Stop Home Foreclosure

Step 7: Get on a budget

Creating a Budget: 

Purpose- A budget needs to have a purpose to be effective. Your budget has the ultimate purpose- to help you keep your home.  

Simplicity- The more simple a budget, the more likely it will be followed. A budget can be as simple as a piece of paper and a pencil, or can involve a complex computer program. You need to find a budget that works for you, which in most cases will be a simple budget. If you use a spreadsheet budget consider lumping similar expenses together (i.e. gas+ water+ electricity= utilizes) 

 Realistic- For a budget to work it has to be honest and accurate. Any fudging of numbers or “bending” of the budget and it will only be a matter of time before you are back to your hold spending habits.  

Following a budget: 

 Set goals- Along with the long term goal of avoiding foreclosure, you should have short term goals. Short term goals may include finding out exactly how much you can afford to pay per month for your mortgage- which is good information to have on hand when discussing foreclosure options with your lender. You should also set goals to reduce expenses and increase your income, see our helpful hints section below for more information. 

 Prioritize- You need to prioritize your spending. Until you have all of your expenses under control you need to determine what is important to you. You mortgage, insurance, and food should be at the top of the list and expenses like entertainment and clothing should be near the bottom. Knowing what is important will make it easier to spend money on the things that matter. 

Be Accurate- Keep track of every single dollar you spend, especially in the initial few months of a budget. Getting accurate information about where your money is going is the best way to see if you are spending that money wisely. 

 Be Flexible- If you find that you keep spending more than you have budgeted for in one area, change your budget. Find areas where you can spend less to make up the difference. If you start to break your budget in one area you are much more likely to stop using your budget. 

 Stay Dedicated- You have to stay true to your budget for it to work. If you have trouble staying motivated, get your whole family involved in the budget process. Group support is always easier to follow. 

Types of budgets: 

There are two basics effective types of budgets; the envelope budget and the spreadsheet. 

Envelope Budget- Envelope Budgeting is accomplished by setting aside a certain mount of money for each speding caterory and placing that money in a marked envelope. When you make a purchase, pull the money out of the specific envelope. You can determine how much you are spending by looking at the mo

Types of budgets: 

There are two basics effective types of budgets; the envelope budget and the spreadsheet. 

Envelope Budget- Envelope Budgeting is accomplished by setting aside a certain mount of money for each speding caterory and placing that money in a marked envelope. When you make a purchase, pull the money out of the specific envelope. You can determine how much you are spending by looking at the money left in an envelope. If you empty the envelope before the end of a month you are done spending in that category, but if you have money left over you can roll it over to the next month or you can adjust your budget and move that money into another evnelope where you consistantly end up over you limit.

Spreadsheet Budgets- This is a more common type of budget. This is a list of your income and expenses written out. You can see where your money is going by looking at the different categories. Spreadsheet budgets can be as simple or complex as you choose. As mentioned earleir, the more ismple the budget the more likely you are to follow it.  

Getting started 

 Income- Get check stubs for the last 4 months and find your average income. Don’t forget to include other income like alimony and interest income from bank accounts. 

 Expenses- Go through old bills for the previous 2-3 months to get an idea of what your expenses actually are. This is particularly easy for your utility, mortgage and insurance bills. If you don’t keep your receipts, you may have to make an educated guess the first moth and then start with a more accurate budget starting with month two. Keep tack of every dollar you spend and what you spend it on. By keeping track and paying attention to where your money is going it will become easy to reduce your expenses by not wasting money on things you may not need.  

Use the Spreadsheet below to get started. If you want an automated spreadsheet or a budget program, you can get those for free at: 

http://office.microsoft.com/en-us/templates/CT101172321033.aspx  

Helpful Hints 

Utilities:

• Get rid of cable TV

• Cell or house phone, not both

• Get a cell phone plan that actually matches your use

• Talk to utility companies about getting an average bill to make that a fixed expense that does not change from month to month and it will be easier to budget

  • Reduce electricity usage

  • Cool house to 77 in summer

  • Heat to 69 in the winter

  • Turn of lights when not in the room

  • Unplug electronics if leaving for more than a few days

  • Reduce water cost

    • Take shorter showers

    • Don’t let water run while brushing your teeth

Food:

• Develop a meal plan

• Pack your lunches

• Avoid fast food restaurants

• Plan grocery trips ahead of time with a list

• Avoid multiple trips which takes gas money

• Buy generic, or house brands which are cheaper

• Buy the brand that is on sale

• Use coupons

• Buy in bulk for things you will use before they expire

• Don't shop hungry 

Entertainment:

• Eat at home

• Rent movies instead of going to theatre

• If you do go to theater, go to matinee

• Use the library instead of buying books or CDs

• Go to inexpensive productions put on by your city or local college

• Avoid gym fees, get home exercise equipment or join an athletic league 

Clothing

• Some is required

• Buy in bulk (like socks for the kids, etc)

• Shop at outlets

• Only but items that are on sale

• Make a list before going shopping

General Tips

• Track every dollar spent, and write it down

• Keep all receipts

• Don’t use ATMs- fees add up and it easy to spend more than you budgeted

• Don't use credit cards unless you can and will pay them off each month 

Increase your income:

• Get a second job

• Work overtime

• Sell your newer car and buy an older one to generate cash

• Step 1: Understanding how foreclosures work
• Step 2: Slow down the home foreclosure process
• Step 3: How and why to communicate with your lender
• Step 4: Understand all of your options and home foreclosure alternatives
• Step 5: Where you can go for foreclosure help
• Step 6: How to avoid foreclosure scams
• Step 7: Get on a budget

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The information contained in this site is based on our opinions, research, and experience dealing with the foreclosure process.  It does not constitute legal advice.  If you need legal advice specific to your personal situation, please consult an attorney.