Saturday, May 2, 2009

Recession: What To Do While It's Here

The Recession is showing signs of lessening. The Recession will continue into 2010. The recovery from the Recession will be the steep upward move that the economy went down, like a "V". The recovery will be longer because it won't be a "V" but a "U". Doesn't anyone know - The President; the head of the Treasury; the Chairman of the Federal Reserve; your brother's wife's third cousin who delivers the Wall Street Journal?

What should you do if you have debt problems, or have a mortgage that has adjusted up in rate and cannot afford the new payments or have a credit card or two that has increased your rate from 6.99% to 15.99% (you were 1 day late and paid the $39 late fee) but Lawrence Bossidy, former CEO of Honeywell, says he has no concern about people who make a contract and won't stick by their agreement?

Here are some suggestions that might help you out of the money bind:

1. Ignore the headlines - no one knows when the Recession will end or how fast the recovery will be. Rather than panicing and then fainting, read the whole article - more than one. Try to get a balanced perspective on whatever the front page big bold type means by checking at least several sources.

2. If you listen to a business channel(s) compare and contrast several opinions and several channels

3. Prepare a realistic monthly budget for you and your family. Determine how much income you have left (if any) after regular monthly expenses - without and with debt service.

4. How much of a reserve do you have for emergencies, like a temporary job loss. You should have at least 3 months and really at least 6 months

5. If your mortgage is an Adjustable or Variable Rate Mortgage ("ARM"), can you afford the payment if the rate goes up the maximum permitted when the rate changes? If not, you should start trying to contact your lender. Most of the Federal Programs that are in place are NOT for delinquent borrowers, but are for those who might fall behind unless . . .

6. Credit Cards: Pay down as many as possible. If that is not realistic, pay $25 more than the minimum payment on each. Be sure to ail your payment at least 7 days before it is due. It is critical that you are not 1 day late. You rate will skyrocket and you will have the privilege of paying $39 as a reminder

7. Credit Cards: Don't keep moving balances to get a lower rate. If you have a very high rate card, move that balance as a transfer to a new card AND CLOSE THE OLD ONE. Again, do not be 1 day late in your payment or you will be back into double digit rates.

Do not wait for the GOVERNMENT to help. The Senate has all but killed the chance that the House-passed amendment to the Bankruptcy Law, which would allow Bankruptcy (Federal) Judges to modify home mortgages, will ever become law. This was due to intensive lobbying by the banking and finance industry. The same fate awaits the Consumer Credit Card reforms the House just passed by more than 4 to 1 ( see the next post for details on both)

Author's Copyright by Richard I. Isacoff, Esq, May 2009

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