Three ways to spring clean your spending plan to avoid foreclosure

You can start by tracking your expenses.

While foreclosure rates have been trending down slightly during the last few years, one in 1856 Michigan homes is currently in the foreclosure process, according to RealtyTrac. Homeowners who are facing financial challenges can do several steps in an attempt to avoid foreclosure. The first action is reviewing their spending plan to determine what has changed and where adjustments can be made. Understanding their budget will help determine their options to control their situation.

The first step in making a spending plan is to keep track of spending for at least one month. This will help you see where your money is going and your spending habits. It will also help identify where to spring clean spending leaks. Small purchases add up fast! What are your absolute needs versus wants?

The second step is to write down all your monthly income and all your monthly expenses. Use a spending plan worksheet. Remember to include occasional expenses, such as holiday purchases, auto insurance or repairs, school supplies, etc. Add each column to do the math and figure out the bottom line. If you cut back on unnecessary items, at least temporarily, will your monthly income and expenses balance? Can you afford your house payments more easily?

The third step is to set your financial goals. If your objective is to keep your home because you think you can afford it, take control by contacting your mortgage servicer. The phone number is on your monthly mortgage statement. Talk about why you cannot make your monthly payment and ask the servicer for help avoiding foreclosure. The servicer will ask for your monthly budget which you prepared in step one. If you contact your mortgage servicer early enough, they must tell you your options to keep the home, or if it makes sense, to leave your home.

If you cannot get what you want from your mortgage servicer, another option is to ask for free expert help from local housing counseling agencies. Experienced counselors aid you to develop an action plan and help you work with your mortgage company. Search for a Michigan State University Extension housing counselor or find a local HUD counselor near you. Be cautious: scam artists are out there who try to take advantage of distressed homeowners by charging lots of money for false promises of assistance.

Start with making and analyzing your spending plan. More information, resources and tools to help you are at the MI Money Health website. And remember that financial challenges takes time, patience, and discipline to overcome. Free local assistance is available when you ask for help.

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