which will eventually increase your chance to refinance the loan.
If you feel overwhelmed with credit card debt, don’t wait for help to come to you. Build a plan that starts with paying off the credit card with either the lowest amount owed, or the highest interest.
For example, if you have five credit cards, pay off the card with the lowest amount owed by making larger payments on it and minimum payments on the other four cards. Set a goal for paying off the first card, then work on the others.
If you find that your expenses are higher than your income, or you have other payments that are causing financial headaches, develop a plan to rectify this situation. Instead of waiting for a government agency to enact a law, examine all of your expenses and determine if each one is necessary, which ones can be eliminated and others that can be reduced. Develop a budget that allows you to live within your means.
Once you have achieved that goal, begin to set aside funds for an emergency savings account, a regular savings account and long-term investments.