STUDENT LOAN DEBT KILLING ECONOMY FOR SOME

#StudentLoans #StudentLoanDebt #economy #college
Imagine having your dream job, after a great education, and yet be broke.
That is the case with Melissa Cefalu, a veterinarian, and her husband Andrew, a chiropractor.
You see, Melissa and Andrew are buried under $365,000 in student loan debt.
Paul Davidson highlighted their story in his USA Today article about how student loan debt is hurting the U.S. economy. It was also published in the July 7, 2017, edition of The Atlanta Journal-Constitution.
Melissa and Andrew never take vacations. They may grab a long weekend with friends or relatives. Andrew drives a 13-year-old Chevy Tahoe. Instead of buying new clothes, Melissa, 35, wears her sister’s hand-me-downs, according to Davidson’s article.
The $1.34 trillion in student loan debt, a record high, is affecting the overall economy, Davidson writes. It’s causing delays in home purchases, it’s crimping consumer spending and inhibiting formation of new businesses, the article quotes analysts. He quotes others as saying the student loan debt crisis is no more than a lot of hype.
“I love what I do but … I don’t feel my degree was worth the sacrifices we have to make every single day,” the article quotes Melissa Cefalu. The couple, between them, makes $125,000 a year, and lives in affordable Madison, Miss.
Let’s break this down further. We’ve all heard about the excessive student loan debt, and the debate rages on about how to fix the problem. Should we, as a nation bail out these loans, or should we let the people who incurred the debt take their medicine – probably for a lifetime?
At the rate they are going, Melissa and Andrew will probably never be able to save for a house, let alone retirement, for a good long time. Theirs is a lesson for others thinking about whether college will be worth what they will have to do financially to get through.
And the Mississippi couple’s example shows that even if you come out of college with a decent job, doing what you had always wanted, debt can punch you in the gut for many years. Think about the graduate who comes out of college with no job, AND lots of debt.
Statistics repeatedly show that the more education one has, the better his job prospects. Still, the decision whether to go to college should not be automatic, even for the brightest of students.
There are many different ways to approach the problem. Consider these options: if a student is college material, but his family cannot afford to send him, he could work for a few years at a relatively menial job, i.e. a restaurant server, and save his money to go to college later in life. That same student could take that menial job, and take some college courses part time over a few years until he has the money to go to school full time.
Secondly, a student could consider military service for a few years, presuming he is physically able for that. The service may entitle him to college benefits after he serves his tour of duty.
Thirdly, a student may decide to look for a vehicle that will provide him enough income to eventually give him a world of educational options, without incurring a lifetime of debt. To check out one of the best such vehicles, message me.
Regardless of how you may feel about student loan debt, and how it may be affecting the economy, consider this: if a student incurs debt that would surpass a mortgage, that student will not be able to do much of anything financially for a good long time. He or she could grow old and broke, with very little help to get out of their situation.
If you don’t want to be among those folks, think long and hard about whether, and when, to go to college. College is not for everybody, and for those who are ripe for college academically, but not financially, it’s still not a decision to be made without lots of thought.
He who properly thinks through the college decision will likely see the most success as a productive adult.
Peter

