The California Foreclosure Prevention Act was introduced in an attempt to slow the torrent of foreclosures flooding the state – and with many more to come – and to allow extra time for lenders and borrowers to agree on loan modification terms.

Realistically, nobody expected it to make much of a dent in the number of foreclosures, given that so many people simply can’t pay the mortgage owing to California’s  escalating unemployment and poor economy, not to mention the huge price drops that have put them a long way under water.

However, it was hoped that the California Foreclosure Prevention Act would at least force mortgage companies to make more of an effort to modify loan conditions for struggling homeowners.

Unfortunately, this hasn’t worked either, since all the big mortgage lenders were granted exemptions from the new law as soon as it went into effect. This essentially renders the law useless and leaves most distressed borrowers no better off, as the exempt lenders account for over 90% of properties presently under threat of foreclosure in the Golden State.

Federal government efforts to help those facing foreclosure – such as the Making Home Affordable program and the HOPE hotline on 888-995-HOPE or www.hopenow.com – can benefit some of California’s distressed homeowners. State authorities have also teamed up with Spanish-language TV network Univision to provide information and assistance to Spanish-speaking mortgage-holders. There are also community-based counseling programs across the state.

However, it’s clear that these rather modest measures can make only a minimal dent in California’s burgeoning mortgage disaster.

The House of Representatives recently passed the Neighborhood Preservation Act, which is now headed to the Senate for approval. If signed into law, the Act will permit (but not oblige) lenders to offer foreclosed homeowners the opportunity to stay in their homes and pay rent for up to five years, with an option to repurchase the property.

This would give the lender some cash flow while waiting for the market to rebound, and keep homes occupied and off the market, where they would contribute to delaying the housing price recovery. As the name suggests, the aim is also to keep neighborhoods from deteriorating because of mass foreclosures, as well as to remove the need for families to look for alternative accommodation.

Even if the Neighborhood Preservation Act does become law, we still don’t know how many lending institutions would actually make use of this facility.

It has been suggested that this legislation should be accompanied by a law that gives homeowners the right to remain in their homes as renters. If a renters’ right law of this nature could be enacted quickly, it would help Californians cope with the huge wave of foreclosures expected in the state over the next three years when a million option ARM mortgages reset at sharply higher levels.

Related Articles:

• The California Mortgage Crisis: No End in Sight
• US$18 million Website to Help Americans Recover from the Financial Crisis
• Alternative Options When You’re Facing Foreclosure

Historically, California been one of the most expensive states to live in, but residents have been willing to put up with high real estate prices for the privilege of enjoying the California lifestyle. So, it’s not surprising that the Golden State is suffering particularly hard in the current mortgage crisis.

For many Californians, their dream home has now turned into a nightmare. Real estate prices have slumped by 40% to 60% since peaking in 2006 after a huge run-up that started in the late 1990s.

Meanwhile, some homeowners are seeing their monthly repayments rise to unaffordable levels – even though official interest rates are at an all-time low – and hundreds of thousands more will find themselves in the same boat over the next two or three years.

Mortgage Defaults

Almost one in ten Californians with a mortgage is now in default, i.e. they have missed several payments and are likely candidates for foreclosure. June 2009 figures show a 9.5% statewide default rate, up sharply from 6% a year earlier.

If the recent trend continues, 60% of these properties will enter foreclosure over the next several months. Industry observers say a commercial real estate crisis is looming too, with a large number of retail, office and industrial properties already in negative equity.

There are close to half a million foreclosed homes in the state at the moment, with around 80,000 to 90,000 new foreclosures being filed every month.

Many of the homeowners now under water are sub-prime borrowers, who typically took on so-called 2/28 mortgages. This is a 30-year loan, the first two years of which carry a low, “teaser” rate that has in most cases now reset to a higher level.

With California’s nearly 12% unemployment rate, soaring personal bankruptcies and cutbacks to government services, a large number of these sub-prime borrowers have had their homes foreclosed, or have simply handed back the keys and walked away.

Coming soon: the option ARM reset crisis

Hard as it might be to believe, we’ve so far only seen the beginning of California’s mortgage misery.

Brace yourself for the full blast of the option ARM reset crisis, which is starting to unfold now. In this state where (formerly) million-dollar homes are nothing special, option ARM mortgages were marketed enthusiastically to buyers of relatively pricy homes in “nice” neighborhoods.

