Article September 13, 2010 Issue

HOW WE FOUND FINANCIAL BALANCE

BY GREG JARVIS

WHEN I LOOKED out at a beautiful sunrise one morning last year, I thought how grateful I was for the opportunity to live in an attractive little house that suited my family well. My next thought, however, was rather unsettling. It was the suggestion that my wife and I were just one small step away from losing that home and many of the things we'd worked for over the years. Not that we believed material things were the most important stuff of living, but our income had been declining and we seemed, like many others, to have borrowed too much over the years.

It didn't take much calculation to determine that the situation needed to change for us to keep meeting our financial obligations. This did, however, mean taking a whole different view of the significance of "things" in our experience.

We started with a discussion about our credit card balances. We had let them get too high, and now we were just making the monthly payments and not eliminating the debt from year to year. We determined that the prudent financial step for us would be to refinance the house and pay off these high-interest debts with the proceeds. Unfortunately, while that might have seemed like a good step two years previously, now it didn't look like the house was worth enough to make a refinance possible. In terms of what we'd paid and what the house was worth, we seemed to be just keeping up with the declines in housing value. Worse, some of our neighbors were watching the value of their homes decline by a greater amount than what they owed on their mortgages. Furthermore, I was involved in managing a real estate business that was also being impacted by declining home prices.

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