NOT BUYING LUNCH CAN CREATE $90,000

#LunchMoney #savings #retirement
On average, Americans eat out lunch twice a week.
It could be more than that, if you buy your lunch at work every day.
The average American forks over $11.14 twice a week for lunch, according to a Visa survey.
If a person skipped that meal – or made or brought his own lunch – and redirected that money into an investment account earning 6 percent, he’d have an estimated nest egg of $88,500 30 years later.
These numbers were quoted in an article by Adam Shell for USA Today, also published in the June 8, 2017, edition of The Atlanta Journal-Constitution.
OK, sometimes dining out for any meal is a nice treat. And, one does not want to live a life of deprivation.
But if you are having trouble saving for retirement, or you believe you don’t have the money to do so, perhaps one can find the money in places he never thought to look.
As a child, if your parents gave you an allowance, it usually was meant to teach you how to make the most of your money.
If you got a weekly allowance, did your spending habits cause you to run out of money before your next allowance installment?
Ask the same thing, now that you are an adult, about your paycheck. Are you accustomed to cashing the check and spending the money until you run out? Put another way, how much of your money do you spend without first giving it a thought?
Some people are well off in retirement because they had a great job, with great benefits and a great pension plan or 401(k). Others have a nice retirement because, from the beginning of adulthood, they earned a paycheck, and knew where every cent was going. These folks also made sure that a certain percentage went into savings.
Once they saved enough money, perhaps they parlayed it into a house, which, for them, was probably a good investment. As they kept saving, they then began to invest in other things so that, when they reached retirement, they didn’t have to worry how they were going to live.
The younger you start this process, the more you will have when you get older.
So, let’s pose the question again: is skipping a couple of lunches out every week worth close to $90,000? Some might say that $90,000 won’t go far in retirement, which is true. But eating lunch at home, or bringing your own lunch to work, is just one way to build a bigger nest egg, even if your job is hardly lucrative.
Another way is to use some of your non-work time to find, and work on, other great ways to make extra money. There are many such vehicles out there that don’t involve taking a second job. To check out one of the best, message me. Perhaps you will also find other ways to save money, besides not buying lunch.
So, it is possible to have a nice retirement, even though your income is hardly a rich person’s tally. You may have to do without some things that give you a moment of pleasure. Naturally, don’t cut ALL fun out of your life, but just take great care in your spending habits. Perhaps you could not only bring your own homemade lunch to work, you could brew and Thermos your own coffee.
Then, you have to be disciplined enough to put that money into safe savings at the start. As your nest egg grows, you can graduate into investing, without being overly aggressive at first. Then, as the money grows you can parlay it into more diversified investing – all with the help of a trusted adviser.
So, to borrow from Stephen Sondheim, here’s to the ladies (and gentlemen) who lunch – without spending $11 a pop.
Peter

JOB MARKET GETTING CRAZY

#JobMarket #employment #SmallBusiness
After years of recovering from the 2008 recession, the job market is starting to look good, even for those who’ve had a hard time finding work in the last decade.
The number of part-time workers who would prefer full-timework dropped by 281,000 in April 2017. Those numbers dropped from 9.2 million at the peak of the job crisis, to 5.3 million in April, according to an article in USA Today by Paul Davidson. It was published May 11, 2017, in The Atlanta Journal-Constitution.
On the opposite side of the coin, many baby boomers who are small-business owners are at or approaching retirement. That may produce a “silver tsunami” of job losses among those who work for those retiring business owners, according to an article by Gene Marks in The Washington Post. That article was also published May 10, 2017, in TheAtlanta Journal-Constitution.
According to Project Equity, many small business owners do not have a succession plan. Therefore, many of those businesses will quietly close forever, the Marks article quotes Project Equity co-founder Alison Lingane.
Let’s examine these two trends together.
Many big employers are finding it hard to find workers. Small businesses may quietly close when their owners retire, putting lots of folks out of work.
“There simply aren’t enough” available workers, the Davidson article quotes Joe Brusuelas, chief economist for consulting firm RSM U.S. “The dynamic has shifted. Labor is going to have power for the first time in years,” the quote continues.
“Since today most family-owned businesses don’t have somebody in the next generation who wants to take over, employee ownership is one of the best ways to keep thriving businesses locally rooted into the next generation,” the Marks article quotes Mark Quinn, district director of the U.S. Small Business Administration.
So, are you finding that your employment prospects are looking better? Do you work for small business with an owner who’ll retire soon, with no plan to keep the business going?
Do you like what you do? If so, enjoy the better job prospects, or become an owner of the company for whom you work. That’s easier said than done, obviously.
If you don’t like what you do, and really need a change, there are many vehicles out there to earn a potentially great income and help others do the same. To check out one of the best such vehicles, message me.
We’re all hearing and reading good news about the economy, but some folks still are not seeing the improvements in their own lives. There are still a good number of folks who, if they are still working, are working a job that paid less than the one they lost. Others just never found work at all after losing a good job, and have quietly left the job market.
In those cases, complaining, blaming various people or entities for one’s plight is not productive. One must take action – perhaps a different action from the one(s) he has taken thus far – to find a better way to live.
Indeed, there is much to be excited and optimistic about out there. Likely, those things may not just land in your lap. Or, if they do, they may do so in the form of a person – someone you already know, or will meet for the first time – who has something to show you.
Don’t be afraid. Check it out. If that person is honest, he’ll take no for an answer. (If he doesn’t, walk away). Saying no before looking could bring you much regret.
Peter