Many of these buyers put down little or even no equity, which left them with no buffer when prices started to drop.

Also known as pick-a-pay loans, option ARMs allow borrowers to select their preferred monthly repayment level once the introductory low-rate period ends. You can choose how much to pay each month by switching between different mortgage types: interest-only, or fully amortizing over 15, 30 or 40 years. If, as many borrowers do, you make less than the standard payment, the difference gets added on to your mortgage debt.

Option ARM Mortgages

Option ARMs typically recast to a higher repayment level after five years, or once the loan balance reaches 110% to 125% of the initial mortgage. In other words, there are a lot of option ARM mortgagees out there with loans that have been growing in a market of sharply falling home values. And now these borrowers are looking at having their monthly mortgage bills bumped up by 40 to 80%.

To make matters even worse, a large proportion of these option ARM mortgages were issued to so-called alt-A borrowers with good credit but questionable or inconsistent payment capability. Since alt-A mortgages don’t require proof of income or assets they attracted a lot of self-employed people, but also droves of borrowers who overstated their incomes (hence the nickname “liar loans). It’s no wonder experts are warning of an impending disaster.

Aside from a good credit record and FICO score, an alt-A borrower needs to show a lower-then average LTV (loan-to-value) ratio on the property to convince the lender that they will be able to pay the mortgage. The result is that a large number of Californians with middling incomes were able to buy big, fancy houses they couldn’t actually afford, and are likely to lose over the next few years.

Nationally, about 40% of those who took out option ARM mortgages in 2006 and 2007 have already stopped making repayments, but less than 10% of these delinquent borrowers have had their loan terms modified by their lenders.

A Big Problem from 2010

The really big problem will come when the majority of California’s roughly 1 million option ARM loans recast higher in 2010, 2011 and 2012. At that point, or before, we will see homeowners throw in the towel and simply abandon their properties en masse. And they can usually do this without fear that their mortgage companies will come after them for the losses they will incur when they sell the houses for less than the outstanding loan.

Unlike the rest of the country, in California you’re not liable for any shortfall in the sales price if you walk away and hand the keys back to the lender. Officially this only applies to the first loan you took out on your home, but in practice it’s hard for them to pursue you even for a refinanced mortgage.

This has spawned a new trend in the state: an increasing number of homeowners with negative equity are now abandoning their homes even though they can still afford the repayments. Some of these people are even turning around and buying a more affordable foreclosed property instead.

So far the foreclosure problems have been worst in the Central Valley, with Riverside County the hardest hit. But once the number of option ARM resets starts to snowball in 2010, huge swathes of swanky neighborhoods in coastal locations like the west side of Los Angeles, Orange County and San Diego will turn into foreclosure-towns too.

Related Articles:

• Preventing a Catastrophe in the California Crisis
• 10 Tips on How to Avoid Foreclosure

Just enter a loan amount or the purchase price of your property and other details such as the interest rate and the term of the loan and press the “Calculate” button.

The calculator will instantly calculate the loan and mortgage repayment requirements in a table and chart your loan visually.

In the example above, we used these loan specifications:

• Loan Amount: $150,000
• Loan Term: 15 Years
• Interest Rate: 5.5%
• First Payment Date: July 2009

Free Mortgage Loan Calculator - To use the free calculator for mortgage loans, click on the “mortgage” tab on the top (next to the “loan” tab). Here’s an example mortgage loan:

• Purchase Price: $250,000
• Down Payment: 10% ($25,000)
• Mortgage Term: 30 years
• Interest Rate: 5.5%
• Property Tax: $3,000 per year
• Property Insurance: $1,500 per year
• PMI: 0.52%
• First Payment Date: July 2009

Now, try this free online calculator for your loans and mortgages yourself and feel free to share any comments below.

Mankind is presently facing two of the greatest challenges that it has ever encountered - a world economy that has almost collapsed and a global ecosystem that is on the brink of being uninhabitable if we do not change immediately.

It may seem like we’ve suddenly been hit by a double-whammy, but the inevitability of these crises have already been observed, discussed and warned for many years prior to self-fulfilling themselves. The root of both these problems may be traced back to man’s greed and selfishness, weaknesses from our inherent makeup that will drive us to our own destruction unless we can wake up to what’s going on.

