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Living Within Our Means

one-dollar I’ve received several emails lately from ‘Creditnetters’ expressing concern about their HELOCs getting frozen without much notice from lenders. Yes my friends, they can do it, and there’s not a whole lot you can do to fight it. HELOCs, just like credit cards, can be frozen or shut down at any time. In some cases, reductions in home values have triggered the HELOC freeze (you may be able to fight this by using comparables to prove them wrong). In others, a minor drop in credit score or a late payment gave the lender enough of a reason to reduce their risk by completely removing the exposure from their books. As credit issuers are rushing to stanch the bleeding in every way possible these days, I wouldn’t expect things to get much better in the near future. It’s just the reality of the world we live in at the moment. The real thing that bothers me is that in most cases the individuals have been using their HELOCs to cover monthly bills and other daily expenses. So, when the creditor pulled the plug, they found themselves in an extremely difficult financial position. While I am sympathetic, a part of me wants to repeatedly rap on top of their heads and do one of those, “Hello McFly, anybody home?” lines from Back to the Future. Haven’t we learned anything by now? Yes, our homes are probably one of the largest investments we will ever make. Hopefully, in the long run, they will be one of the most profitable investments as well. But really, we should never be using them to finance our daily lifestyles. It’s just not a financially smart thing to do. As the economy continues to weaken, it’s become apparent that the big auto companies and financial institutions are not the only ones who need a revamping. Millions of Americans also need to take a step back and revisit what it means to actually live within one’s means. In other words, make a promise to yourself today that you will spend less than you make each month. It’s all about changing your lifestyle so it coincides with reality. It may seem obvious, but the truth is most people struggle with this principle every day. So, if you can master the art of living within your means, I promise you will emerge from this credit crisis financially better off than those who don’t.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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