MILLENNIALS: MORE SAVERS AND SPENDERS THAN INVESTORS

#millennials #investors #savers #spenders
Millennials don’t see themselves as investors.
According to the 2016 Fidelity Investments Millennial Money Study, 46 percent of the millennials surveyed considered themselves as savers, 44 percent considered themselves spenders and only 9 percent considered themselves investors.
This study was quoted in an Adam Shell article for USA Today, which was published April 27, 2017, in The Atlanta Journal-Constitution.
Despite Wall Street’s attempts to woo the nation’s largest generation into the stock market, millennials have yet to embrace investing, Shell’s article says. Only one in three say they invest in stocks, the article quotes a Bankrate.com survey.
A Black Rock study says nearly half of the millennials surveys found the market “too risky,” the article says.
And, four in 10 say they don’t have enough spare income to put away for the future, the article quotes a financial literacy survey from Stash, a financial app.
Let’s break down the facts. If you are a saver, and are putting money away, where are you stashing it? In a bank? Under your mattress?
In this market, the rates of return on that money between those alternatives are not far apart.
Secondly, there is wild and crazy – “risky” – investing, and there is careful investing. Each requires consultation with someone you trust , but here’s a good rule of thumb: as you start investing, look for more conservative vehicles, i.e. relatively safe mutual funds. As your wealth grows, you can diversify and take a few, well-thought-out risks. If you really do well, and want to play, take a very small amount of money and invest aggressively.
Here’s another rule: it’s difficult to have a nice nest egg for retirement just keeping your money in a bank. There are very few, if any, traditional, regulated banking products that are paying decent returns. Banks are wonderful institutions for your checking account, and perhaps a small savings account to cover unexpected expenses.
But to really be a saver for retirement, you have to take SOME risk. And, make no mistake, EVERYONE has to save for retirement. As stock-market-loving baby boomers can attest, you never know when your job is going to go away.
For those of you in the category of not having enough spare money to save for the future, there are ways to solve that problem. First and foremost, you have to make saving for the future a priority in your life. Even if you see yourself as a spender rather than a saver, you have make SOME saving a priority, or the fun you are having today will turn into poverty when you retire, or when that good job goes away.
A suggestion might be to look at the many ways out there to use your spare time to earn a secondary income. To check out one of the best such vehicles, message me.
In short, saving is not just prudent, but necessary. The more you save when you are young, the more you will have, and the better your life will be, when you are older. If you are a millennial, talk to your parents about what to do. However their lives have turned out, there are lessons in their lives that will apply to you. Don’t underestimate their story, or their advice.
As you save, some risk will become necessary. Though the stock market looks scary, over time it has proved to provide the best returns. Find a trustworthy, knowledgeable adviser to help you get started, and who will continue to work with you. Don’t be afraid to ask lots of questions about fees, returns etc., so that you will have a clear picture of how to proceed.
Finally, watch what you spend. Don’t deprive yourself, necessarily, but look for things you can eliminate to allow you to save more money. Remember that a dollar in your pocket generally is better for you than a dollar you put into someone else’s pocket.
Your future could well depend on decisions you make in your youth. You don’t have to depend on things “going right,” if you make good choices now.
Peter

HOW HARD IS IT FOR YOU TO LEAVE WORK?