The recent global financial and environmental crises are powerful events to help us alter our mindset about a lot of things. If we look at them from a positive light, they are in fact what we need to force us to change.

The economic recession has brought about lower wages, relatively higher living costs and a depleted standard of living which has led people to be more open to lifestyle changes, especially if they are financially beneficial.

Combined with government efforts to promote green initiatives, the current global financial crisis may turn out to be the last hope of shocking us out of our ecological complacency.

Research studies indicate that men with higher levels of the testosterone will make riskier investments compared to the counterparts who have lower levels of the sex hormone.

When you combine this finding with the fact the financial markets are dominated by capitalistic male egos, the picture becomes clearer as to how we got ourselves into the present economic crisis.

If the capital markets are indeed influenced by the hormone levels of its participants, it’s not surprising that it operated with such an irrational exuberance to ultimately cause the financial meltdown.

So, does this mean that we could have avoided the current crisis if the trading pits were full of women instead of testosterone loaded men?

Well, the female sex is generally more responsible and rational but if fluctuating hormone levels come into play, we might end up with the same turbulent markets that make no sense as well.

In fact, the money is actually being spent on a website redesign as there’s already an existing “website to foster greater accountability and transparency” in the use of funds covered by the American Recovery and Reinvestment Act of 2009 at www.Recovery.Gov.

So, why do we need a multi-million dollar site to report on how much money the government is spending, especially as we’ve already got one?

In an announcement from the General Services Administration, officials mentioned that the new site will allow “taxpayers to see where their dollars are being spent” but failed to reveal pertinent details about the deal where apparently only 59 companies were eligible to bid for the contract.

Although the Recovery.Gov site is supposed to create greater transparency, the management of its own redesign has certainly been surrounded by secrecy and too many unanswered questions.

As for accountability, it’ll be interesting to see how anyone justifies spending US$18million on a website upgrade.

UPDATE:

As it turns out, the contract’s price tag may be quite understandable if we take a closer look at the details:

1. The current cost of the redesign is only US$9.5 million. US$18 million is the total value of the contract including the possibility of an extension through to 2014.
2. US$9.5 million is still an enormous sum to develop a website when you consider that the technology licensing cost for UsaSpending.Gov (a larger site which tracks the entire Federal Budget) was only US$600,000. Using this as a reference, it may be reasonable to assume that a fair value for the project may fall in the region of US$2 to 3 million.
3. Further investigation reveals that there is a very tight deadline on the project, where the contractor has less than 60 days to deliver a finished product. OMB Watch explains that this could be a major reason for the high cost.

In view of the expedited timeline, the premium included in the project cost may be more understandable, even if it’s still unacceptable.

If you’re unable to keep up with the mortgage payments on your home, there is a risk that your lender will foreclose on the loan.

This means that the house or apartment will no longer be yours, and you will be evicted!

If you act quickly, however, there are a number of steps you can take to help prevent this from happening.

Keep in mind that mortgage companies don’t actually want to take over people’s properties – they would much rather see borrowers stay in their homes – and are often willing to work out a deal, at least temporarily.

Here are 10 Tips on How you can avoid foreclosure:

1. Contact your mortgage company if you can’t pay: It is very important that you call your lender as soon as your personal financial crisis gets so bad that you’re looking at missing a mortgage payment. The earlier you do this, the better.
2. Get impartial, free advice: The Homeownership Preservation Foundation (call them on 1-888-995-HOPE) can also advise you about how to talk to your lender and what your options are. Alternatively, you can get help and advice from the Department of Housing and Urban Development (HUD). Find a HUD-approved housing counselor near you or call 1-800-569-4287.
3. Open and respond to any mail from the lender: Early on in the process they will send you advice on how to avoid foreclosure and hold on to your home. If the problem escalates, you will receive letters about impending legal action and court appearances. If you respond promptly and take the action suggested, the lender will be more inclined to see you as an honest and co-operative customer.
4. Stay in your home: If you move out you might not qualify for assistance, so it’s best to stay put while the problems are being sorted out.
5. Be aware of your mortgage rights and obligations: Study your mortgage papers to see how your loan issuer is entitled to act if you miss any monthly payments. You should also find out about the foreclosure laws and procedures that apply in the state where you live.
6. Understand your options: Depending on your situation and your lender, there may be a number of options available to you. For instance, the mortgage company could offer you a repayment plan or a modification of the loan terms, or if that doesn’t work they might agree to a short sale or a deed-in-lieu. For more details see Your Options When You’re Facing Foreclosure.
7. Watch your spending: Along with healthcare, keeping your home should be your top priority. In other words, you need to get used to spending less on other things like entertainment, cable TV, memberships and eating out in order to avoid being made homeless. Also, don’t forget that paying your mortgage is more important than your credit card and other unsecured debts that are cancelled if you go bankrupt.
8. Cash in your assets: Do you have stocks, jewelry, a car or other assets you can sell? Clean out your house and have a garage sale or sell some things on eBay to raise cash. Get a second job to bring in a bit more. Even if you don’t raise enough to get out of trouble, it shows the lender you are trying.
9. Don’t pay for foreclosure prevention: You need every penny to pay the mortgage with, so don’t deal with companies that promise to negotiate with your lender and charge you hefty fees. You can deal directly with the bank or mortgage company, or speak to a HUD approved housing counselor.
10. Beware of foreclosure recovery scams: There are companies that say they can act on your behalf to stop your foreclosure. Be very wary, as this often means you have to sign over the property title to the company and then pay them rent every month in order to stay in your home. In other words, you lose the house or apartment anyway! Never sign any legal documents without consulting an attorney or a reputable real estate professional with experience in this area.

If you really can’t stop heading for a foreclosure, make sure you are aware of the potential alternatives to foreclosing.

In the current economic climate, we all need to look for ways to save a bit of money.

One of the least painful ways of doing this is to cut back on your use of household energy and water. As an added bonus, you will be doing the environment a favor at the same time.

So, what exactly can you do to save money on your utility bills?

There are a lot of different money-saving methods you can use that are incredibly simple and won’t cost you anything – it’s just a question of being aware of them and remembering to use them.

Other helpful measures will require a one-time investment that you can then recoup over and over in years to come.

16 Tips to Lower Your Energy Bills

Here’s a list of 16 money saving tips on how you can reduce your electricity, gas and energy bills. Try some of these techniques as part of your overall personal financial management plan, and watch your utility bills shrink from month to month:

1. Turn the heat down a few degrees and put on a sweater instead. Likewise, if you use an air conditioner in the summer, put the temperature up a few degrees until you start to feel too hot.
2. With a programmable thermostat on your heating system you can set the temperature a bit lower at night when everyone is tucked up in bed. Program the heater to kick into gear early in the morning so the house is comfortable when you get up. If nobody is home during the day, use the timer to save energy and then ensure that you come home to a warm house.
3. Use ceiling fans together with heaters or air conditioners to circulate the warmed or cooled air and save money. The fans are relatively cheap to run.
4. Don’t heat or cool rooms you seldom use, such as the guest bedroom. Keep the doors between rooms shut so the warm or cool air doesn’t escape.
5. Your furnace and air conditioners will work a lot more efficiently – and use less power – if you clean the filters frequently. You should also have them professionally serviced regularly.
6. If you are renovating or building a new house, put proper insulation in the walls and attic to help keep the place warm in winter and cool in the warmer months.
7. If there are gaps around windows and doors, use adhesive insulating foam strips for a snug fit.
8. It takes a lot of energy to heat water, whether you use electricity or gas. Reduce the temperature on your water heater and see the savings add up.
9. Many electrical appliances consume a lot of power even when they are not switched on, if you leave them plugged in. A recent UC Berkeley survey found that idle appliances account for six to 26 percent of household power bills. Get into the habit of unplugging appliances or using a power strip with a central on/off switch for convenience. Some electrical items are particularly big power drains – among them are TVs, microwaves, computers, modems, DVD players, cable and satellite boxes, and game consoles.
10. Use energy-saving light bulbs, which use only a quarter of the power compared with regular bulbs. Sure, they cost more to buy but they last for several years.
11. Switch off the lights when you leave the room unless you are planning to return shortly.
12. Solar powered outdoor lights cost nothing at all to run, and are also a good security measure in your front and back yard, as well as in doorways and by the garage.
13. Regular electric or gas ovens use a lot of energy if you are cooking for a long time. If you use the microwave instead you will save money as well as time.
14. Air dry your laundry instead of using the dryer all the time. Hang your washing outside on a warm day for that fresh, sunny smell!
15. Always make sure the filter on your dryer is free of lint before you start it up. This will make a huge difference to drying time and energy consumption alike.
16. When purchasing new appliances, look for energy-saving models and read reviews of comparable items before deciding which one to get. Old refrigerators, for example, use a lot more power than newer, low-energy models, and can be worth replacing even if they are still working OK.

