Can't afford a home? Buy another

When you can’t afford the payments on the house you already own, buying a second home hardly seems like a good solution. According to ABC News, however, this is a strategy of homeowners facing foreclosure.

Due to the rapid drop in property values over the course of the past year, many recent borrowers are confronting debts much greater than the current value of their homes. In addition, many homeowners with adjustable rate mortgages have seen their payments skyrocket recently.

Some believe that it could be less costly to allow the first, often more expensive home to go into foreclosure or sell for a large loss. It is important for the homeowner to secure a second home before the foreclosure, however, because foreclosures seriously damage credit scores.

This practice of abandoning a first home after buying a second has been subject to criticism because some in the industry consider it deceptive and it is far from an ideal way of rectifying debt problems.

In addition, the homeowners often must be able to pay a deposit on the second home and secure a loan to finance the purchase price. ABC News suggests that in order to obtain another mortgage, potential buyers sometimes tell the bank that they plan to rent the house out or put the loan in another name.

The mortgage industry as a whole has come under serious scrutiny for the lack of farsightedness of many of its actions, so perhaps it should not be surprising that some borrowers are following suit.

Click here to read the article.

--Bridget O'Sullivan

Cash-only approach can save you money

Using cash can save more than you think.

According to an ABC News Report, one family saved 24 percent by paying cash and avoiding all plastic.

How did they do this? The family cut up eight of the nine credit cards they own. The ninth card they froze in a cup of water, to use only in extreme emergencies. By spending cash, necessities and groceries are bought but the extras are forgotten.

By looking over all expenditures paid in cash at the end of the month, it is clear how much is spent, and how much one can do without spending. Grabbing the card when all the cash is gone is a quick fix, but is extremely detrimental. Credit cards can encourage impulse purchases, such as that beautiful dress that won't be worn, or that triple latte that really isn't necessary.

ABC News reports that the family saved $1800 by the cash-only approach.

The only downside? The paper approach may slow down today's fast paced lifestyle. Searching for that one dollar bill and storing your change will take longer than whipping out the credit card. This is a downside we can probably afford to deal with.