#work #All-ConsumingJob #FamilyFriends #fun
You don’t work an eight-hour day.
You don’t know when to leave the office.
Even when you leave, work goes home with you.
Perhaps you’ve made a new year’s resolution to spend more time with family, friends and other people or things that give you pleasure.
But, you feel you can’t.
There’s a crisis at work you have to deal with.
Laura Petrecca discussed this topic in a Jan. 16, 2017, article in USA Today. Here are some figures quoted in the article:
• 60 percent of people have dreamed about something at work;
• 49 percent check work e-mail after work hours;
• 46 percent work during non-business hours;
• 44 percent are up at night thinking about work;
• 15 percent gave up vacation days.
Here’s another stat: the average person in Europe works about 19 percent less than the average American. Thus U.S. workers put in 25 percent more hours than Europeans, according to a study by a group of economists, quoted in an article by Ben Steverman for Bloomberg News. The article was published March 13, 2017, in The Atlanta Journal-Constitution.
You may know your job is eating you alive, but you fear that if you don’t put in the extra effort, you may be replaced.
News flash: you may be laid off regardless of how well you’ve performed, or how much extra effort you’ve put in.
“There is pressure globally … to do more with less,” Petrecca’s article quotes Patrick Kulesa, director of employee research at Willis Towers Watson.
So what does one do to bring sanity back into his or her life? One way is to just stop working when you get home. Reserve your home space strictly for family, friends and pleasurable activities.
If you have an after-hours crisis at work that requires immediate attention, deal with it at work, so you can go home with a clean slate.
Or, create a Plan B for earning money in what spare time you have, so you can eventually kiss the pressure cooker goodbye. There are many such ways to do that. To learn about one of the best, message me.
Instantaneous communication has become both a blessing and a curse. Take advantage of its blessing to give you pleasure, and pay less attention to the curse that allows work to follow you home.
In short, give yourself a break. Know that no matter what you do, you are not indispensable at work. Know that your boss will not hesitate to let you go if it makes his numbers look good, regardless of the effort you’ve put in.
Leave work at work. Delegate more of what you do, if you can. If you are good at what you do, look for other options if your situation shows no end in sight.
There’s only one you. You deserve to engage in the pleasure of family, friends and enjoyable activities. Don’t let a job deprive you of that.
It’s OK to enjoy your work, but it should not control you, or keep you from other things. No matter what happens at work, learn to live well.
Peter

FLYING TAXIS IN DUBAI

#FlyingTaxis #DriverlessVehicles #drones #drivers
If you are old enough to remember, there was a cartoon series in the 1960s called “The Jetsons,” a tale of what the future may look like.
“Cars” flew through space.
In Dubai, commuters in The United Arab Emirates may soon climb aboard automated, driverless taxis, soaring over busy streets and past the desert city’s gleaming skyscrapers at the push of a button, writes Russell Goldman in The New York Times.
The article was published in the Feb. 20, 2017, edition of The Atlanta Journal-Constitution.
USA Today has also written about tests for driverless big-rig trucks.
The flying taxis will be capable of carrying a single rider and a small suitcase, Goldman writes. So, that probably means a group cannot pool resources for a taxi fare.
The taxi is an eight-rotor drone made by the Chinese firm Ehang, writes Goldman. It has flown test runs past the Burj Al Arab, Dubai’s iconic, sail-shaped skyscraper.
It can fly up to 31 miles, or about 30 minutes, on a single battery charge. Passengers can weigh up to 220 pounds, Goldman writes.
Let’s think about this for a minute. If you live in a populated area, with lots of traffic, you may someday be able to fly over that traffic, if this concept proves sustainable.
Air travel will be redefined. Would car travel become obsolete?
There is much else to ponder. What happens to the many folks who now drive for a living? Will ALL transportation become driverless?
When one is disabled, or too old to drive, will he or she own a driverless vehicle and not miss a transportation beat?
What about those who fly, sail and otherwise transport for a living?
Will all transportation be changed?
Perhaps those who make their living moving people and things about would be wise to find a Plan B to make money. The technology, therefore the trend, won’t be halted. The good news here is that if you fit that description, there’s time to plan. The technology won’t be commonplace tomorrow.
There are many good, Plan B options available. To check out one of the best, message me.
Technology alters life in good and bad ways. Competing rental car companies at Logan Airport in Boston decided to set up a common shuttle service to and from the terminals, stopping at each rental car base, instead of each company having its own drivers. The move saved money, and lessened traffic jams around the airport, but a lot of good drivers lost their jobs.
Now, imagine every airport doing the same thing, with driverless buses, cabs etc. Even Uber and Lyft are talking about driverless vehicles.
So what will flying taxis, driverless vehicles of all types, do for your life? That might depend on how you make your living now.
It might make sense to visualize that eventuality, and plan accordingly.
Peter

