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Man, winter really sneaked up on me this year. I planned a number of winterizing projects that I never completed and my procrastination just caught up with me in the form of a $365 utility bill. Time for some action!

Here are the known problems in my house:

Windows

Unfortunately we have cheap twenty year old windows, and a lot of them. I’m not ready to lay out the cash for replacements. Here are two (literally) stop gap options: Continue Reading »

Talk about finding a silver lining! Homeowners who are feeling the pinch of falling real estate values and rising adjustable rate mortgage payments are weighing the consequences of foreclosure and finding it may make more financial sense to take the default. Recently

A homeowner who can’t sell his house [told] the L.A.Times, “Foreclose me. … I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.”

According to Calculated Risk, that response is exactly what is keeping bank execs up at night: people who are current on their credit cards and have the ability to pay their mortgage, but walk away from their homes because it doesn’t make financial sense to keep paying on a sinking ship. Says a commenter:

I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.

But the bank won’t work with him, so he’s taking his finances into his own hands:

I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

What about his obligation? Well, he makes a good point:

I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

In certain situations, a 7-year ding on the credit report might save money in both the short and long run. This is not a decision to take lightly. If you are in trouble and thinking about doing this, make sure you thoroughly think through the ramifications and consult a professional to figure out the pros and cons you probably didn’t think of on your own.

See Walk Away From Your Home Part II: Resources for sites to help you review your options to keep your home.

I recently attempted to access my emergency fund due to an auto fiasco I’ll cover separately. I say attempted because I found out that I couldn’t transfer funds out of my emergency fund! Not exactly the most useful of emergency funds, but luckily I found it out before a serious emergency hit and know how to resolve the issue. Here’s what happened:

I opened my emergency fund in August of 2006 with ingdirect.com because of the great interest rate they have on savings accounts. It takes a couple days to transfer money in and out, but I normally keep a buffer in my regular checking account and I thought receiving the money in my regular checking account within a couple days would be fine.

Unfortunately, because of the holidays, my normal checking account buffer had run low and, to put it mildly, my savings account at ingdirect was not as responsive as I needed. Due to a technicality, while they have been happily accepting my deposits for almost a year and a half, they won’t let me withdraw any funds until I confirm the secondary accountholder on my account. Nice that I find that out in the midst of a minor emergency. Even more ludicrous is that I was the one that added the other accountholder (the wife), and the confirmation process, because we share checking accounts, is simply logging in under her name and entering the same amounts with which I confirmed the primary account.

Apparently, I must have missed this step when I added her account because they refused to release my funds until she calls them and gets them to deposit a new amount for verification or until I can figure out from my bank what was deposited by them a year and a half ago. Unfortunately again, the wife was out of town when I needed this, and our regular bank does not go back that far online, so I had to accept that I was not going to be getting my money for this emergency.

Fortunately, the “emergency” was my car imploding and my need to buy another one. Good thing it wasn’t something really serious. On the other hand, this inability to access my funds really added to the stress of the situation.

So: Make sure your emergency fund is accessible in whatever manner, including timeframe, that you might need to use it. I suggest doing a test run, simulating an emergency (on the weekend for the worst case scenario) and see how long it takes you to get cash in hand. I don’t expect you’ll run into a problem like mine, but when an emergency arises, you’ll want to know exactly how long it will take you to have your emergency cash in your pocket.

BTW, I still recommend ingdirect, and I still use them, so if you want a free $25 for opening an account, send me an email through the contact tab up top and I’ll email you a referral link (and I get $10).