There’s Money Everywhere – Part 1 of 3

Sam Walton once said, “Money isn’t scarce – Vision is!”

I have found that statement to be very true. We have money all around us. The problem is knowing where it is and accessing it.

The number one area people have money in but don’t see it as money is in their Home Equity. If you have a home with a mortgage of $100,000 but the home is valued on today’s market at $300,000 then you have equity of $200,000.

That equity is just sitting there doing nothing. It is earning no interest! It is not in compounding mode! Compounding by the way is the magical ingredient of wealth creation which is why Albert Einstein called Compound Interest the eighth wonder of the world. Yet your equity just sits there – dead – doing nothing.

With home prices falling in the USA what if next year your home was worth $250,000? You would’ve lost $50,000 in equity! You could have had that money sitting in an investment and earning something. Even if it was in a high risk – high return investment it would be a better gamble than just letting it sit there doing nothing.

However, I do know that to many people touching their home equity is sacred and not to be tampered with. If you are one of those people the only reason you feel that way is because you don’t understand that even by doing nothing you are taking a risk (read the example above).

On this subject as a Wealth Coach here is what I advise clients. If you have $100,000 in equity take out half of it. With that half divide it into 4 parts and invest as follows:

1- Something really safe like Money Market Mutual Funds or Certificates of Deposit. Typically these will pay around 2% to 4% if you are lucky. Still this is better than earning 0% leaving the equity in your home doing nothing.

2- Invest in higher yielding Mutual funds and Bonds. Typically these should yield 8% to 18% per year and therefore are riskier than # 1.

3- Invest in Real Estate, Real Estate Co-Ops, Real Estate shares.

4- Invest in high risk / high return investments. You need some of these crazy, mad investments in your portfolio if you are going to ever hit a home run. The secret is to find someone who has been successful with these and ride their coat tails.

In 3 to 5 years no matter what happens to home prices in your area you should have made some money with that equity you withdrew from your home.

The bottom line folks is either YOU are going to Work Hard For Your Money or you are Going To Let Your Money Work Hard For You. I prefer the latter!