by | | The Blog
There’s a lot of talk about housing market stabilizing. Some homeowners, for instance, see the value of their houses rise simply due the decreasing availability in their specific area. Unfortunately, from a bigger-picture perspective, a look behind the curtain reveals that the recovery from the bubble-burst has a long way to go. Seniors, in particular are getting killed by the foreclosure crisis
Here’s why:
- There are still 23 percent of all loans in America that are underwater where the mortgage on the house is greater than the value of the home
- There are still almost 1.5 million homes in the shadow foreclosure inventory
- More than 1.5 million seniors have lost their homes and millions are still at risk
- Billions in home equity loans will require principal AND INTEREST payments to be made starting in 2012. And, many of these loans are backed by properties that are not worth the amount borrowed against them
Seniors are particularly unprepared because they have no way to increase their income. Many elderly are losing their homes because they cannot pay property taxes. Reverse mortgages are not available because there is no equity. Many more will lose their homes because they have used up all their assets and do not have enough income to stay in their homes and they live in a home that’s now worth about half what it used to be worth and part of their net worth has been consumed by the huge decline in housing values. Many of these people would have benefited from the kind of planning and strategies I offer where they treat their home as a place to live and not an investment….hence keeping their equity in their homes outside of their homes in an account that’s safe, accessible and earning a real rate of return.
Bottom line is there are many things you can do independently to succeed no matter how robust or disastrous the economy is; one of the great advantages of living in the land of liberty, freedom and rugged individualism. Unfortunately, your real estate is not one of them. You can do everything right, over and above and to the letter; but if your next door neighbor doesn’t exercise personal responsibility in his own back yard, yours will suffer as a result.
For those that still view their home as an investment, I’ll share a pop quiz I shared in a prior article in hopes that you might reconsider your position. 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….yeah the one you probably still view as an investment.
While your home is certainly your castle, it’s definitely not a savings account. Unless of course your entire neighborhood knows your PIN.
by | | The Blog
I’ve stated in previous posts and blogs that this country doesn’t have as much an economic problem as it does with priorities. While there are great and indisputable fiscal issues making success unnecessarily difficult, success is never easy to begin with even in the best of times. Conversely, there are people determined to be successful and stay that way, regardless of who’s in The White House or on Wall Street.
Among countless issues in the news, there’s a growing statistic of people experiencing difficulty achieving the necessary savings for retirement. Some cynics have gone far enough to declare retirement as dead as the Latin language, citing everything from dropping income and slashed pensions, to the simple fact that the numbers necessary to live off the interest are impossible for most to achieve. Since everyone is different, there aren’t any easy answers. But since everyone is different, there are personal decisions you can make to determine which statistic you want to be.
First off, assert your individuality by recognizing the fact that the idea of 65 as your retirement birthday present was introduced in the US in 1935 when the average life expectancy was 61.7 years. This does not need to be a drop-dead date to determine success or failure. In a day where the morning shows seem to constantly report a 100 years-young codger in the mid-west, people need to realize this isn’t a race. Just because retiring early is an accomplishment, retiring at 70 is not a tragedy. In fact, the odds of success by working five more years shoot up to 85%. You’ll get there when you get there.
Everything else lies personally within you and your ability to honestly answer questions you need to ask yourself. How much do you need to retire? What do you need to do to get there? How long will it take? And here’s the one nobody wants to ask themselves. What are you prepared to sacrifice to get there? Do I need a pool this year or can it wait? Does my car have another 10,000 miles on it? Can I afford a vacation right now? Is this flip-phone good enough? Do I need to spend even more time away from home to get where I need to be?
You are not a statistic. You are an individual. Success is attainable and so is retirement. What are you prepared to do?
by | | The Blog
Nothing solidifies a relationship more than trust. It’s been said that if you’re able to say you have one best friend you can trust with your life, you’re in pretty good shape. If you find a car guy you can trust, he’s your car guy for life. And as far as romance, if you don’t have trust, “till death do us part” is out of the question.
When computers found their way into more and more people’s households around the mid-90’s, computer dating soon followed. Back then, finding a date through your home computer was at best a stigma and at worst, downright creepy. Over time, as technology evolved and became ingrained into our everyday lives, computer dating became accepted, popular and ironically enough, safer. Dating services are so thorough with their screening process nowadays that you end up knowing more about your blind date than you do about members of your own family.
