10 Lessons From the Smartest People I Know

https://www.kimsnider.com

The smartest people I know make their money work hard. Money tied up in your house is lazy money. Your house may appreciate over time, but historically, in most parts of the country, you are lucky if your house goes up by 3% - 4% per year. That is not enough.

Money tied up in your house is not liquid. When you need it most is when it is going to be hardest to get out. I have a friend who is in financial trouble. He has $500,000 of equity in his house. He can't get a home equity line of credit because he is in financial trouble and he can't declare bankruptcy because he has too much equity in his house!

Money tied up in your house produces no cash flow. I am all about cash flow. It makes the problem of markets and economies that go up and down over time much more manageable.

Money tied up in your house is not diversified. For most of us, the value of our home represents too much of our net worth to be tied up in a low return, illiquid, non-cash flow producing asset.

Finally, people cling to the quaint idea of a paid for house as security. No one can force me out. At least I'll have a place to live. It's mine. I own it. It's paid for.

It's also wrong.

The smartest people I know don't pay off their house or even make extra payments on their mortgage unless they have more than enough money to meet all other financial objectives.

Action: If you are making extra payments on your primary residence, find a better use for that money.

What about you? If you were going to write an article entitled, Ten Retirement Lessons Learned From the Smartest People I Know, what would be on your list? Share them on my blog or by sending me an email at kim@kimsnider.com.

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buy gold and silver

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