Ask The Money Coach

Archive for the ‘Employment’ Category

Sorry to hear about your job loss and your extended period of unemployment. It’s hard to rid yourself of credit card bills when you simply don’t have any earned income coming in because your unemployment benefits, naturally, have to just pay all your current bills. You said “we” several times in your message. So I assume that you have a spouse or a significant other. Hopefully, that person is earning W-2 wages or self-employment income. Your rental home may turn out to be your saving grace. You said that the appraisals on both homes were done “years ago.” Was that two years, five years ago or something else? Whatever the case, that’s an eternity in the real estate market. So do yourself a favor and get an up-to-date market analysis of your house. You don’t have to pay for a full appraisal at this point. Just get an experienced realtor or real estate agent to check out your rental (and your home too) to tell you what the current market value is for those properties. If you do have to sell one of them shortly, at least you’ll know how much money you can expect to net. Those funds may be sufficient to pay off the credit card debt. Meantime, read this post about tips for getting out of debt and managing your finances when you’re out of work or have reduced income. And askthemoneycoach.com/2010/03/i-have-three-credit-cards-and-my-combined-monthly-payments-are-about-700-is-it-wise-to-consolidate-through-a-debt-management-agency-will-this-affect-my-credit-score/” target=”_blank”>this one too for advice about debt management plans and a referral to the National Foundation for Debt Management (www.nfdm.org). Good luck!

Start by asking your husband’s employer what relocation benefits, if any, they are willing to provide. Some companies will do just the basics: like paying for moving costs. Others will offer more assistance, like reimbursing you both for house-hunting trips, putting you up in hotels during temporary stays in your new state, or even paying for meals and local transportation during the transition period. With really generous companies, they may offer to fund some of the cost of buying a new home (like providing money for a new down-payment), or may consider buying your existing home, or perhaps reimbursinig you at some level if you have to take a loss to sell it quickly. Relocation packages vary greatly based on the industry, region of the country and, of course, the specific employer involved. But you should ask about any or all of these options. Also inquire about neighborhoods and the cost of living in your new region. Do some basic online research, yet ask your husband’s soon-to-be boss or his colleagues about desirable communities and where there are good schools in your new state. This later area will be of particular importance if you have kids. Ask too about taxes in your new state. Not just property taxes, but also ask whether or not your husband’s employer may consider “grossing up” his income to cover some of the taxes you’ll have to pay if he gets a cash relocation stipend or bonus.

Regarding your existing house, I don’t have to tell you that it’s a buyer’s market – particularly in Florida. Without knowing any specifics about your home or your particular neighborhood, I can only really tell you to price it agressively (i.e. make it attractive to potential buyers) if you want to move quickly. Also, if you need to sell your current home in order to afford a new home (as most people do), then you might as well get the ball rolling and put your home on the market as soon as possible. Ask for referrals or drive around your current neighborhood and look for signs to find a local, experienced real estate agent. Then call that person and have him or her come by your house to do a complete market analysis and tell you what your house is likely worth. Good luck!

Well, only you know whether or not it’s time for a major career shift. But based on what you said, you seem to be a bit overwhelmed in dealing with such an emotionally demanding job. You said you’ve worked there since 1997 and have been in the special education field since 1990, so the good news is that it’s not too much of a stretch to take the skills and experiences you’ve amassed over 20 years and apply them in the general education arena. From a financial standpoint, however, since you have no savings and described yourself as struggling to make ends meet, I would advise you to be cautious about taking money out of your 401(k) plan. You said you planned to roll it over. But into what? Your message didn’t indicate specifics. Into an IRA or something else? Read this post about Roth IRAs and this one as well about the benefits of having a 401(k), as well this item on the drawbacks of taking money from your 401(k) before you are age 59 1/2.

It sounds like you and your mother can not only not afford your home, but the house itself is also severely underwater. I understand your desire to improve your credit and get your own place, but honestly, you must fix problems A, B, and C before you can move on to issues D and E. In this case, problems A, B and C are: getting realistic about your financial past and present, learning how to create and live with a budget, and dealing with your home dilemma. Until you first do those things, you won’t be able to pay off your debts (issue D) or improve your credit (issue E). Without tackling first things first, you’ll also put yourself at risk of losing another home simply because you’ve neglected to learn certain financial lessons.

