I have said for some time now that there are some silver linings associated with this economic implosion. The biggest and best of those is that there has been a smart re-thinking about the rules that tell us how to build wealth. Interestingly, the “new” rules will look awfully familiar to those who are from past generations. That which is old is new again, and never has that been more beneficial to us than when it comes to the broad guidelines associated with building for the future.
When it comes to retiring, later is now better. In truth, later was always better, but the hype associated with early retirement overtook us, and was too tempting to seriously question. First, working more years is better for your physical being; productivity keeps us alive longer, and helps us to stay healthy. Also, the longer you work and set money aside, the more you’ll have saved when you reach the point where you absolutely must stop working.
Re-think the idea of real estate as immediate wealth. Whether it’s your principal residence or a house you own purely for investment, it’s fair to assume that we will not see supersonic appreciation again in real estate for a long time. Putting money into real property is still a good way to build equity over the long haul, but keep your expectations reasonable. The days of the instant real estate millionaire are basically gone.
No longer look to borrow your way to wealth. The idea of leveraging yourself to great levels in order to buy investment property or stocks is dead. Why? Because we've seen, first-hand, that the assets you were buying which were supposed to always outpace the cost of your borrowing don’t always do so - they can, in fact, crush you. Save borrowing for things like your home and your car…and do THAT as prudently as possible.
The investment lessons to take from the Great Economic Implosion of 2008 are not that investing is bad…but that it cannot be approached as though its success is always guaranteed. It’s not. Don’t approach investing as you did (or would have) a few years ago; approach it as your parents and grandparents did. Do that…and you’ll do just fine.
Robert G. Yetman, Jr. Editor-At-Large www.ChristianMoney.com