COLLEGE DEBT CRUSHING GRADS

#CollegeGrads #jobs #debt
One graduate has resorted to selling her eggs to help infertile women.
She is one of many college graduates who have huge college debt and not enough income to easily pay it off.
Her story and others were relayed by Kala Kachmar of the Asbury Park (N.J.) Press in an article also published in the May 8, 2016, edition of The Tennessean in Nashville as part of its USA Today supplement.
About 2 million borrowers bear a $1.3 trillion loan burden, the headline reads.
“Who wants to live at home at 29? I don’t. But, luckily, I can. … I shouldn’t be living paycheck to paycheck,” the article quotes Christyn Gionfriddo of Neptune, N.J.
Let’s examine what has happened. We have gotten constant messages for decades that to get a good job, one needs a good education – a college degree. Colleges and the government have made it easier for students of all income levels to go to college.
Some of the vehicles used to facilitate students getting into college involve loans that students are not obligated to begin repaying until after graduation.
In theory, this plan works if students can convert his or her education into a good-paying job.
That doesn’t always happen.
Therefore, students are graduating with huge debt that may be difficult to repay, if their incomes can’t support it.
Some, in fact, will try to avoid repaying it.
What’s a young person to do?
First, determine in your high school years whether college is right for you.
It’s certainly a nice goal to have EVERYONE get a college degree, but today’s economics require a more in-depth thought process for each student.
Ask yourself, if you go to college, what is the goal when you graduate? What kind of income will you be likely to earn with your degree? Will you need loans to get through school? What is the likelihood of you getting a job in your chosen field immediately after graduation? Will it be enough for you to live a decent life, and pay off your debt?
If you’ve determined that college is worthwhile enough to borrow money for, then watch your spending while in school. You may have to forgo some good times, get a part-time job and otherwise be somewhat miserly. Watch every dime you spend and make sure it is worthwhile.
If you determine that college may not be right for you, don’t fret. There are other ways to make an income without having to worry about what kind of job you have. To learn about one of the best, message me. You’ll learn about people of all income and education levels spending less, and potentially earning enough to pay off any debt promptly.
In short, don’t view going to college as an automatic decision. Don’t view your education as an interlude to be young, boisterous and have a good time. Because, when you grow up, there could be a big debt welcoming you to adulthood.
Colleges don’t care what happens to you once you get out. But you should take that into account before deciding whether to go to college.

