Guest Post by John Stone from Stone Realty

There is a common misconception a lot of homeowners and some agents, including myself until I learned more, that banks want houses. In other words, banks get happy when people fall behind on their mortgage payments, have to foreclose and abandon the house. In all reality, that couldn’t be farther from the truth. Banks want nothing more than for you to stay in your house. You see, banks are in the business of lending money, not taking over real estate. Sounds obvious, but a lot of people don’t understand that.
So, what is the true cost of foreclosure? First, let’s discuss from the banks perspective. If we are talking cents on the dollar, if you sell your house in foreclosure, the bank will get $.30 on the dollar. In a successful short sale, $.70 on the dollar. So, it’s a win-win for the bank to sell your house in a short sale.
Now, let’s talk about the cost of foreclosure to a homeowner. This is much worse. Let alone losing your home completely, foreclosure also affects your credit score, current and future employment and how long you have to get another mortgage. Let’s dive into these a little deeper.
1. Credit Score: If you let your house go into foreclosure, you can expect your credit score to lower from 250 to 300 points. Typically, this will affect your credit score for over three years.
2. Current Employment: Employers have the right to check the credit of all employees. In many cases, a foreclosure is reason for immediate reassignment or termination.
3. Future Employment: Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases challenge employment.
4. Time Frame: A homeowner who loses their home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of five years.
In a successful short sale, credit score lowers by only 50 points, it is not reported on any credit report therefore not challenging current or future employment and the time frame is only two years for a Fannie Mae-backed mortgage. Closing your home in a successful short sale is the best, and in my opinion the only, option a homeowner has if they are falling behind on their mortgage payments.
If you have any other questions regarding this issue, please contact me. Go to my website,  and there is a page designated specifically to short sales. Or you can always call me at 317-209-4355.

Yesterday I asked Facebook and Twitter followers to immediately transfer $37 from their checking accounts into their savings accounts without asking questions. While at first this message was reminiscent of a Nigerian prince asking you to send him a money order in exchange for great wealth, it was actually a Pete the Planner diabolical experiment. How many people would follow these directions? And of those that did, how many people would realize the point of the exercise?

No matter who you ask, I think that everyone would agree that $37 is about as arbitrary a number as you can get. It won’t, in itself, help you retire. It won’t, in itself, replace the brakes on your car if they were to go out. But when you take numerous amounts of arbitrary and insignificant amounts of money and put them together, then you actually start to make financial progress.

Generally speaking, people don’t save money because they forget about saving money. If people are prompted to save money on a random occasion, then they are more likely to see the ease of doing so. At last count, yesterday’s experiment saved nearly $2000 based on those who let me know that they went through with the exercise. That’s pretty decent for such an insignificant and arbitrary amount of money.

The best thing you can do is this: don’t kill kittens. The second best thing you can do is this: setup a reoccurring transfer from checking to savings on a set day every month. Start with a small arbitrary amount of money, and then gradually increase it. For other great tips like this, pick up a copy of 60 Days to Change. I know, that was a choppy segue. Oh well.

The Holiday’s are upon us. Consider these easy tips to make your holiday spending go a little smoother.

12 or More Fixed Monthly Expenses Each Month.  That’s how many the average American has.  Don’t get sucked into buying more than you can afford this holiday season by adding another fixed monthly expense to your budget.  If you can’t pay for it now or pay it off right away, you can’t afford it.

11 Household Purchases Per Week Limit your household purchases to this many this week.  In a normal week, that includes gas, groceries, maybe a meal or two, and a few other expenses.  Since you’re spending big for the holidays, cut back on your other purchases to offset your additional holiday purchases.  Maybe that means cutting out lunch out or drinks with the guys.  If you can limit the number of times you spend money each week, you’ll actually end up limiting the amount you spend each week.  Really.

10 Percent of Your Monthly Budgets for Groceries and Entertainment.  The average consumer can easily reduce their spending on groceries and entertainment by 10 percent each month.  That’s easy money (and more than $50 for most people) that can be put toward holiday purchases.  Little differences like having a glass of wine before you go out or sticking to your grocery shopping list add up to significant savings.

9 Things to Look for in Your Free Credit Report. Get a jump on any post-holiday surprises by ordering your credit report now.  Once you have it in hand, you should check nine key sections to make sure your credit is a-ok.

8 Extra Cans of Food at the Grocery Store.  Charity doesn’t have to be complicated, and don’t assume that you can’t afford it.  Little things, like buying a few extra cans of food at the grocery store, sending your gently-used clothes to the Goodwill, or volunteering an hour of your time every week can make a world of difference to a person in need.

