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Our culture’s psychology today is not doing well.  People are absolutely panic stricken. Everything they thought was true about money is being turned on its head. Seemingly rock-solid institutions have collapsed.   Average affluent individuals have lost 25-50% of their net worth in the last year, and many have of course lost far more.  These are people who seemingly did everything right and were following the rules–diversified portfolios, thoughtful weighting of risk vs. return, etc.  So what do we do now?

How do we instruct our children moving forward - what common sense are we to use to build the future we want to live?

• First - Careful, thoughtful and responsible choices. If we learned anything, could be we consider not only what we want but what might be lost and do research and investigate our options more thoughtfully.
• Second - The cry of the ages, save more & spend less. We now know the purpose of savings and lots of it, maybe the US savings rate will stay up & we will discover we not only like it but will live more peacefully doing it.
• Third - How about a responsible plan that gets reviewed often and followed rigorously until following it becomes a habit.  This could curtail some of the out-of-control emotional spending.
• Fourth - Let’s create additional sources of income, passive income so we don’t have to rely 100% on an ever evolving career or job.
• Fifth - Design our children’s education system to include basic financial literacy then support it with practical applications and examples from the parents who follow those very principles.
• Sixth - We could also look for others in our communities who needs support and work with them in ways that transfer the skills that come from the unique experiences we each have from our lives.

In the coming posts, I’ll discuss & develop each of these a bit more.

What do you think?

Danno. . .

She is a school teacher, he is in the technology game, and they just married last year.  They’ve been working on combining two financial household, so the combining of two budgets into one is a struggle, but 90% through it, they see enough to know what monthly payment they can actually afford, and they could prove it to you.  In our coaching sessions we all agreed that saving 10% for their future was the right number.

She brings two properties to the marriage, him none but he does have some debt & minor credit issues that will be solved in the next 30 days.

They have a chance to buy a single family home in Silicon Valley that would have cost $650-750,000 1.5 years ago for about $450 to $475,000 now.

They also have access to low rate teacher financing with 3% down payment, or they could use his no down payment veterans’ loan eligibility.

A wise move they made was to select and agent and begin looking at property on weekends by themselves before they were actually ready.  That way, building the sensibility of what’s available at what price, they will instantly be able to spot the good deals from the average and be ready to make a saleable offer to the sellers.

Again, please tell me, who is buying real estate right now?  It’s your turn, click the comment button and send me a profile of yourself or someone you are working with - 

What do you think?

  A financing client I’ve worked with for many years asked a difficult question last week.  He is contemplating turning his keys in on a home he purchased 6 years ago as part of his retirement plan.  His main concern how a foreclosure or short sale would impact his credit & if he really needed to be concerned about that with the number of people in situations like his.

For retirement planning purposes, he purchased this home and planned on big appreciation to make up for lost savings in the “Dot Com Bust” of 2000 & 2001.  The property value increased, he refinanced taking out cash to purchase two more properties.  He had a high leverage, high appreciation plan.

My answer was he did need to be concerned and that he would loose between 100 & 150 points in credit score.  Repairing this score will not happen quickly and for a period of at least 7 - 10 years my client will have less access to credit with increased expense for the credit he does get.  This in turn will negatively impact his ability to acquire additional financed assets he might use for retirement.

Although he called to discuss one property, he will soon need to address the other two which are high cost as well.  This strategy works well in rapidly appreciating markets which never last as long as normal or down market.

He would have done much better moving his profits to a lower leveraged property that could carry itself in any market.  That would have been a most powerful move.  Also, the financing on low leverage properties is slowly retired as tenants make their rent payments which increases equity.

Thank you for reviewing this and for your comments.

I am a LinkedIn member, have nearly 1,300 front line connections and 11,000,000 total.  I have had a 30+ year career instantly displaced by the recent down turn in the economy.  Fortunately I took action quickly and am now leveraging those years to help others who may be in financial difficulty in these times. 

In the months to come, employment or a job may not be sufficient to survive.

My questions is this:  I’ve started a continuity group supported by 14 Tele-course calls on personal finances from the basics of budgeting clear through effective retirement planning.  See my profile and this link - Don’t Let Your Finances Ruin Your Personal Life. 

I’ve noticed people will readily discuss their financial situation and most specifically how poor it is, how much they would like it to change but when offered the opportunity to make something happen to change it, nearly 95% of the population stop short, don’t engage, and continue their bad habits and to suffer nedlessly. 

What ideas do you have that would made a difference for yourself, something that would have you take action, learn even the basics of how to get exactly what you want from life, even in times like these?

Again, Thanks - Dan