By Guru on July 22nd, 2009

SORT OUT YOUR FINANCES ( 2 )

The toughest act is to admit to yourself that you are in a financial mess . Once you admit this to yourself , you can go forward towards solving this mess and get your life ( and your family’s ) on track again .

First thing to do is : List what you own -

( a ) HOUSE if you own your house , find out what is the present value of the house and what is the outstanding mortgage on this this will give you a rough idea of what your equity is . Whether positive or negative .

( b ) Shares and stocks If you have any , what is the value of them .

( c ) Any other savings you have

This way you will arrive at a figure which will give you what you are worth

Make a list of what you have coming in .
Make a list of what you require to live on – NO LUXURIES but include the amount you pay every month for mortgage / rent .

NEXT Make a list of what you owe –

( a ) loans which are secured ( like on your property ) and loans where you have given a personal guarantee – ( these are your priority ) or where you have agreed to a second mortgage on your house .

( b ) loans /credit cards which are unsecured .

Make a list out your monthly payments – loans and credit cards .

You should now have a fair idea of where you stand .

If what you have coming in is more than your outgoings than you are OK and don’t need to read further , but if it is the other way , read on …..

BEFORE YOU TAKE ANY ACTION , UNDERSTAND THAT WHATEVER ACTION YOU TAKE AFTER THIS , YOUR CREDIT RATING WILL BE AFFECTED AND IT MAY TAKE YEARS FOR IT TO BE RECTIFIED SO THAT YOU CAN BORROW AGAIN – if you ever want to do that again .

So any action to be taken should not be taken lightly and this action plan is for those who are genuinely in problems and do not have assets that they can liquidate to pay their debts .

If you own your house than you need to work out what your equity is ( value of the house less the mortgage ) . If your equity is substantial , then the creditors will most likely force you to sell the house and pay the debts .

Who owns the house ? if it is in joint names , then your debts can only be offset against your share of the equity .

Assuming that your share of the equity is very little , AND your debts are large ,

we go forward ………