Peter

DLEAYED RETIREMENTS DON’T HELP TROUBLED ECONOMY

#DelayedRetirement #retirement #OlderWorkers
In decades past, one worked in a job, or for a company for 30 to 40 years and retired with a pension, Social Security and, perhaps, a no-stress, part-time job.
Some fortunate ones retired earlier than the traditional age 65. A scant few worked past age 65.
Retirements opened positions for younger workers to move up, and the jobs they vacated were available for newer workers. That was helpful to the economy.
In the last few years, since the 2008 recession, that dynamic has changed. More people are delaying retirement, largely because the relatively generous retirement benefits of decades past have been cut, or have disappeared. Another reason is that more people are being forced out of good jobs ahead of when they wanted, or had planned to, retire. They end up taking jobs that pay a lot less, so they have to work longer and retire later.
Michael Molinski, a Paris-based economist and writer, discussed this topic in a column for USA Today. It was published July 24, 2016, in The Tennessean newspaper of Nashville.
“People in the U.S. are working longer and waiting longer to retire – often not by choice – and that could be bad news for our economy,” Molinski writes. He quotes a study done at the University of Paris-Sorbonne that says, in part, “the most productive group is the group of core workers (ages 25 to 54) right in the middle” of the barbell-shaped labor force, Molinski writes.
In other words, more older and younger workers, starting at age 15, are being pushed into the labor force, he says.
He adds that older workers can be, and often are, valuable mentors to younger workers. But the average age for retirement in the U.S. has jumped to 62 in 2014, up from 59 in 2010, he writes.
“As a result, our economy is less productive than it could be, and that trend is expected to continue for the next 35 years unless something is done to turn it around,” Molinski writes.
Actually, when the traditional work cycle was alive and well decades ago, life expectancy was a bit younger than it is now. So, more people have more energy and, at least in theory, get “old” much later in life.
That isn’t to say that everyone WANTS to keep working later in life. Most of us, unless we really love our jobs, want to retire as soon as we are able. Also, many of us do not want to be FORCED to retire before we are able.
The key to making the work cycle work for you is to be retirement-able as soon as possible. You might decide to keep working even if you can retire, or you may be forced to retire before you want to. The key here is to make whatever you do YOUR choice. Circumstances may hit you in the face, but if you have options, you can hit back.
One option is to save and invest wisely throughout your working years, starting at the youngest age possible. Another is to have a Plan B, at which you work part time during your working years that will help you save money and earn an income that could enhance your options. There are many ways to do that, for those willing to look for them. If you’d like to check out one of the best, message me.
Working longer because you want to is commendable. Working longer because you have to could be torturous. At the youngest age possible, everyone should be thinking about how to enhance his or her options as life, and the labor force, takes its turns.
If you are an older worker and are able to retire, perhaps you should think about the younger person who really needs your job. If you are a younger worker and see many people working past when you think they should retire, don’t resent them. Instead, learn from them.
Peter

ARE YOU 20-SOMETHING AND STILL LIVING WITH MOM AND DAD?

#millennials #StillLivingAtHome #adults
OK, you’re 20-something, with no job, perhaps a college degree.
Let’s presume you don’t want to be living at home, but you don’t believe you can afford not to.
If you PREFER to live with your parents, that may be a discussion for another time.
Peter Dunn, an author, speaker, radio host and personal finance expert, tells young people to “knock it off,” as the headline reads, and stop laying their financial problems on their parents. He discussed this in a March 29, 2016, column in USA Today.
Dunn says that every late-night pizza, every beer and every other good-time splurge in college contributed to the young person’s financial dilemma.
“Your parents (speaking directly to the young folks) want to cut you off, but are afraid to,” Dunn writes. “It’s not good enough to stop asking for money. You must tell them you don’t need their money anymore.”
Admittedly, the problem is not as simple as it appears. Kids go to college expecting to come out with some kind of job. But, as the last few years have taught us, not only is that not guaranteed, it’s becoming more unlikely in certain fields.
On top of not having a job, the kids may have mountains of college debt lurking in their lives.
Certainly, if you are in college now, you need to be aware that you might not have a job when you get out. The earlier you plan for it, by, say, watching your spending while in school or getting work experience in some area that might employ you when you get out, the better off you will be.
It’s great to love your parents. It’s great for your parents to love you. The greatest love you can show your parents, perhaps, is not to burden their lives. They are trying to save for retirement. Every dollar they give you is one they cannot put to that cause.
As a young person, you can lament that your parents probably had it better than you as far as the job market goes. Or, you can buck up and find ways to support yourself in the current climate.
Believe it or not, there are many ways out there to do that that don’t necessarily involve manual labor. For one of the best, visit www.bign.com/pbilodeau. You may have to look outside your comfort zone for a solution, but the possibilities are out there.
Let’s look at this from a social perspective. Do you really want to bring a date back to your place with your mom and dad there? Do you really want to confine your personal space to one room? Do you really just want to hang out at home the rest of your life?
A life is certainly worth working for, even if that work may not be exactly what you want to do. You can also find a solution (job) that is temporary, while you think about how you are going to use all those skills and all that knowledge you paid so dearly for. Chances are, you WILL find a use for it, but it may or may not make you a living.
“I’ve come to the conclusion that asking 18-year-olds to commit to tens of thousands of dollars of debt, without a job, income or assets, is among the stupidest things modern society does,” Dunn writes.
We hear that you can only get a good job with a good education. But some of those “good” jobs don’t pay much. If you are going to commit to a college education, have a plan. Know what you are going to do with it as you proceed. Also, beforehand, do the math. Decide whether the education is worth the debt. There’ no shame in deciding that college is NOT for you, or just not worth the financial sacrifice.
Whatever you do, give mom and dad a break. Come home to visit, even frequently. But make your home somewhere out of theirs.
Peter

