How To Avoid Foreclosure and Cut Your Burn Rate in 3 Weeks

Suppose you lost your job or are afraid you might.  Maybe your hours are being cut back or your income stream is not as stable as it once was. These ideas came to me when my husband and I quit our tech jobs and went back to do a second bachelor’s degree in music, but all the same principles apply.  Do not panic.  There are plenty of things you can do to survive this economic downturn!

1. Do not sell your house… rent it! Unless you live in one of the lucky parts of the country that has not seen the foreclosure boom, you are not likely to get full value out of your house.  And when the market turns back around, you will be glad you did.  Instead, rent.  We worked with a lawyer/realtor friend who was able to list it for rent on Craig’s list, write up a rental agreement, and do the pre-screening of the applicants’ credit report.  Be sure to get a credit report because in this economy you really need to know whom you are renting to.  Find someone to do this for you because with the entire list below you will absolutely not have time to do it yourself.  We paid her 1/3 of the first month’s rent, and it was worth every penny.

2.  Rent a smaller, cheaper place.  This is the first part of reducing your burn rate.  We were able to rent our house for a little more than the mortgage (to cover any repair costs, the HOA, etc.) then pay about half of the mortgage amount in a cheaper place we rented.  WE EFFECTIVELY HALVED OUR MORTGAGE. The utilities were also a lot less than half.  Just doing this really cut the burn rate. To do this, you will probably have to get rid of stuff.  A lot of stuff.

3. Be ready to get rid of stuff. Okay, to be honest, this is a place most people will get stuck.  It was not a problem for us because we made the decision to downsize, it was not decided for us.  Here is the thing.  IT IS ONLY STUFF.  None of your stuff is worth what you paid for it, even when you bought it.  You will never get the money out of it.

          It is not worth money to store it.   Consider this equation.  Let’s say you rented a storage unit at $200/month to store the stuff you could not fit in the smaller space. At the end of a year it cost $2400.  Your stuff is not worth another $2400 to store if you have to downsize to survive.  If you can live without it for a year, you can live without it forever.  After 2 years (almost $5,000), it was really, really not worth it.  You don’t need it.  

         We went through and made a list of things to keep – not a list of things to get rid of.  Think about what you would save in a fire.  What would you take if you could only fill your car? What is actually important to you?  Why are you keeping any of it? If you were to get hit by a bus and someone had to go through all your stuff, what would they think was important to you?  Anyway, if you really have to downsize, you can’t take it all with you, so just pick the important stuff, grit your teeth, and find a way to make someone else deal with the rest of it.

4.  Have a garage/estate sale, sell stuff on Craig’s list, or sell through an auction house. 

How to downsize in 3 weeks: *

a. Grand piano: Call the largest piano dealer in the area to find out if they will take it on consignment.  There is no way you can do this yourself unless you are an actual dealer.  They took the piano in a few days, and when the piano sold they mailed me a check for a lot more than I could have gotten on my own.  Believe me, much less grief than any other way.  I would still do it this way if I had more time.

b. Large Furniture: If you are on the 3 week time scale, take pictures of everything (ipad or iphone is acceptable) and put it all on Craig’s list.  Expect to sell one or maybe 2 things out of about 10-15, but you will get the most money for it.  If you have time, this is your best hope.  If you really only have 3 weeks, call an auction house.  They cart it away, send you a pitifully small check, but it is out of your world.  Most other places will charge you to haul it away.  I sold several pieces to friends before the auction house came, but there was no other way to get rid of the really big furniture.

c. Small Furniture and Sports Equipment: Start with Craig’s list. You will be able to ditch a few items for the money you are looking for.  If you have nice items or antiques that you can’t keep, you might try consignment, but I had no luck with this. Good items for Craig’s list in this category are treadmills, weight machines, and other heavy equipment that are hard to get rid of in other ways.  Getting return at places that resell sports equipment is not worth it in general.

d. The Garage Sale.  Start advertising your garage sale a few weeks ahead of time on Craig’s List with pictures of large items and prices.  We got rid of a lot of the big / good stuff ahead of time doing that.  We made $1500 on our garage sale that day even though we almost gave away most of the stuff.  Of course we were trying very hard to get rid of it, so that was helpful.

e. Goodwill / ARC & The Dumpster.  Anything that did not sell in the garage sale and was still not trash was scheduled for Goodwill / ARC pickup (actually we ended up dropping it off in the end, but pickup would have been better).  And you can get a dumpster dropped off at your house and hauled away for a slight fee (call around for a good rate).

f. Liberation! I could not believe how freeing it was to be out from under all the stuff!  We pay a small rent. We own a small number of items. To be honest, I do not miss any of it.

5. Gain a New Perspective on Employment. Now that you live in a smaller place, have a smaller burn rate, and have a lot less stuff, you actually need a lot less money to survive.  That’s a good thing.  Your new lifestyle does not require the level of employment it did before.   Don’t make the mistake of turning down a paying job just because it is not glamorous.   Glamorous jobs are like stuff; you don’t really need them.  Pay your bills first.  But plan for a day when you can do something satisfying because you don’t have to answer to your house anymore.

          We used to feel that our house owned us, that it required us to work high paying jobs to survive, that it trapped us into a lifestyle that we could not escape from.  Were we happy? Were you?  Now we can work jobs that make us happy, that are fulfilling, that satisfy our souls.  Now that your house does not own you, what vocation will you pursue? 

        

*In our case, we had to move within a short period of time, and maybe you do, too.  So we used every means possible to sell everything we did not absolutely need. We had a 2400 square foot house piled full of furniture and stuff (from a 4400 square foot house that we had previously downsized from) including a grand piano.  Three weeks before school started we realized that we were not going to be able to commute from our current house to school 45 minutes away because we had 8 am classes 5 days a week and the first snow was going to shut us down.  It took an extra 4 weeks to land a great tenant.