Debt Free / Care Free

Weathering the Storm

by Glinda Bridgforth

"But here's something to keep in mind: We are all more powerful than we think when it comes to fulfilling our destinies and reaching our accomplishments. Market downturns or not, you can still attain your dreams by making smart decisions."
—Glinda Bridgforth

On November 4, 2008 at eleven o'clock my time, the photos and video clips I watched on television from around the world spoke volumes ranging from uncontrollable tears of joy to celebration and jubilation. An amazing beacon of light has illuminated our hopes, dreams, and confidence for the future. In the midst of palpable economic fear in our financially troubled households and global environment, we now have an exciting new president to welcome and be thankful for. The election of Barack Obama has stirred the emotions of men, women, young, old, rich, poor, black, white, and every color in-between. After two years of holding my breath during the campaign process, I was finally able to exhale. It was official. In a landslide victory our country had embraced a new leader to guide us into an era of positive change. I wish the bliss and exhilaration of that history-making moment could be present in our lives 24/7.

But that was then and this is now. We still woke up that next morning to confront more economic bad news. The personal finances of many who celebrated that night are dire indeed. The home foreclosure rate was up 25 percent from a year ago and 1.2 million people have lost jobs so far in the past year. On the one hand, the US government must do its part to fix the country's massive economic problem. And on the other hand, we must do our part and take greater personal responsibility and control of our lives. We are compelled to take inventory of our financial situations and continue to move forward with gratitude and grace.

I've been fielding a lot of questions lately about the fate of our economy, and what people should be doing if they are falling behind on their mortgage payments, their bill paying, and keeping their sanity in check. I know, watching the news can stir a lot of mixed emotions and worries. It can also rouse confusion and dreadful feelings of hopelessness. Is your money safe? What should you do if you can't pay your mortgage? Is retirement a thing of the past? Well, I'm here to help you answer those questions and manage all those feelings by sharing the top Do's and Don'ts of the month. Let's start by taking a deep breath. It helps to bear in mind that no matter how tough things look on television, we each have the capacity to make decisions that will move us toward our goals and to where we strive to be. No one knows if the current market turmoil will last months or years. But here's something to keep in mind: We are all more powerful than we think when it comes to fulfilling our destinies and reaching our accomplishments. Market downturns or not, you can still attain your dreams by making smart decisions.

DOs

• Keep paying your bills and mortgages on time. If you're "underwater," meaning you owe more on your mortgage than your home is currently worth, don't automatically assume you can stop paying the bank back. (You're not alone: After a housing slump that has pushed values down 30 percent in some areas, roughly 12 million households, or 16 percent of the 75.5 million US homeowners, owe more than their homes are worth.) And if you're already behind, get on the phone and speak with your lender. Taking action as soon as possible is critical. It's much easier to negotiate before falling behind on payments and entering delinquency.
• Watch out for "foreclosure rescue scams." If your house is in foreclosure, be wary of offers to help you out. They are hitting about 1 in 11 consumers now. Ignore unexpected solicitations, whether through the mail, by phone or in person (and watch out for late-night infomercials, too). Instead, enlist the help of a HUD-certified counselor. A state-by-state list is available at HUD's Web site (HUD.gov). If you are facing foreclosure, the HUD site and the National Foundation for Credit Counseling (NFCC.org) offer many trusted resources for you.
• Speak with a financial counselor before deciding to do a short sale. People who engage in a short sale and benefit from debt forgiveness might get some surprising news at the end of the year. In some cases, banks are sending 1099 tax forms to former homeowners, meaning the IRS will treat the forgiven debt as income, which could result in a hefty tax bill. Foreclosure can be better than a bad short sale or a bad rescue.
• Research programs for which you may qualify. Bank of America, for example, has announced the creation of a proactive home retention program that will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide. Also go to HUD.gov for info on the Bush Administration's recently unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD's Federal Housing Administration (FHA). You can also call 1 (800) 225-5342 for more information.
• Keep your resume updated in case you lose your job and need to start looking for another one. Be open to honing new skills or modifying your current job tasks in order to fill needs in other job areas that are less likely to be affected by the economic downturn.
• Continue to modify your spending plan and see where you can cut back to save more. There are lots of ideas and step-by-step guidance in my book Girl, Get Your Credit Straight.

In her latest release, Glinda Bridgforth delivers a power-packed plan for paying down debt, repairing your credit score, and securing your financial freedom—along with a future that makes your heart sing.

bridgforthfinancial.com

DON'Ts

• Lose faith in the banking system and start piling money under your mattress. Similarly, don't act as irrational as the stock market and sell everything in your 401K. Make sure you use an FDIC-insured bank account (which now will insure up to $250,000 in deposits) and don't become alarmed if there are more government takeovers and bank failures. Speak with a financial planner if you are close to retirement and concerned about the losses in your portfolio. For those under 50 year of age, you have plenty of time to recover recent losses.
• Rely on your credit cards to pay basic living expenses like rent/mortgage, food, gas, and unnecessary items that you don't need right now. Review your spending habits and make adjustments to free more cash up if you can't pay off your bills every month.
• Rush into filing for bankruptcy. Speak with a certified counselor before considering this last-ditch effort. The bankruptcy law changed a few years ago, and it's much harder to simply erase bad debt. Go to NFCC.org for help and guidance with this option.
• Watch the news to the point you feel drained and anxiety-ridden. It's like a constant refrigerator hum, and unfortunately the news only likes to highlight the drama and negative events. This can distort our perspective and sense of reality.
• Forget to take care of yourself during these times of high-anxiety. Exercise, enjoy time with friends and family, watch your diet, and make restful sleep a priority. Most of these activities cost next to nothing and will give you the stamina and positive energy to weather the storm.
• Fall into the trappings of thinking that because everyone else is saddled with debt and a bad mortgage makes it okay to lose a sense of responsibility.

I'll end this by adding that another silver lining is shining brightly: there will be lots of opportunities in the road ahead after we move past this ditch. Those who are ready and able to grab them will have much to gain. The idea that you can accumulate wealth for retirement and achieve financial freedom is not a thing of the past. It's doable and possible no matter where you stand today. Remember, don't overextend yourself financially or emotionally and you can come out a winner!

We would love to get your thoughts about this article, or have you share your thoughts about the state of the economy and how you and your family are weathering this storm. Please come share with us at Bishop's Blog.