Are we past the home mortgage crisis? Or is there a possibility that there just may be a round two? If there is another round of mortgage defaults, how can we avoid getting caught up in it?
One Woman's Mortgage Problem
This morning I read about a woman who had just had her hours at work cut back. She was concerned about what to do because of the crimp it put on her budget.
In particular, with her work hours reduced she did not have enough income, as she saw it, to be able to keep up with her house payments. She was concerned about her options.
The only suggestion on the table was selling her home and looking for a less expensive one, or renting. Naturally, nothing at hand looks good for a person in this situation.
A New Potential Mortgage Catastrophe
In America the new health law (Patient Protection and Affordable Care Act (PPACA) signed into law on March 23, 2010) will require businesses to provide health insurance for all full time workers beginning in 2014.
If you own a small business with sixty or seventy workers and have a profit of $10,000 a month ($120,000 a year) you may feel quite successful. But now, even if you could find some really cheap insurance it may cost you over $50,000 a month to provide the required insurance, far more than you earn. So what to do?
Businesses are exploring their options for dealing with this dilemma. Rather than closing the doors, many anticipate reducing the hours of work they offer employees to less than 30 so they will not be required to provide these employees insurance—a 28 hour work week is the most common option I've heard discussed.
NOTE:
How widespread this practice may become I do not know but I do know that some very large companies are considering this possibility, especially in the service sector where profits are generally smaller per employee.
Thousands, and possibly millions of full time employees in America may find themselves working with reduced hours if this possibility proves workable for businesses faced with this problem. The result for many individuals who have their hours cut back will likely be an inability to keep up with their mortgage.
Avoiding the Pending Mortgage Crisis
As the potential for this income reduction and second mortgage crisis becomes better known perhaps steps can be taken to avoid it. I hope so. But in the mean time we need to insulate ourselves.
If you are in a position that might be affected because of this potential and have not taken steps to get out of debt yet, do it now. The section on our Success With Money website titled, Get Out of Debt, can give you the guidance you need. There are many reasons in addition to the possibility of reduced work hours or income to do this in view of the other economic uncertainties still before us.
A second idea to consider is that of diversified income. This is a good time to think about starting a part time second job or new part time business. Another option is to work at reducing expenses, perhaps learning to garden if you have access to the space. It isn't hard to support your budget with home grown food and it is good for your health.
Prepare, but Don't Panic
There is plenty of good news. Opportunities to achieve financial success are still abundant. But it is important to prepare to meet challenges such as the possibility that many people with full time jobs are likely to become part time workers in the future. What will you do if you are one of them?
