My last few blog entries have focused on rebuilding your life after foreclosure. In today’s post, I’ll show you how to assess your current situation and set a steady course (financially speaking), so you can more effectively deal with coming out of foreclosure without making matters worse.
Here’s exactly what we’ll cover (again, from my book, Foreclosure Self-Defense For Dummies):

• Finding out how much you’re worth
• Calculating your monthly income and expenses
• Checking your credit report
• Searching for other sources of cash
• Holding a steady course.

1. Calculating Your Net Worthiness: If you sold everything you currently own and paid off all your debts, how much money would you have? That’s your net worth, and when you’re facing foreclosure, that amount is key in assessing your options. One of the first questions your lenders or future lenders are going to ask you is “What’s your net worth?” So grab a pencil and a piece of paper, and do the math. Officially, the equation goes like this: Net Worth = What You Own – What You Owe
2. Taking the Pulse of Your Current Cash Flow: Imagine your house is a big bucket with a garden hose pouring water into it from the top and a spigot at the bottom where the water flows out. The flow of water into and out of the house is like your cash flow. As long as cash flows in fast enough to keep up with the cash that’s flowing out, your finances are stable. If more cash flows in than flows out, you can sock away some money. If more cash flows out than flows in, however, you begin losing your financial footing. Now that you know what cash flow is, you know enough to realize the importance of a budget. To establish a healthy, positive cash flow, your household needs to be bringing in more money (from wages, salaries, bonuses, odd jobs, and so on) than it’s spending (on groceries, utilities, mortgage and car payments, gas, and so on). The formula for calculating cash flow is fairly easy to remember: Cash Flow = Income – Expenses
3. Checking Out Your Credit Report: Access to loans can often buy you time and enable you to restructure payments in such a way as to make them more affordable. To gain access to loans, however, you need a a fairly clean credit report. If you apply for a loan, one of the first things a loan officer is going to look at is your credit history, so make sure yours is accurate and do what you can to remove any blemishes and boost your credit score. Remember: No irregularity is too small to correct.
4. Hitting up Relatives for Gifts or Loans: If you need a one-time cash infusion to set you on the straight and narrow, consider asking a relative for assistance. Tread carefully when borrowing from relatives — you want to make sure that whatever arrangement you agree to doesn’t jeopardize your relationship. Treat their money better than you would treat your own, and pay it back as soon as possible.
5. Keeping a Bad Situation from Getting Worse: As soon as you begin to sense your financial situation has taken a turn for the worse, you and the rest of your household need to work together to prevent the problem from getting any worse. The situation is as though you’re in a boat that’s taking on water. Before you start bailing out the water, you want to find the holes and plug them.

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