So let’s start with the first thing: a reality check. You seem to have attempted to throw your mother a lifeline, only to wind up nearly drowning yourself. Your email said you bought the home from her back in 2004 to help her avert bankruptcy and foreclosure. Despite your best intentions, you also stated that you and her wound up 3 months behind on the mortgage and in danger of being foreclosed upon anyway. That’s what led you to seek out the $10,000 loan you’re not saddled with. What happened to during the time of your unemployment? Your message indicated that you were twice laid off and that you “made some not so smart money decisions?” Whatever those decisions were, you have to truly acknowledge them, and make sure that you don’t repeat them.

It sounds to me as if you had your mother have been stuck in a cycle of making repetitive bad decisions. I hope you don’t think I’m being too harsh on you. Because I’m telling you these things honestly out of care and concern for your situation. I can sense your struggle and I know it’s very hard to be in such a tough predicament. I’m just giving you a bit of “tough love,” however, because I’ve seen cases like this time and time again. The only way people get out of these dilemmas is by actively breaking the cycle and ending the behavior that landed them in hot water.

Now let’s move on to the second issue: having a proper budget. Unfortunately, most of us grow up never having learned to create a realistic budget. This is likely true of your mother, and it’s probably true for you as well. Read this article I’ve written on budgeting and this post too, to get some ideas on how to budget to better manage your finances. Additionally, read this post about budgeting and financial planning when you go thorugh a layoff or have reduced income.

So what about the house? The fact that you’ve both faced foreclosure at least twice, and have even refinanced twice since 2004, yet you have still wound up deep in debt and deeply underwater tells me that you can not truly afford this home. I assume you refinanced in recent years to take advantage of relatively low interest rates. But I also suspect that you took cash out of your home as well. I could be wrong. But that’s certainly what many people did during the heydey of the housing market. How was that money used? Did you pay off debt, set aside any savings, or do something else with it? I recognize, of course, that part of the reason your house is likely under water is because home prices have fallen greatly in many parts of the country. But the fact that you owe twice as much as your home is worth signals that something else was going on.

If I were you, I would investigage the prospects of a short sale or a deed in lieu of foreclosure. I don’t know where you live, but it’s highly doubtful that your home will “come back” in value anytime soon. Unfortunately, short sales and deeds in lieu of foreclosure do have negative ramifications for your credit. But these are short-term hits from which you can recover, if you’re prepared to move on and do the right thing financially in the future.

You asked about the loan you got while you were unemployed. I don’t know of any way to legally get this loand eliminated or removed from your credit reports. Just because someone loaned you money at a time when you weren’t working doesn’t make the loan a “predatory loan.” Unfortunately, scores of lenders all across the country did this — both reputable lenders and not-so-reputable ones. Honestly, I don’t know which camp your lender falls into.

Nevetheless, again, I want you to be willing to take responsibililty for your own actions, and not put the blame elsewhere. You stated to me that you knew you shouldn’t have applied for the loan in the first place but that you were “desperate.” Plus, the reason you applied for the loan was because you were in arrears on your mortgage. That’s certainly not the fault of the lender that gave you the $10,000 loan. So it’s not fair to now accuse them of “predatory” lending. Predatory loans are characterized by unreasonably high interest rates, abusive pre-payment penalties, or excessive loan fees including enormous commissions for lenders or mortgage brokers.

Don’t worry about paying off 5-year-old debts at this point. You’ve got enough on your plate to try to pay your current bills. And trust me: In the long run, you will be far better off if you take my advice and deal first with these issues before you attempt to pay off old debts or improve your credit rating in order to try to get another place to live.

I’m not opposed to filing for bankruptcy protection, but I think it should be a last resort — done after you’ve tried other things.  In your case, a bankruptcy filing may be in order, based on all the circumstances you described. From what I understand, you are currently unemployed, and have been out of a job since July 2009. You had a $70,000 a year salary, but you’ve not run through almost all your savings.

Although you are currently working as a real estate agent, you’ve not successfully closed on any deals, which means you haven’t earned any income there. You didn’t say whether or not you were able to collect unemployment, but I assume that any unemployment compensation you may have gotten has now run out. Since
you also indicated that your credit score has dropped from 750 to around 530, I can tell you that a bankruptcy filing won’t do as much damage to your credit rating at this point as it would’ve done if your credit scores were still in the mid 700s. With $40,000 in debt, a Chapter 7 bankruptcy filing would help you to wipe out those credit card bills. You did the right thing also to get a loan modification from your mortgage company. That was a smart move.