7 Tips for Avoiding Foreclosure

1. Budget conservatively. Even you hate the “B” word, it is important to apply a budget to your household finances. Creating a conservative financial plan that allows for a sufficient savings cushion, expense allowance, and a bit of spending money will create a foundation that stands up to emergencies.

2. Find ways to increase your income. Increasing your income stream helps to augment your monthly budget. Think about starting a part-time job or a small business to earn extra cash. If you cannot trade time for money, consider renting out a room or look through old items to sell on eBay.

3. Explore ways to decrease your expenses. Cutting your expenses is critical to stretching your funds. Try telecommuting 2-3 days per week, using public transportation, or carpooling to save gas money. In fact, have you considered selling your car outright or downsizing your automobile to save cash?

4. Watch your credit card debt. Credit card debt is crippling the American homeowner with each minimum monthly payment. Minimize the amount of purchases you make on credit and increase your cash purchases. Move towards a plan where you keep one card for emergencies only, and limit the spending to thirty percent of the credit limit.

5. Opt for a Fixed Rate over an Adjustable Rate mortgage. A fixed rate mortgage allows you to plan for the long term. If you are just beginning to budget, having your house payments remain the same over the long term increases the probability of remaining on track. If you have an adjustable rate mortgage, ensure that you project early and accordingly for the financial adjustment.

6. Save 10% of your income. The key to successful financial planning is to pay yourself first. With every paycheck, divert ten percent of your pre-tax funds to a savings or money market account. This is the way to ensure you are building financial security automatically – don’t make it a secondary action.

7. Don’t buy too much house. The first rule of purchasing a home is to buy smart. The easiest way to derail your financial future is to buy more house than you can afford – trying to keep up with the payments while juggling additional financial responsibilities is a losing battle. Purchase a property where the total monthly expense equals less than 40% of your income.