13 Tips to Lower Your Water Consumption

You can save plenty of money by being careful with your consumption of water, which is becoming an ever more scarce and expensive commodity.

If you live in an area that has a water shortage, you will already be familiar with some of these tips:

1. Shower instead of taking a bath, and make it a short one. Outsized and multiple shower heads have been popular for some years, but many people are saving water and cash by returning to normal-size, less powerful shower heads now.
2. While you are waiting for the shower to run hot, use a bucket to collect the cold water. You can then use this to flush the toilet.
3. Similarly, you should put a pitcher under the tap in the kitchen sink when you are waiting for hot water to appear. Use that water for plants or pets, or to make coffee or put in the refrigerator.
4. Don’t keep the water running while you are brushing your teeth – this is a huge waste. Turn the faucet on again when you need to rinse or, better yet, fill a glass and use that to rinse your brush as well as your mouth.
5. When you are washing dishes, don’t rinse them under running water. Instead, fill the second sink or a plastic basin with clean water and change it when necessary.
6. Fix leaking toilets, pipes and faucets immediately. Check the kitchen, laundry and bathrooms for leaks and drips regularly, and you will save money that would otherwise literally disappear down the drain.
7. Replace old toilets with modern, low-flush models that use a lot less water.
8. Don’t do less than a full load of laundry – this will save both water and electricity. Also, avoid washing items that don’t really need it. You might be able to wear a piece of clothing more than once before putting it in the washer.
9. For the same reasons, you should only run the dishwasher when it is full, and only put in dishes that are actually dirty.
10. Wash your car or motorcycle with a bucket of water, not a hosepipe, and you will save a gallons of water each time.
11. Watering your plants and lawn with a watering can or a low-flow hose nozzle conserves a lot of water too.
12. Get a water butt or barrel and place it under a drainpipe to collect the runoff from the roof. Use the water for plants, pets and car washing.
13. If you have a pool or hot tub, keep it covered if possible when you are not using it. This helps prevent the water from evaporating and needing to be replaced.

If you actively practice these 29 tips on how to save money by lowering your utility bills, it will definitely help your personal finances especially if you’re in a financial crisis.

In the current economy, more and more homeowners are having trouble making their monthly mortgage payments.

The number of foreclosures is at a record high, and looks set to balloon over the next few years.

If you’re in danger of having your home repossessed, the good news is that mortgage lenders are generally quite keen to negotiate a deal to allow you to keep it.

However, you do need to demonstrate that you are willing to work with them.

What Happens During a Foreclosure?

If your home is foreclosed, you will lose all rights to it no matter how much money you have put in to the mortgage, and you will have to move out.

The foreclosure will show up on your credit report for 7 years, and you might not be able to get any type of loan during that time. In addition, your credit score will take a hit.

In cases where the lender sells your foreclosed property for less than you owed them, they are permitted to take out a deficiency judgment against you. This means you have to pay them the difference, even though you’re no longer the owner.

The only state where you can’t be pursued for the balance of the loan is California – and that applies only where the mortgage has not been refinanced.

So, what are the Alternatives to Foreclosure?

1. Special Forbearance

Your mortgage issuer might be willing to set up a repayment plan to help you catch up with missed payments. This could even include a temporary lowering of your monthly mortgage bill, for instance if you have recently become unemployed. Of course, your lender will need to be convinced of your ability to stick to the new payment schedule.

2. Mortgage Modification

Another way to reduce your monthly payments is to ask the lender about refinancing your mortgage at a lower interest rate (contingent on market conditions) and/or extending the term of the loan. You might qualify if you’re getting back on your feet financially, but are earning less than before you defaulted on the mortgage. This arrangement could be either temporary or permanent. Check your mortgage documents first, though, to ensure that there is no penalty for paying off the initial loan early and refinancing.

