So you have your $1000 in the bank and you are focused on getting rid of the debt. The problem is that all the payments are eating up your income and there is nothing extra to throw at the debt. What would be great is if you could get rid of that huge truck payment, or move that boat that you no longer have time to take to the lake.  Problem is you own more on the 'toy' than it is worth - in short you are upside-down.

I will agree that your situation is not a good one, but it is not hopeless. Most people think that being upside down will prevent you from selling that particular item. Although you will not likely be able to sell the item for the total you owe, especially if it is a car or a truck, you may still be able to sell the item for enough to make the sale a good idea. Let's look at an example to help you better understand what I am talking about. Let's pretend you owe $18,000 on a car and you think the car is only worth $14,000. What can you do? First, let's make sure the value of the car is accurate. Visit www.kbb.com or other vehicle pricing company. You are looking for the price as sold to a private individual, not a dealership. You will be able to get a lot more money if you sell to a person rather than a dealership. The reason is simple. The individual is buying the car to drive; the dealership is buying the car to sell. The dealer cannot give you full price for the car, because he or she is in this deal to make money which means you won't get full value.

Now that you know the true value of the car, let's clean it up and make it look really nice. That would mean a quality car wash - yes, the inside too. If a prospective buyer opens the back door and French fries fall out, you just lost a few dollars. So expend some elbow grease and an afternoon and let's get it clean...really clean.

Here is the hard part. You are going to have to talk to the local bank or credit union and start the process of getting a loan large enough to cover the difference in the amount you owe for the car and the amount you will sell the vehicle. You have to have the full loan amount so you can get the title of the car for the new owner. Now that you have the financing lined up, you simply need to sell the car. Be patient and make sure you tell everyone you know that you are in the market to sell a car. The more people that know about your car, the quicker you will start getting bites.

That's about it. You will still have some debt after the sale goes through, but in this example you moved from $18,000 in debt to $4,000. That's a very good step toward becoming debt free.

Decades ago, when asked, "do you know what the market is going to do?" Mr. JP Morgan responded, "Sure. It’s going to go up and down".

This is a very appropriate quote given where the market has been over the past 12 months. Is the drop in the stock market uncomfortable? Yes. Is it scary? Yes. Is it the apocolpyse? Of course not. The market averages one down year out of every four. As a financial advisor and an investor, it would make my life much easier if it followed a distinct pattern: three years positive, one year negative, three years positive, etc... However, since we do not have this good fortune, there are several actions that are imperative.

First, diversify. Simply put, don’t put all of your eggs in one basket. In the early 2000’s, if you had all of your money invested in all technology stocks, your portfolio would have been hit real hard. However, if 10-15% of your portfolio was invested in technology stocks, that portion of your portfolio would have been hit real hard but the rest of your portfolio may have held its ground, or at the least not have gotten demolished.

Second, create an all-weather portfolio. This piggy-backs on point #1, to diversify, but it takes it a step further. It is important to have both stocks and bonds in your portfolio. The reason being is that the two generally move inversely. In the late 1990’s, the stock market was roaring and the bond market was lagging behind. As the stock market corrected itself, the bond market took off. By having both in your portfolio, it will add a nice balance and minimize, to a certain extent, the roller coaster ride that can be the market. One’s risk tolerance and more importantly, time frame, should dictate the stock-to-bond ratio in their portfolio.

Lastly, I urge investors to buy-and-hold for the long-term and not to sell solely because a particular investment is down. We have all heard the investor logic of buy low and sell high. However, human nature dictates this logic. Human nature is to invest when you feel most confident about the market, usually when the market’s running high and doing well, and to sell when you feel least confident, usually in times like this when the market’s low. This is not to point fingers because as humans, we are all wired the same, but human nature just told us to buy high and sell low. It takes discipline and patience to be a successful investor.

In conlusion, the market is down right now. Assuming your investments are for the long term (defined as 5+ years) just ride the storm. I would highly recommend, though, making sure that you are in good investments and that your portfolio is properly diversified for your stage of the game and for your goals. In addition to riding out the storm with existing investments, it’s a great time to add new money. If the stock market’s down 25%, just think of it like going to the mall and buying a shirt that is on sale for 25% off. The investments will come back so just view it as Wall Street is having a 25% off sale right now.

Most people that take out a loan understand the details they are agreeing to: monthly payments, with interest, until the full loan amount is repaid. Sounds pretty simple. The only catch is the person loaning the money has to feel comfortable that the full loan amount will actually be repaid. If not, the loan is not granted or the lender requires a cosigner. Here is where things really start getting ugly. Most people that require a cosigner look to their family for help. After all, what kind of person would you be if you told your little sister that you won't cosign the loan that she has to have in order to get that cute little sports car that has her name "written on it"?

Let's take a look at what the Bible says about cosigning a loan. In the book of Proverbs, we find that God has some pretty strong ideas about becoming a cosigner. Proverbs 17:18 says:

A man devoid of understanding shakes hands in a pledge, And becomes surety for his friend.

Pretty simple. If you cosign for someone, the Bible says you are devoid of understanding; or in contemporary terms, you are stupid. And if you stop just for a minute and try to determine why the bank is asking for a cosigner in the first place you might not be so stupid after all. The bank is requiring a cosigner because your friend or family member has already been determined to be a risk at repaying the loan. If the bank doesn't trust them to repay the loan, why do you?

So if you shouldn't cosign the loan, what should you do? Encourage them to save up and buy the item. They may have to step down in car to get something that they can afford, but everyone involved will be much happier than if the loan goes into default because someone can't make the payment.