Very often I find that people are not focusing on the resources that they have. Or an even bigger problem is that they don't move in the direction they want to go. One analogy is that of a car wreck. Most people who see that they are about to get hit by a car, lock up. They slam on the brakes, wait for the impact and then assess the damage. It is the very few that will look in the direction that they want to go and accelerate. This is a common mistake for most.
Where does this apply regarding your mortgage, real estate, or your long term financial plan? For most right now, we are in the middle of a car wreck. You could owe more on your home than it is worth. You could be in the middle of a career change. Or you could be doing fine, though doing nothing. In any of these cases, you're locked up. You're waiting for the impact as opposed to moving in the right direction for you.
Let's address some of these dilemmas. If you're in a house in which you owe more than it's worth, do nothing. Pay your mortgage and wait. Do everything possible to keep your credit in tact and maintain the status quo. There are a number of things that will be developing in the future to help you out. You may want to contact your lender and see if they will re-negotiate your balance. It's not likely that they will do anything immediately; however we will need to see if any Federal intervention materializes to help you out. I realize that this is not the answer you may want, though it's the only answer available at the moment. Worse case scenario, your home will eventually appreciate.
If you are in the middle of a career change, or if hard times are coming your way, you may want to take a look at your long term picture regarding what you are going to need in the near future. Is your car lease coming due? Do you need credit for anything in the next year? If so, take care of that before you change jobs. Maintain the status quo for as long as possible and take care of any needs you may have in the immediate future before letting your credit take a hit or allowing your house to go into foreclosure.
If everything is stable in your life, and you are doing nothing, this could be the biggest mistake of all. There has never been a time in history with as much opportunity for people who are able to maintain their current quality of life. The WORLD IS ON SALE. Now is the time to invest in the future. Through the stock market, life insurance, or annuities you can make major gains towards your retirement. Furthermore, interest rates are at historic lows and likely to go lower. It is a great time to assess the value of your home and the opportunity cost that you may incur by not taking advantage of these rates. For instance, if you take $100,000 of equity out of your home at 5%, you will have a net after tax rate of roughly 3.5%. You could take that money and buy an annuity that guarantees 7%. After 20 years, that $100,000 is worth $386,968. It would have grown tax free and could be set up to give you income for life. Can your home equity do that? No. Furthermore, there is no possibility of loss. You can't lose your money. This is just one method. There are several. Though now is the time to explore your options.
My point here is simple. Assess where you're at. Look at your resources and make the most of them. You could look at this time as the launching pad to a long and prosperous life.
If you would like to discuss these options and how they relate to your particular situation, please give me a call (540) 761-7868 or send me an email at rlusk@1stmetro.net I'll be happy to talk with you.
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