3. “Hard money” Refinancing

If you’re fortunate enough to have a good amount of equity in your home (it’s worth a lot more than you owe), you could apply for a “hard money” cash loan secured against the property. This would give you a lump sum to pay for the months you’ve missed. The effect of a high interest rate is negligible since you are borrowing a relatively small sum compared with a complete refinancing loan.

4. Fannie Mae HomeSaver Advance™

Ask your lender if your mortgage is owned by Fannie Mae. If it is, you might qualify for an unsecured personal loan that will enable you to make up for delinquent payments.

5. Partial Claim

Your lender might be able to apply for a partial claim on your mortgage from the Department of Housing and Urban Development (HUD). If so, HUD would make a payment to the lender to get your mortgage up to date. HUD would also grant you an interest-free loan that you would pay back over an agreed period. To qualify, you must be at least 4 months, but no more than 12 months, behind. Also, your mortgage must not be in foreclosure.

6. Pre-foreclosure sale (short sale)

This means that you sell the house or apartment for less than the value of the mortgage, with the agreement of your lender. In some cases lenders are willing to take a loss, and to release you from your obligation to pay the loan balance, in order to get the mortgage off their books and not have to foreclose and be saddled with the property. This would preserve your credit rating, but remember that you would have to find somewhere else to live.

You might qualify if the appraised property value is at least 70% of what you owe, and the property sells for at least 95% of the appraisal. You also have to sell the home within 3 to 5 months (depending on the lender’s stipulations), and to have missed at least 2 months’ payments by the sale closing date.

7. Deed-in-lieu of Foreclosure

If it’s taking a long time to resolve your mortgage default, it’s possible that your lender will allow you to “give back” the property and walk away. This way, you avoid the hassle, stigma and credit issues associated with foreclosure, but you do still lose your home. Lenders generally see this as a last resort, though, since they would really rather avoid having to become property owners.

Most mortgage lenders would prefer to conduct a short sale in this situation, particularly if they believe they could go after you to cover any shortfall. Even so, you might be able to hand over a deed-in-lieu if all other options have failed, you have tried to sell without success, and you don’t have any other mortgage in default.

8. Walk Away

As the mortgage crisis continues to escalate, an increasing number of people are becoming so desperate that they are simply abandoning their homes, suspending their payments and mailing the keys back to their lenders (known these days as “jingle mail”).

This is definitely not a good idea. Your lender will most likely foreclose on you, your credit report and credit score will suffer, and you will not get another mortgage for the next 7 years. You might also find yourself facing a deficiency judgment, where you have to compensate the lender if they sell your home for less than the mortgage (this doesn’t usually apply in California).

If you’re lucky, you might be offered the chance to sign over the property with a deed-in-lieu, but there is no guarantee of this. Another important point is that you need to remain at your address to qualify for mortgage assistance, refinancing or repayment plans – so don’t burn all your bridges by walking away!

If losing your home has become inevitable, it is really better to try to reach an agreement with your lender to avoid any nasty surprises that could make a bad situation even worse.

Here are 13 personal finance tips that will help you to manage your finances and keep your head above water until you can return to the workforce:

1. Find out about Severance
2. Apply for Unemployment Benefits
3. Stay Insured
4. Track your Spending
5. Prioritize your Bills
6. Cut Unnecessary Spending
7. Try Not to use Credit Cards
8. Leave your Retirement Funds alone
9. Be Careful about using your Home Equity
10. Raise Cash
11. Take a Temporary Job, or Freelance
12. Consider Volunteering
13. Identify sources of Emergency Aid

1. Find out about Severance

Ask your former manager or HR department whether you are eligible for severance pay. You might also want to find out what the rules are in your state, to make sure you actually get what you are entitled to. Don’t forget that you could be owed accrued vacation, overtime, sick pay, pension benefits or unemployment insurance as well. Some firms provide job search assistance to laid-off workers – you should ask about that too.

2. Apply for Unemployment Benefits

Do this as early as possible as there is always a waiting period before you start getting your checks. Receiving unemployment will not affect your credit, nor should you be worried that it’s ‘welfare’. It’s not – your employer paid into the system for you while you were working, so you’re entitled to use it. You can normally claim for up to 26 weeks, and often longer when the economy is bad. With the average unemployment check at $270, it probably won’t replace your previous income, though. Your state’s employment office can tell you how to apply and how much you’re likely to get.

