State of the U.S. Housing Market
(c) William L. Brown

Right-sizing your finances probably isn't your idea of the best way to spend a lazy Sunday afternoon. And it certainly doesn't seem like the thing you'd want to do over your cup of morning joe.

But if your income has been slashed either by a job loss or layoff, forced furlough or just a plain old salary reduction, you may have more on your mind than just thinking about how to lead a smaller, cheaper life. You might be forced to choose between buying a bag of groceries and paying for your monthly prescriptions.

If 10 percent of the American workforce is unemployed, and another 10 percent is underemployed, has gone back to school, is staying at home or has just given up on finding a job, that 20 percent of the population isn't earning anything close to their former salaries.

On top of that, another 20 percent (or more) are earning less than they were a few years ago. If your boss asked you to take a 10 percent pay cut last year, I'm betting that it hasn't been restored yet -- and might not be for another few years.

Meanwhile, there are huge companies that in the past few years cut 401(k) matching contributions (another form of income reduction) in addition to freezing or reducing pay. While a few have restored these matching contributions, many Americans' 401(k)s, IRAs and other retirement savings accounts took a huge hit when the stock market crashed.

Are you a senior on fixed income? Then you know your bonds aren't paying what they once were. But locking in on a longer-term CD doesn't feel right, not when the inflation hawks are predicting inflation is going to skyrocket thanks to the U.S. debt. (Rising interest rates mean your bonds are worth less.)

All of which means you have to do what you can on less money each month. Rightsizing your finances is about learning not only how to spend less each month, but finding a way to be happy with a smaller, less expensive life that is hopefully equally rewarding.

How can you wipe your financial slate clean?

1. Take stock of what you're spending each month.

Write down every cent you spend, either in a cheap little notebook that you carry around with you or at an online money management site.

2. Cut out all discretionary spending.

Cut back to food, shelter, utilities, transportation (to work), child care, health care and insurance. It will be easier for you to cut out everything at first than to try to pick and choose among expenses. Since cutting the budget this drastically will affect everyone in the family, you should have the first of what will be a regular family sit-down meeting to discuss candidly where the family is financially and what can be done to ease the crunch.

3. Figure out how much cash you have left each month after taking care of the basics only.

4. Prioritize the other regular expenditures on your list.

Put savings and paying down high-interest debt at the top of the list.

5. Slowly add back a few additional expenses, including paying down other debt you may have and adding to savings.

As difficult as it is to cut your budget (and these six steps are pretty drastic), it's actually the easy part of rightsizing your finances.

Because so many of us connect money with "things" and "stuff," the bigger challenge is to replace the emotional satisfaction or adrenaline rush that some get from spending money.

If you want to build a satisfying life with the money you do have, you need to remember that experiences matter more over time than things. Spending time as a family sharing an activity, whether that is holding a garage sale or attending a free day at the local museum, will help build a stronger family bond that will resonate emotionally.

If your house needs a paint job, get the whole family involved. Brushes and paint are cheap, and the memories will last a lifetime.

The hardest part about rightsizing your finances is simply taking the first step. If you're not used to curtailing your spending, going "cold turkey" will feel awkward and uncomfortable.

It gets easier. And you'll find that, over time, rightsizing your finances feels like a simpler, cleaner way to live your life.

And for those who have to live on less, it may even be a lifesaver.

 

 

Right-sizing Your Life: Making The Most Of What You Have
Ilyce Glink

People are having to right-size their life. That's my term for people who face extraordinary financial pressures -- whether they lose a job, get a pay cut, get divorced, get sick, are widowed, or experience some other financial calamity -- and have to entirely change not only their finances but the way they cope with that financial shift in their lives.

Government Backed Mortgages: New FHA Requirements
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Facing a tricky balancing act of keeping the housing market alive while protecting its eroding balance sheet, the Federal Housing Administration's new policy changes help ensure that most American home buyers still have access to government-backed mortgages. Here are five things you need to know about the new FHA Requirements

Real Estate - Strategic Defaults and the Foreclosure Crisis
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Foreclosure tallies continue to break records and even more homeowners appear headed for foreclosure this year. However, as the housing crisis rumbles forward, an additional driver of home foreclosures has become clear: Strategic Defaults -- borrowers able to pay their mortgage are simply walking away because they believe it's best for their finances

How Much Money Will You Really Need for Retirement
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How much money will you need to live comfortably in retirement? One way to calculate the answer is the old income-replacement rule of thumb -- to retire comfortably, you must replace 80 percent of your annual pre-retirement income. But at best, this is a rough estimate. Here's a checklist of major issues to consider for your retirement plan

Can the Real Estate Market Revive if so Many People Remain Unemployed
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In a recent press conference, the Mortgage Bankers Association released its annual real estate market facts and figures. For those who believe that the real estate industry is on the verge of a revival, you might not want to bet the house just yet.

10 Things to Know About Real Estate in 2010
Luke Mullins

Is 2010 the year to buy a house? After a steep run-up during the first half of the decade, home values plummeted back to 2003 levels. Fixed mortgage rates are sitting near record lows. And foreclosures have created opportunities for bargain hunters. But while 2010 appears inviting, there's one key catch. That said, here are 10 things to know about real estate in 2010 ...

Getting a Mortgage in 2010: 10 Things to Know
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To help consumers better understand the requirements and costs they will face as they shop for a home loan next year, we spoke with a handful of housing market experts and compiled a list of 10 things to know about getting a mortgage in 2010.

New Year's Resolutions for Home Sellers
Ilyce R. Glink

If you tried to sell your home in 2009, you probably didn't have a lot of luck. Home sellers are seeing their properties languish on the market, in some cases for years. It is beginning to seem normal to see properties that have been listed for more than 360 days. As we look forward to the new year, the news isn't going to look a lot better for home sellers.

New Year's Resolutions for Home Buyers
Ilyce R. Glink

At the end of 2008, I said I wouldn't be surprised if that year went down as one of the worst ever for housing since the Great Depression. But as we get ready to say goodbye to 2009, it's clear that this year hasn't been much better. We've had another record year of foreclosures. So what's in store for 2010 ...

FHA Loan Requirements About to Get Stricter
Ilyce R. Glink

The Federal Housing Administration (FHA) isn't broke, but its reserves aren't quite where they're supposed to be either. FHA's capital reserves are supposed to be 2 percent of outstanding loans. In 2009, the reserves are a mere 0.5 percent. By the time you read this, FHA's capital reserves might have disappeared entirely, due to increasing FHA foreclosures.

 

Real Estate - Right-Sizing Your Finances

(c) 2010 Real Estate Matters, Ilyce Glink