A Savings Account Can Save Your Home

Defaulted home loans and foreclosures in the United States are making international news. You cannot open up a newspaper or turn on a television without hearing about the housing market. It's my opinion that mortgages will continue to be in the news for quite a while.

So what's happening and how does that affect you? Simply put, people are falling behind on their mortgage payments because of unexpected changes to their finances. As a result, they have lost their homes or are in danger of losing their homes. We would like to think that these people couldn't afford a home to begin with, but it's not always true: job loss, disability, divorce, and other changes that we don't even like to think about can completely change our financial outlook. Rising interest rates or balloon payments, events we thought we'd be ready for, can suddenly become dangerous obstacles to our security. Unfortunately, no one knows what will happen next month, let alone next year. So you need to take steps to be prepared.

What can you do to be prepared? The standard answer is to have an emergency savings account that can meet six months of expenses, but how do you set aside money when you're having trouble meeting your current monthly expenses?

1. Find the leaks. You need to find the leaks that are preventing you from setting money aside. Some leaks may be obvious and can be addressed immediately with very few changes, but others may need some research and investigation. How do you find the less obvious leaks? You start by dividing your expenses into two categories: needs and wants. A need is something you must have, such as your mortgage payment, the utility bills, insurance, transportation, or food. A want is something you can do without, like expensive clothing or entertainment. Sometimes a want is disguised as a need. An example of that can be eating out instead of preparing your own food. Yes, you do need to eat, but you can eat for much less if you bring food to work instead of eating out every day. Your mortgage, utilities, insurance and transportation can also be closely examined to see if you're making the best choices.

2. Reduce your entertainment expenses without giving up entertainment. Once you've found your leaks, then you can start addressing them. One of my personal leaks was books, because I love to read. These days, I typically go to the library and borrow a book if I think I really must have it. After I've read the book and know I will read it again, then I'll let myself make the purchase. Did you know that you can ask the library to purchase books if they don't already have them? Most libraries have a fund especially for requested books, knowing that if one person asks for the book, many others are probably wanting to read it as well. This works for movies, too. Most libraries also have a free movie night - great entertainment at no cost. By my example, I'm trying to show you that saving money doesn't always mean going without, it can mean making better use of the resources available to you.

3. Lower your utility costs the smart way. Not every need or want can be replaced by free community resources, but it is possible to lower your expenses while still holding on to the basic services you're used to enjoying. You can have fewer televisions connected to your cable / satellite service, switch to a less expensive package, or maybe give it up all together and strictly watch movies and TV shows on DVDs that you've rented or borrowed from the library. If utilities are your biggest expense you can lower your costs there as well. When we power washed our home this summer, we found a few windows that needed to be caulked. We were glad to take care of it, because caulk is much cheaper than the heat we would have lost during the cold winter months. Other ways to lower utility bills are to take shorter showers, turn out lights when you leave a room, and dress according to the weather instead of forcing the heating and cooling to make you comfortable no matter how you're dressed.

4. Don't be afraid of change. I know from experience that the biggest obstacle to saving money is the desire for convenience and the need to fit in. What will you talk about if can't watch the latest TV shows? Who will eat lunch with you if you have to eat in the break room? What if you've never used caulk and aren't even sure what to do with it? Fear of the unknown can make it hard to get excited about change. A great way to get excited is to learn what other people are doing and how it has benefited their lives. If you are interested in learning more, a few really great books to read are: "Not Buying It: My Year Without Shopping" by Judith Levine; David Bach's "The Automatic Millionaire" Suze Orman's "The 9 Steps to Financial Freedom" and Amy Dacyczyn's "The Complete Tightwad Gazette". Remember to check your local library for titles. After you've sampled the book and know you want to keep it for future reference, then feel free to buy it.