3. Stay Insured

You can usually buy continued health coverage under your former employer’s plan, although this can be expensive. You don’t need to do this right away, though, as you have 60 days to decide whether to take up so-called COBRA coverage. However, a high-deductible individual policy might suit your budget better while you’re out of work.

4. Track your Spending

When money is tighter than usual, you need to know what’s happening to every penny. Keep a record of everything you spend, either with a notebook and pen, or using a simple spreadsheet, personal finance software like Quicken or Money, or an online site such as Quicken Online, Mint, or Geezeo.

5. Prioritize your Bills

Once you know where your money is going, you can decide which bills and other regular outgoings are essential, and which you can cut out or hold off on paying. List all your expenditures in order of importance. At the top of the list should be your rent or mortgage payment, essential utilities like electricity and water, and transportation you need to get to job interviews (car payment and insurance, or public transit). Near the bottom you should have unsecured debts like student loans, credit cards and other personal debt you use to pay for things that can’t be repossessed.

Your list should remind you what your priorities really are, if things get so bad that you need to choose which bills to pay. If you don’t pay your credit card bill, your credit score will suffer and you might have to deal with some phone calls from the issuer, but not paying your mortgage or rent could mean losing your home.

In the event that you can’t pay an essential bill like the electricity or the mortgage, get in touch with your power company or lender before it falls due. Utility providers often have low-cost services for those with low incomes. You might also qualify for temporarily reduced payments on your mortgage or other loans, but it is important that you notify the lender of your situation rather than simply default on your payments. In many cases, you can defer your student loan repayments while you’re unemployed too.

6. Cut Unnecessary Spending

When you have a lot less money coming in, you have to adjust your spending habits as well. You simply can’t spend money on anything that is not strictly necessary, especially as you don’t know how long you will have to live without a real income.

There are many ways you can trim your spending, for example: invite friends to your house or to a picnic in the park instead of meeting them in a restaurant or bar; stop buying clothes other than those you need for job interviews; use Skype for long-distance calls; get several errands done in one car trip to save gas money; buy generic groceries instead of branded; adjust the thermostat on your heating/cooling system; clean your car yourself rather than go to the car wash.

7. Try Not to use Credit Cards

Charging purchases to your credit cards gets expensive if you have an outstanding balance. Try to avoid putting any more items on your cards for the moment. You should also attempt to lower the cost of paying off what you owe by negotiating a lower interest rate with your card issuer, or shopping around for a card offering a better rate for balance transfers. Here are some great tips on how to stop using your credit card.

8. Leave your Retirement Funds alone

Don’t be tempted to ransack your 401(k) or IRA to get through this rough patch. You will be stung for taxes and penalties now, plus you will lose the tax-deferred returns you could have made. If you have 30 years to retirement, and assuming 8% annual growth, taking out $10,000 now means $109,000 less when you retire. Retirement funds are protected in bankruptcy court, so they should never be used to pay your credit card debt, which is wiped clean if you go bankrupt.

9. Be Careful about using your Home Equity

When you have a job, a home equity line of credit can be a useful fallback, as long as you use it for real emergencies only. If your financial situation is uncertain – for example when you’re unemployed – you must avoid using home equity to pay unsecured debts since home equity is also protected in bankruptcy court.

10. Raise Cash

Now that you have plenty of free time, use it to clean up your house and hold a garage sale or sell your old stuff on Craigslist or eBay. Maybe you have a room you can rent out. Think about your skills and how you can use them to do casual work like dog walking, house sitting, yard work, home maintenance, tutoring, editing etc., to bring in a bit of money until you find permanent work.

11. Take a Temporary Job, or Freelance

If it’s taking some time to find a job, consider applying for a temporary position, even if it seems like a step down from your usual job. Depending on your profession, there might also be opportunities for freelance work. Keep your options open, and you will have a greater chance of finding gainful employment – and you might even enjoy it!

12. Consider Volunteering

Why on earth would you want to work for nothing when you don’t have an income? Because it can give you a sense of purpose and routine, and show you that there are people whose situation is worse than yours. Don’t forget that it can also be good for contacts, and might even lead to a job somewhere.

13. Identify sources of Emergency Aid

If you’re out of work for a long time, you should find out how to qualify for food stamps or other government aid. Contact the food banks in your area and ask if you can join. Your church might have emergency funds for people experiencing financial hardship, and your family and friends might be able to help too.