A couple are drowning in debt and ask for my advice. I’ve given them the hard facts on what they need to do, but will they listen?
QUESTION: My husband and I bought our home nearly five years ago. We borrowed more than the house was worth, to incorporate our existing debts. Since then we’ve refinanced our home loan to purchase a car, and now we’re in a position where we owe approximately $40,000 more than our house is worth. We’ve got ourselves into a really bad position, and we want to know what steps we can take to get ourselves out of this mess!
SCOTT: Lots of people are in your position – it’s called mortgage stress.
The fact is that you shouldn’t have bought your home in the first place – you had no savings, and you had a history of spending money you didn’t have. But until now you got away with it.
Your problems have been masked by a rising property market. Each time you did something dumb you went back to your home and used it like an ATM machine.
Those days are over.
The person that stares at you in the mirror each morning is the only person who can change things. You need to change your behaviour and make some tough decisions.
The fact is that you shouldn’t have bought your home in the first place – you had no savings, and you had a history of spending money you didn’t have.
Sell the car. You can’t afford it. Buy something you can. Take an extra job. Each. Watch every dollar. Get a Mojo (emergency) fund of $2,000.
If you decide you’re not fully prepared to do whatever it takes, you’ll need to sell your home, and go back to renting.
Right now you’re at the crossroads – it can either be the making of you or the (financial) end of you. Over to you.
Reading through emails like these makes me incredibly sad.
I’ve been accused in the past for being ‘unnecessarily gloomy’ about the economic climate.
If that’s true, I apologize. I don’t attempt to read the economic tealeaves, and besides I’m a firm believer that anyone can win, regardless of what Craig James says on the telly.
Yet too many people struggle when the economy has a pullback like the one we’re having now – due a combination of too much debt and the fact that none of us were taught anything about money when we were kids.
Yet years of doing this has shown me that people can pull themselves out of a pickle, and often it’s the one’s who get hit the hardest that come back the strongest.
Tread Your Own Path!