Why not take the concept a step further; say with financial advisors? That’s a question Shelley Hackler is asking with her new business, Investorclarity.org; a business that uses computer-based algorithms to match financial advisers to the user. Instead of just a simple directory, Hackler has each advisor fill out more extensive and detailed profiles to better match a potential investor’s specific needs. Much like picking a life-partner, what’s more important than choosing a person you intend on entrusting with your financial future and being as picky as you please?
The more you know about someone, the less intimidating they become. And sometimes, like dating, a simple recommendation from a friend may not be enough to be the best fit for you. In fact in some cases it could backfire drastically for no other reason than, despite the best intentions, your friend is not you.
By no means should people frivolously, haphazardly and carelessly pick a financial advisor. But there’s no denying the intrigue of this potentially groundbreaking concept. While most ask, why people should try it, the cautious optimist in me asks, “Why not?”
by | | The Blog
It’s no secret the US Federal Government spends more than it brings in; nor is it news to anyone who’s been paying any attention this election season that the gap has increased exponentially within the last few years. In an ever ongoing attempt to reduce the trillion-dollar-plus deficits, politicians are always brainstorming new-fangled revenue sources to tap into instead of, God forbid, reducing their obscene spending of other people’s money. The latest government account yet to be pillaged is the $18 trillion or so in 401(k) accounts that are, at present, untaxed. According to a new proposal, all that may change.
Not only is there a plan under consideration to limit employer-employee 401(k) contributions to 20% up to a $20,000 ceiling, but the tax deductions would be replaced by an 18% credit sent directly to everyone’s retirement account; making any contributions to a 401(k) plan treated as taxable income. The credit is said to increase revenues by approximately $458 billion; another short term Band-Aid on a long term financial cancerous cliff, especially if programs like Medicare and Social Security are left rudderless.
What’s interesting to note here is the possibility of an unintended lesser-of-two-evils result for the taxpayer, assuming this outrageous and irresponsible proposal is given the green light. Who’s to say that your present tax deferral won’t wind up becoming a costly tax-procrastination when it’s time to retire, cash out and pay up? Getting it over with, a little at a time, one payment at a time, in order to enjoy a tax free harvest via ROTH plans and ROTH-LIKE plans, may very well be worth the temporary and immediate pain of taxable income you can’t spend. Not to mention the very real possibility that the tax rate, according to experts, will be higher at the time of the withdrawal than during the contribution process today. A possibility made ironically clearer by the very proposal laid out by a political system whose spending has reached a level of complete insanity.
Of course, none of this would be relevant if most workers opted out of the program and companies eventually eliminated the option all-together. Hopefully, someday they’ll finally realize you can’t simply tax your way out of a financial crisis.
Hopefully.
by | | The Blog
This week I read a story entitled…
“After FCAT Scores Plunge, State Quickly Lowers the Passing Grade”
The particular state, test, nor circumstances in the story were relevant to the all too familiar point that popped into my head. In this instance, the state may very well have had their reasons for doing so. Individual student aptitude, after all, is nearly impossible to accurately nail down by one all-encompassing standardized test. Nevertheless, I was troubled that the immediate response was not rising to the challenge of improvement, but lowering the minimum standard.
From the days of “Everybody gets a ribbon” in little league, to higher education today, it seems the mind-set of educators and parents alike has evolved (or devolved) from learning from one’s failure, to a perplexing and futile attempt to eliminate it from the curriculum altogether; thereby supposedly protecting their feelings and keeping self-confidence intact. The results, unsurprisingly, is a generation largely consisting of individuals who not only lack the mental capacity to handle real failure when they’re thrust into the unforgiving real world, but are also sadly unable to see the valuable opportunity failure presents itself as a tool to learn, improve, and grow as a human being.
Parents naturally want to protect their child from pain and suffering. And yes, failure does somewhat involve those experiences. But if you look at it as a case of instead of “protecting from”, to “building an immunity to”, it’s easier to understand. For instance, when you immunize your children from disease, what are you actually doing? You are giving them small harmless doses of the disease until the body incorporates it and develops the anti-bodies to protect itself from greater exposure to the disease in the future. Same concept. If you let your child deal with the painful loss of a basketball game or experience the repercussions of seeing a red “F” at the top of a math quiz when it’s not a matter of life and death, they’ll be better prepared as an adult when faced with the reality of a job layoff.
Is it any wonder why there are more and more stories about fired employees returning to the office with a gun?
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