7 Steps to Improving Bad Credit. The holidays aren’t an excuse to put off improving your credit.  In fact, there’s no better time to start thinking about spending responsibility.  Don’t put all of your holiday expenses on your credit card.  Don’t max out your card.  Spend responsibly and you’ll be building good credit rather than doing damage.

6 Different Debts.  So you have six open lines of debt.  And maybe you’re about to create another this holiday.  Don’t do it!  And, more importantly, resist the urge to consolidate!  This might seem like a good idea, but actually it will prolong your debt, indebt you to another (the consolidator) and do further damage to your credit score.

5 Percent of Your Monthly Income. That’s how much money you have to spend on your guilty pleasure, be it cars, clothes, wine or home decorating.  Don’t think that just because you’re being generous with others this holiday season, it gives you an excuse to be overly generous with yourself.  Anything than over five percent is overspending.

4 Major Credit Cards. Seriously? You really need four-or more-major credit cards?  If you’re justifying your overspending this holiday by spreading it over multiple cards, you’re kidding yourself. Take your gas card, your back-up card, and that department store card, and cut them up!  No one needs more than one credit card, and you should be able to put all of your holiday purchases on it-then pay them off.

3 Tiers of Savings. Don’t let holiday spending-and post-holiday payments-put you off your savings plans.  You should always be thinking about saving for short-term emergencies, mid-range big purchases (a car, a home), and retirement.

2 Jobs.  Sometimes your full-time job just isn’t enough.  If you’re planning on making some major purchases this holiday season that you can’t realistically cover, it might be time for you to consider a part-time job.  Snowplowing, babysitting, you name it, a few hundred dollars extra each month can make a big difference and get you out of the hole a lot quicker than you might think possible.

1 Monthly Budget Meeting.  It’s a must.  Head off financial crisis-or just some big January fights-with your significant others by sitting down to a monthly budget meeting, where you look at your past spending and plan for the future.  It’s painful at first, but it only gets easier as you get more financially aware.

A recent AP story details the plan of Toys R Us to readopt layaway for the holiday season. And I say HOORAYYYYYY. Too over-the-top? Sorry. Yeah.

Layaway is a tool used by retailers to keep customers buying during tough credit times. The practice started back in, you guessed it, the Great Depression. Customers make a down payment on an item, and then continue to make payments on the item prior to taking possession of it when it is paid in full. It is quite the alternative to taking possession of an item prior to actually owning it. Back in the day (1980s), layaway was a huge strategy for retailers such as Marshalls and TJ Maxx. But the strategy disappeared when retailers figured out that they could instead “sell” you a store credit card, give you the item now, and then charge you ridiculous amounts of interest. Not only that, but since the customer had possession of the item, they were much more likely to make the payment on a non-standard payment schedule (read: late). That is why layaway disappeared. Don’t get it twisted.

And this is why layaway has reappeared. Consumers aren’t qualifying for the revolving credit that stores offer, therefore stores are turning to their old friend, layaway. And as you might have guessed, layaway has returned with a newfound sense of benevolence. Hooray, big business is still allowing consumers to buy things they can’t afford (Google search: sarcasm). But I would take layaway any day, over delay of pay.

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.

We have completed our study on Multi Level Marketing. I feel we did a good job of staying objective and making judgements on the informations we found. Feel free to send me an email if you have any questions or comments.

Enjoy the podcast.

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.

My segment on 24 Hour News 8 on 10/14/09

Don’t get me wrong. I am huge fan of the obvious, and in fact, as a quasi-journalist, I often restate the obvious. So I am pleased to inform you, based on recent study by Equifax, Moody’s, Economy.com, that if you make less than $30k per year you have over a 30% chance of default or delinquency on your mortgage. Wow, that’s refreshing. What is also interesting to note is that you have over a 5% chance of default or delinquency if you make $80k per year.

This just in to the Pete the Planner newsroom….the grass is green.

Be sure to sign up for book updates here. My new book, 60 Days to Change: A Daily How-To Guide With Actionable Tips for Improving Your Financial Life will be available in November.

There has been a tremendous amount of buzz over our latest radio show. Well, here it is. You can judge for yourself whether or not this is a fair assessment of a controversial industry. We would love to hear your comments. Please post comments on this blog, or simply email me at pete @petetheplanner.com

Here is the Podcast. Enjoy

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.