Every week on the program, I remind people of what they might be doing that hurts them financially.   There are generally 3 things people are doing wrong.  The number one thing is that they don’t understand their mortgage and how they can make money by managing their equity in their house.  The number two thing that people do wrong is that they don’t have a good understanding of retirement plans.  People just automatically do something they were told to do in planning for retirement, which may not be in their best interest.  They third thing has to do with choosing a good financial adviser.

Too many financial advisers today are still doing the same thing they were doing ten, twenty, even thirty years ago.  But it’s a different world.  The world has changed.  We are now in a global economy.  The financial adviser that you have may be putting you in harm’s way and their not even aware of it, because they’re listening to the people they work for and pushing their products.

Take for example, the year 1998.  In 1998, we had a good year.  It was a good year for the economy.  Then, in 2001, we fell back.  After that, we started to gain momentum and then we fell back again.  The economic picture changed a lot between 1998 and today.  But most people are in the same place today in 2008 as they were in 1998, because they didn’t see what was happening.  Their financial advisers did not see what was happening.

I challenge you today to start doing things differently.  Look at the financial adviser you currently have.  Is there a situation that might be better for you in 2008?  Get our free reports and learn how you can take control of your financial plan.

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Most people believe home equity is a prudent investment.  Most people believe that home equity enhances net worth, that you can make money on your home equity and that mortgages should be eliminated.  Let’s take a closer look at home equity as an investment.

Let’s say, I had an investment. Here are some of the terms of this investment: You can pay more than the minimum monthly contribution, but not less.  If you attempt to pay less, the financial institution keeps all the previous contributions.  The money deposited in the amount is not safe from loss of principal.  Each contribution made to the account results in less safety.  The money in the account is not liquid.  The money in the account earns a 0% rate of return and your income tax liability increases with each contribution.  When the plan is fully funded, there is no income paid out.  You know what I’m talking about here?  I’m talking about your mortgage.

Home equity has 0% rate of return.  Home equity is not liquid.  And home equity is not safe.  Home appreciation is another story. Home appreciation happens when the prices of houses in the area goes up.  Don’t confuse home appreciation with home equity. If there are 2 homes, each is worth $500,000. and home #1 has $50,000 in equity home and separated the equity and put away this equity in side account earning interest on the $350,000. Home  #2 has $400,000 of equity in a fixed rate 30 year mortgage. Now suppose you lost your job and couldn’t pay this mortgage, and you needed this money to live on. How would home #2 get it out of the home? Mortgages are based upon income. It would be impossible to get this money out without showing an income to pay it back. Lets take a look at home #1 again, they separated the equity, lost their job but have $350,000 plus interest to tide them over until they found another job. Home #2 is now looking at foreclosure, their money is tied up in the house. How will they survive if they can’t make the mortgage payment?

You can make home equity a prudent investment. Its up to you to learn more and seee if this plan can work for you. email me at aklfinancial@mac.com or on this website for more information or a specialist in your area who can show you the way to do this. Don’t let an unqualified friend or person try this for us. 

Alan

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