Six ways to get money savvy after foreclosure

After foreclosure, financial recovery is possible. Although you have been through difficult times, you have some choices for new beginnings based on your new economic reality.

After foreclosure, financial recovery is possible. Although you have been through difficult times, you have some choices for new beginnings. They take some effort and decisions over time.

Foreclosure rates in Michigan have declined since the height in 2011, according to the Federal Reserve Bank of New York, but many families are still going through the process.

To successfully live with your new economic reality, follow these six proven money savvy tips and complete the worksheets in Assessing Your Financial Situation.

  1. Organize family records. A record-keeping system helps you easily locate important financial records. Decide on a one place to store necessary papers, who has responsibility for organizing them, and your schedule for record-keeping activities. Include your personal credit report and obtain free copies yearly to monitor mistakes and identity theft.
  2. Develop a Spending Plan. Be realistic about your new financial reality with your income and expenses. What adjustments can you make? Learn how other families have successfully adjusted to reduced income. Which bills you should pay first and the amount you should pay? How will you track your expenses to see if your plan is working for you?
  3. Determine your net worth. By calculating your assets minus liabilities, you can identify your financial resources and areas for improvement. It is okay after foreclosure if your net worth decreases. Over time, net worth statements help review financial progress.
  4. Are you ready to take on new debt? Calculate your debt-to-income ratio to understand your current situation and recommended guidelines before applying for more credit. You can work with your creditors, as they may be able to reduce some of your payments.
  5. Manage your spending. Work with your family members to control spending together. If your income changes again, revisit your spending plan to make adjustment decisions.
  6. Summarize your current financial situation. You may be feeling a variety of emotions ranging from surprise, regret, relief or anger. Moving forward financially may take some time. Community resources may help temporarily to get through difficult financial times.

Foreclosure can take an emotional as well as financial toll on individuals and families. Economic recovery is possible by following these six recommended steps.

Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at MIMoneyHealth.org.

Michigan State University Extension is a HUD-approved housing counseling agency has many MSHDA certified housing counselors at multiple county offices to assist you by phone or through technology. Find the one staff person nearest you on theMI Money Health website. MSHDA certified Housing counselors may be located online as well.

To contact an expert in your area, visit the find an expert page, or call 888-MSUE4MI (888-678-3464).

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