Pop Quiz: If someone were to offer you an investment where you can pay more than the minimum contribution, but not less, which would result in loss of previous contributions, the money is not safe from loss of principal, is less safe with each payment, is not liquid, earns 0% rate of return, the tax liability increases with each payment, and when fully funded, no income is paid out, would you be interested? Before you passionately answer “no” with possible expletives, I just described your home.
The ripple effects of a bad economy permeate every facet of our lives in a very real way, and your house is no exception. In fact, recent reports on the significant drop in median net worth of families are in part a direct result of the dropping housing values. Your home as an investment these days look more and more like automobiles; which as most of us know, are no investment at all, especially when taking into account the interest, taxes, repairs, insurance and other costs of maintaining it. They’re more of an accomplishment, a status symbol, a check box off your American dream list; which is fine as long as houses are similarly regarded.
To ensure that you continue to win the money game, view your home as a place to live…not an investment, not a place to park your money and certainly not an ATM for heaven’s sake. The only tangible benefit to owning a home is hopefully over time, you will build enough equity to be able to transfer your debt over to a bigger home. In the meantime, I refer you to the inspirational phrase, “Life Is What Happens When You’re Making Plans” as it pertains to being a homeowner. You have a house. Enjoy it, make it a home, make memories and be thankful you can still pay the bills on time. It is a nest, not a nest egg.
The days of mortgage burning parties are over.