HOW MUCH HOUSE SHOULD YOU BUY?

#housing #RealEstate #OverHoused
Buying a house is never easy, unless you are, say, an investor paying cash.
Most homebuyers need a mortgage, and getting qualified for one is a process.
Peter Dunn, a financial planner, says many people are “over-housed.” It’s a concept of paying too much money for housing, in relation to one’s income. In some areas, housing prices are over the top, and one cannot help paying too much for a house.
But some over-housing is self-inflicted, Dunn says. He wrote about over-housing in a column in the Jan. 18, 2016, edition of USA Today.
He cites the example of Mark and Jennifer, a Midwestern couple in their mid-40s, who decided 11 years ago to build their “family home.”
Mark and Jennifer knew they were pushing the limit of what they could afford, but the bank approved them for a loan. That gave them reassurance, Dunn writes.
“Things spiraled out of control from there,” Dunn quotes Jennifer.
When housing bubbles burst, it’s the over-housed folks who get slammed first. Are you over-housed? Here are Dunn’s pitfalls: if you’ve dumped everything into a house, and have no emergency fund, you could be in trouble. There are also the realities of increased utility costs, home maintenance, homeowners insurance, property taxes etc. If you didn’t budget for those increases, you could be in trouble.
Mark and Jennifer’s home was 2,000 square feet bigger than their previous home. Their utility costs were much higher and, after two homeowners insurance claims, their premiums went through the roof, Dunn writes. Their tax assessment was based on the value of the land alone. When the structure was added, their tax bill tripled, Dunn writes.
Worse yet, the couple hasn’t saved a dime for the future, Dunn writes. If you’ve given up vacations, new clothes and dining out to live in your new home, you are probably OK, Dunn writes. If you’ve given up your current and future stability, you’re in trouble, he says.
Dunn’s rule of thumb: don’t let the bank tell you how much house you can afford. Being house-rich and cash-poor is not a good situation, especially if housing values plummet, as they did in 2008. Your house is a significant investment, but don’t rely on the equity in it to secure your future. You need to be saving and investing regularly.
The folks who have a comfortable retirement are those who lived BELOW their means, and socked money away. If you buy or build a house, make sure your mortgage payment and other expenses leave a portion of your paycheck left over to save and invest.
Taking vacations and dining out occasionally are nice, too, but saving and investing for retirement are a priority.
Of course, there are ways to earn extra money so you can live in that dream house. For one of the best, visit www.bign.com/pbilodeau. You’ll see stories of people who bought their dream home, but not until they had the money – often the cash – to do it.
Remember, too, that homeownership is not for everyone. Though the American Dream may dictate that one owns his own home, give some thought to the life you want to lead before deciding to buy or build. That house could own you, in more ways than one.
In short, do the math before buying or building a home. Make sure the house doesn’t eat too much of your net worth. If you tap out your emergency fund for that down payment, it could come back to bite you.
Just because you think you CAN swing it, doesn’t mean that you SHOULD.
Peter