Three Financial Strategies

June 10th, 2013

What three things can you do to cope with the economic chaos around you?

First, pay off your mortgage. Why? To improve your monthly cash flow. Other say keep your mortgage for the interest tax deduction and to have more money to invest in other things. I agree with the debt free advice in the Bible and have lived it for almost 23 years. Save money for taxes in a separate account but increase your monthly cash flow by not having any mortgage payment. You will be better prepared to cope with emergencies and you can save more. You will be ready to jump into real estate investments which are more secure in my opinion.

The stock market goes up and down but real estate is forever. Even if the assessed value of a house goes down, rent keeps coming in month after month.

Second, sell your investments and go into a cash position. For how long? Probably a year or more. Why? Won’t I miss stock market bargains? Yes, but you will also miss stock market hiccups and down turns. If you have cash when housing prices drop, you can jump in and buy some investment property and boost your income.

I remember reading about NYC homeowners who sold in the boom of the early 2000’s and rented for awhile. Many bought again after prices tumbled and own more now than they used to and are paying less. Pretty smart, if you ask me.

Third, make a budget. If you have never done this, now is the time to start. Have a separate savings account for each major category, like general savings for annual big bills. Long term care insurance, real estate taxes, estimated tax payments fall into this category. Another savings account could be for travel, if that’s a priority. It’s the electronic form of envelopes that people used to use to squirrel away money.

Some say I’m nuts because I’m not leveraging my assets. Missing stock market growth is a big mistake accusing people hiss.

I say that I sleep well at night, knowing there will be no seeping of assets while the stock market tries to find its identity. I can pay my bills and I know that I can still travel despite cutbacks in regular spending.

And I am ready to make another real estate purchase when prices settle.

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