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Sure you know all this stuff. Me, too. Or do we?
1. Keep upgrading your house until it’s the maximum (or more) that you can pay for. If we ever needed proof that a house is not really an investment, the current market should have done it. Really, a house is more like a collectable—hard to sell (even in more flush times, it was a lot easier to move a stock), uncertain and inefficient market, and subject to complicated tax consequences. At least with collectables you can give them away to your kids. Also, the bigger the house, the bigger the maintenance and the more likely you are to lay out more money to keep up with it. And then there’s the neighbors—you’ll be keeping up with them, too.
2. Do a big move, upgrade, or addition to your house while your kids are in high school. You’ll soon find yourself with a big, empty house. Or maybe the kids will move back in. I’m not sure which is worse.
3. Take out a second mortgage and go spend it. Maybe, just maybe I’m okay with these loans if they’re actually spent on something that adds value, like starting a (well thought through) business or improving the property. Taking a European vacation, not so much.
4. Take out a big college loan. If it’s more than you’ll earn your first year out, it’s too big. At least you’ll remember your college years forever. Every time you write that check.
5. Don’t bother reading the contract. Don’t sign on the dotted line until you can explain to me or your ten year old how much it’s going to cost you.
6. Buy an investment you don’t understand. See #5—if you can’t explain how you’re going to make money on it, don’t buy it.
7. Get greedy. Bernie Madoff wouldn’t have had so many clients if he’d told the truth. They got returns none of their friends could claim, and paid a lot for bragging rights at cocktail parties. If it sounds too good to be true, well, duh…
8. Believe that “my broker is a nice guy.” Another duh—do you think he’d sell anything if he had fangs and a forked tail? I’m certainly not against people making money, but your stockbroker has no legal obligation to keep your best interests foremost. Sometimes the correct financial advice is the hardest to hear, and people who are the most pleasant don’t necessarily tell the truth. Friends of Bernie, anyone?
9. Put your kids first. I don’t mean emotionally, here, but paying for college while not saving for retirement, or habitually bankrolling adult children, or showering young children with material goods—well, don’t do it. You’ll be broke and a burden, and that’s no favor to anyone.
10. Cultivate expensive tastes and hobbies. Buy a boat, develop a wine cellar, develop a fondness for skiing when you live in the South or Midwest, stay at the best hotels—all great stuff. Expensive stuff. Black money sucking holes kinda stuff. If you’re wealthy enough that it’s chump change, fine. Otherwise, as they say in Texas, big hat, no cattle.
11. Don’t give to charity. The world is a terrible place and everything’s in disarray. Don’t try to change that, okay? Much more fun to complain. And that’s one way to economize, right?
12. Spend what you make. Or more. I’m not even going to go there.
Maybe that’s enough negativity for one week. Next week I’ll go with the top things you can do to improve your wealth picture.
