A change of attitude
Altering lifestyle is key to getting back on track
In the early 2000s, new Richmond residents Rose and Jerry Anderson were doing well. Like many Americans feeling stable in their careers at that time, they decided to buy a home.
“We had a couple of years where we made $100,000 combined,” Jerry Anderson said. “Life was good; we were bringing in a lot of money, which was the reason we bought a house in Antioch.”
They bought their home for $176,000 in 2000, but the years that followed brought difficult financial times for the couple.
Between 2002 and 2004, Jerry Anderson was unemployed after the company he was working for at the time made drastic cutbacks. During that time, he and Rose burned through his 401(k) just to keep afloat.
Finally in 2004, Jerry found work at Keebler in Elmhurst, but things remained unsteady. Rose worked consistently through this time for Jewel and other companies before landing at Grayslake North High School, where she has worked for the past six years.
The couple remained in the Antioch home until 2008, when things got out of hand. Rose found that she was unable to support the mortgage on her income.
With the help of Johnson and Associates, a plan was set in motion. The Andersons filed for Chapter 7 bankruptcy, which included selling their Antioch home in 2009 as a short sale.
“Foreclosure is one of the two worst items to show up on a credit report as far as the effect on the credit score, the other being bankruptcy,” said Thomas Nitzsche, financial educator and credit counselor at ClearPoint Credit Counseling Solutions. “For this reason, it is usually in the homeowners’ best interest to pursue an option that avoids this, like a short sale, deed-in-lieu or modification.”
The Andersons had these two big strikes against them, however, and had to make serious adjustments to their lifestyle. They moved out of their home and into a rental town home in Fox Lake. They limited purchases and eating out.
“In the beginning, you go on a budget,” Rose Anderson said. “To this day, we still get $200 a week budget to get groceries and gas. We do have a few credit cards we use. Kohl’s was the first credit card I got after all that. It helps when you make lunches and don’t go out to dinner. You gotta really tighten the belt. We learned to live with it.”
breaking bad habits
These are the types of changes that Cindy Korus, a counselor with Consumer Credit Counseling Service of McHenry County, said are necessary, but there are more behaviors she listed as part of the problem. She said part of the poor money management of recent years stems from a tight-lipped past.
“Part of the issue also is [our parents] never talked about money or their marriages, and so they never taught us,” she said. “My belief is that if we never talk about it, we can’t learn.”
There are a few behaviors that should have been strongly discouraged, she added. For one, many people took on second mortgages because they had equity in their home and they used it for debt consolidation, home improvements and other costs. When the housing market went bust, these people were sitting with second liens on properties that had drastically shrunk in value, Korus said.
“People were using their houses as an ATM as the value kept going up and up,” said Mark Davids, an adviser with Crystal Lake-based Dorion-Gray Retirement Planning. “People would refinance, pull money out of the house and use it for whatever – vacations, new cars, furniture. That behavior hurt lots of people as literally millions of people are underwater on their mortgage right now. The other piece is people bought at the wrong time. Those two behaviors had a big part of this.
“It was all about keeping up with the Joneses, bigger is better.”
Now that the Band-Aid has been ripped off, a change of attitude and spending strategy can benefit those like the Andersons and thousands of others who experienced turbulence in their housing situation.
“In all honesty, I try to put people at ease by saying this housing situation is not necessarily a bad thing,” Korus said. “We’ve all overspent, we need to get reeled back in.
“We need to be able to say no to our kids. They can’t have everything they want right now.”
hope for future
The good news for the Andersons and others in similar situations is that there is hope for the future. Rose still works at Grayslake North and Jerry has worked in McHenry at Follett Software Corp. on the support desk for the past five years.
“We’ve turned everything around and re-established our credit,” Rose Anderson said. “We applied for a VA mortgage, and now we’re moving to Richmond.”
Now the Andersons are back on their feet and are more comfortable with the amount they’ll be paying for housing.
“With this new place, we’ll be paying $1,242 a month for everything,” Jerry Anderson said. “We cut our mortgage in half from Antioch.”
“We just needed to buy something that’s comfortable,” Rose added. “And when all the numbers fell this time, we were comfortable.”