Punchinello’s Chronicles

January 31, 2009

Before You Lose Your Home!

Filed under: Survival 101 — Punchinello @ 2:59 am
Tags: , , , ,

It’s a familiar story, terrifying and filled with worry. They’re a husband and wife, perhaps with some kids either in college or elementary school. They’re doing their best. They’re typical citizens, with a fair amount of credit-card debt. There’s a mortgage to handle, bills to pay, and so on. They need food and clothes, gas for the car, shoes for the kids, and maybe college tuition.

Life is getting tight, bills harder to pay, and there’s not much money.

Maybe they’re both working, or maybe only the husband or wife works. They’ve put aside some money in a 401k and maybe an IRA, perhaps having a small portfolio. Much of their future money is tied up in a house that’s lost value, and they’ve been using home-equity loans to cover things. That, and credit cards.

Suddenly, the husband comes home. “Well, it finally happened. We knew it might, but I’ve just been laid off. I’ve got 4 weeks, then I’m done.”

They look at each other and the wife says, “…What are we going to do?”

I’ve been there. And there simply isn’t anything at all in the world that’s more scary. It’s utter, total, instantaneous, pure terror. Can you imagine having to sit the kids down and tell them, “We’re going to have to go to Aunt Ginny’s for awhile. We don’t have anyplace to live.”

The kids wonder about their friends. What about their stuff? How about their school? And how about their friends? Why is this happening? And most of all, “What will happen to us?”

We for sure know that there are two things that must, without question be the two top priorities of all of life! First, you must have some kind of health. Without a body, you’re dead and nothing much else matters. Second, you must have a functioning mind. And that means having choice. If you can’t choose, then that reduction in choice for the mind is like the lack of mobility for the body.

After we know we have a body and mind, then we move into survival. That’s actually not a long list. We need shelter, a roof over our head. We need air, water and food. We need clothing. That’s pretty much the basics. Beyond that, we learn to distinguish between what we want, versus what we need. Much of today’s economic trouble is due to inability to make that distinction.

So here’s the thing. As soon as you lose a source of income in today’s world, instantly stop payment on everything!

Yes, you’ll believe that it’s temporary. You’ll believe that you’ll get another job. You’ll believe you have obligations to keep your credit score high. You’ll believe that “something will come along…somehow.” No, that’s not a valid assumption anymore.

Survival is absolutely critical. If you make certain survival moves immediately, then you stand a chance of handling a longer-lasting situation.

Think of your assets, that portfolio or IRA, the 401k, savings accounts and other hard assets. They can be converted to cash and used to finance both a major lifestyle reduction and either a job search or perhaps a small business startup. But without that cash, you have nothing.

The first thing is to stop all payments on unsecured debt. That’s credit cards, student loans, or anything else where there isn’t a car or house being held as collateral. IF you get a job soon, or a new form of income, then you always can go back and fix the lowered credit scores. But what if you’re still looking for work in a year?

The next immediate thing is to take a very long and hard look at the probabilities of getting a replacement job at the same salary levels. How old are you? Have you gone out and made some casual inquiries lately as to how quickly you would be picked up by another corporation? How healthy are those corporations?

It’s a lot easier, relatively speaking, to find a job that pays $200/week to cover an $800 apartment than it is to somehow replace $7,000 per month of income. If you lose your home, then where will you live? Where will you put your furniture and the kids furniture and toys? Where will you put the things you’ve accumulated throughout your life? How will you pay for storage if you’re about to be foreclosed?

There comes a time when we have to draw a line in the sand and form an emergency preparedness plan. “As long as this all is in place, we’re okay. But let this ONE thing happen, and we go into disaster mode immediately!”

I had the backups, and the backups of the backups. I had the twelve layers of protection, redundancies, plans, and safeguards. But when life decides it’s time for you to lose it, then you’ll lose it. It won’t matter how many backups, redundancies, and safeguards exist. They’ll be wiped out.

In a precarious economy, it’s like walking at the top of a mountain. If you slip and fall while you’re still near the wide, thick, comfortable base of that mountain, you won’t hurt yourself much. But if you slip and fall when you’re up in the snow, cold, blizzards, and plain rock, narrow paths, you can easily be killed. So too, if you have one type of job you’ll probably be okay. Another, and you’ll have a disaster if you lose the job.

The key is to have a roof over your head. If you can do that, you have a base of operations. You can sleep on the floor, apply for food stamps, get by with minimal electric power, and survive. But without a roof over your head, you’re lost. You’ll lose not only the house, but the furniture, pots and pans, linens, clothes, accessories, tools, computers, and everything else. You simply won’t have a place to store them.

You HAVE to keep a roof over your head! You can lose all your credit, all your savings, all your investments and still make them back with a steady income. You can move from a house to an apartment, or to a different area of the country where small bungalows are even cheaper than apartments. But without a roof over your head, that’s the end.

It comes down to the Emergency Preparedness Plan. And in today’s world, if you lose a source of income, the likelihood is you won’t be able to replace it. Don’t waste all your savings, backups, safeguards and cash on paying unsecured loans. Turn it all into cash and then do whatever it takes to conserve that cash as best as possible. Reduce your lifestyle to absolute necessities.

Why a post like this? Because looking back, I find myself wondering why I was so willing to continue to burn money and throw it down the drain paying and paying on interest and loans that ultimately I never could sustain. I lost not only the money, but also the loans to default. None of it remains. Theres nothing, zero, zip, nada to show for all that money that I kept throwing, good after bad, while sinking into the quicksand.

Putting a strong ecommerce site together to build an online business will cost you anywhere from a few thousand dollars to $50,000. You may not have the fifty grand, but if you have a couple of thousand you can at least begin something. Try and do that on $200, and you’ll see you have nothing.

We’re entering a time in history, a standard cycle that’s been the same for 500 years. Chaos will continue, and so there are many opportunities. But to take advantage of those opportunities means that Cash is King! Lose a steady source of income, and you’ll quickly discover how easy it is to end up out on the streets in a shelter.

So when one of you asks, “What are we going to do?” the solution is to instantly stop all outbound payments of everything. Continue with the mortgage if you really and truly believe you’ll be able to replace that income. Otherwise, you have 6 months before you’ll begin entering foreclosure. In that time you also have a credit rating. You’ll need that to find an apartment.

Without a credit rating, with a house in default, with loans and debt months in arrears, you may not be ABLE to rent an apartment! If you can buy a condo or townhouse outright, then do it. Cash is King! When you own the thing outright, you likely won’t have it repossessed. Sell the car and buy a used one outright. Use the time you have to convert to a cash-only lifestyle, and the hell with the credit rating. AFTER the bankruptcy, you can worry about fixing those numbers.

But only if you still have a roof over your head.

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