So, we’re in the middle of a global pandemic and most of us are safe-at-home. Thank Goodness! Please be safe!
Watching financial markets has felt like riding a roller coaster, and for those of us trying to work-from-home, home-school restless children, and manage growing cabin fever, this time may feel a bit overwhelming.
The other encouraging item I want to share is this—an impending economic slowdown caused by Covid-19 does not mean any of us have to bury our hopes of being home-purchase-ready!
There are still many things you can do now to ensure you are positioning yourself for the home of your dreams, and it starts by looking at your credit.
TIP 2: Pay down and off credit
Attempting to get qualified for a home loan while carrying a heavy debt load is a recipe for heartbreak. Yes, I said it! So, take this time to focus on lowering your debt.
Debt reduction should be your first goal if you want to purchase a home in the next 12-18 months.
Your mission, should you choose to accept it, has 3 parts:
- Pay off credit now
- Do not accrue any new credit
- Hide your credit cards if online shopping is becoming too much of a temptation
That’s it. Simple in theory right? I wish! Yet, I’m aware that the Covid-19 shakeup probably has you in one of the 3 scenarios below. Find which one that describes your current situation…
Scenario 1: The world has shut down, you still have a job, but you are working from home.
This can be a best-case scenario for paying down and off credit, if you leverage it. You have the same income, but because you can’t eat out, travel, or participate in costly entertainment options, you should have additional disposable income.
Use this increase in income to pay down and off your credit.
Forgo online shopping, say no to that high-cost Netflix movie that was just released, and even though steak is the “only” thing at the grocery store, hold out for some chicken or pork. It’s cheaper and better for your waistline anyway!
Your motto: Be aggressive with your debt!
Scenario 2: The world has shut down, and you’ve been laid off, with pay.
Similar to scenario 1 above with one exception… you’re not sure how long your pay will be offered. Anticipating a 2 month shut down, many employers are feeling particularly generous, but what if businesses are shut down for longer?
Even if we are facing a 4-6 month economic slowdown with the risk of less hours or less pay, a debt-pay-down option is still your best option. If you lose your job after a few months, you’ll have less debt to carry into a season of unemployment. If you keep your job, you are still getting a salary and continue being aggressive on debt.
You might also explore a consolidation loan at this time. There are many being offered at low interest rates. A lower interest rate enables you to place more on principal pay back and does what? Lowers your debt faster.
Your motto: It’s never a bad decision to pay down debt.
Scenario 3: The world has shut down, and you’ve been laid off, without pay.
This is a worst-case scenario, but it is still survivable. I get it and have many friends who have found themselves in this situation.
Your goal is not to accrue additional credit in this season. File for unemployment or other government assistance. Use the money that comes in for essential bills, and cut out any unnecessary spending. Look through subscriptions and see if there are any you can cancel. Prune your cable and wireless bills. Shop generic and in bulk as you are able.
The mad rush for toilet paper won’t last forever, and you will be able to get back to buying cheaper brands of the things you love.
Cook at home rather than rushing out to get delivery at fast food restaurants. Even $15.00 for a family meal can add up if you are eating out multiple times a week.
Your motto: No additional debt.
Scenario-I-Do-Not-Know: because I don’t really fit in the boxes
If you are self-employed Covid-19 has caused an extra degree of confusion. You don’t fall in any of the categories that would qualify you for aid or relief, and your contracts may be going silent. Maybe you are one of the small businesses that has had to shut your doors.
Not sure how to grow your business in these perilous times so that you can do #allthethings you want to do outside of work to prepare yourself for buying a home?
Desert Digital Design is hosting an online webinar on Thursday, April 2, at 2pm Pacific Time to discuss ways to grow your business in the midst of Covid-19. Scott Tambling, founder and CEO, will share ways to reach customers through live video and a variety of other creative channels.
Check out Scott’s event on his facebook page and reserve your spot! He is local to the valley and runs his own small business, so he knows how to make things happen locally.
Each of us is in a different debt and income situation.
However, a more intense focus on driving down debt in this season of reclusion means that you will be better positioned for the home-buying opportunity you’ve always wanted!
In case you missed the other posts in our series, they are listed below!