The Rules of Foreclosure are universal guides to get you through foreclosure and into a better financial life. This is what it takes for you to get the best result out of a bad situation. Our most successful foreclosure clients follow these rules, and you should too.
Last week we talked about the First Rule of Foreclosure. You might have been shocked to learn that we believe the first rule is not to hire a lawyer. Rule #1 is to get yourself on a written budget. Almost without exception, every client that comes to us has a financial life that is out of balance. A lot of them are severely unbalanced. You cannot get out of a financial crisis without changing your behavior. So, the first thing you have to do when facing a foreclosure crisis is to get on a written budget!
But what about Rule #2 for foreclosures? "Certainly now I can start researching foreclosure defenses and interviewing attorneys, right?" You can soon, but not yet. Now that you have a written budget in front of you, you need to get serious about turning things around. It's time to do something drastic - it's time to Save Money!
The Second Rule of Foreclosures is to Save Money. As much money as you can. You're in the middle of a financial crisis - probably the biggest financial crisis of your life. It's time to take a second look at that budget and cut cut CUT. No vacations, no outlandish expenses. Get rid of that ridiculous car payment and drive a beater. No more eating out three times a week. Save save save money, as much as you can. Why? Because you're going to need it!
Getting into foreclosure is easy, but getting out takes time, sacrifice, and some cash. No matter what your goals are for your foreclosure defense, you are going to run into expenses. Your attorney is not the only person who is going to need to be paid. Remember that foreclosure is temporary. Life is waiting on the other side, and Life costs Money. There are going to be bills on the other side of foreclosure, so you should be budgeting for them now.
Our rule of thumb for saving money is this - estimate what you think your housing payment is going to be on the other side of foreclosure, and start saving AT LEAST that much money every month NOW (preferably more).
Here's an example: our client "Tim" stopped paying his $2,500 a month mortgage due to being laid off. He's now working again, but at a reduced income. He knows he can't ever afford to keep his house, and will have to rent a house for his family when the foreclosure is resolved. Tim expects he will be able to rent a small place for his family at about $1,200 a month. So Tim should start saving at least $1,200 a month now. After a year of foreclosure defense, Tim will have saved $14,400 before paying for his reasonable attorney's fees. He'll have money in his pocket when the time comes, and his budget is already set for when he needs to move into a rental home. And, if Tim is really smart, he'll find ways to save 20%, 30%, even 50% or more of his paycheck, because he knows that life and emergencies don't wait for you to be out of foreclosure.
Our most successful clients Save Money while in foreclosure. They don't take big vacations, they don't drive to our office in new cars wearing new jewelry. They don't eat out every week, and they don't buy subs at Publix every other day. They know they are in a crisis and they know the only way out is to change their behavior. Successful clients are on a Written Budget and they Save Money. You can be successful too, even in foreclosure. Start saving money for your future. Foreclosure is temporary. Life is waiting. Save money now so that you can meet life on your terms.
Coming soon, we'll talk about the Third Rule of Foreclosure. You guessed it - Rule #3 is not Hire a Lawyer!