Monday, April 8, 2013

The Hidden Lesson for Homeowners and Financial Advisers from Stockton’s Bankruptcy

The Hidden Lesson for Homeowners and Financial Advisers from Stockton’s Bankruptcy 

News of the official approval of Stockton, California’s bankruptcy has been center stage this past week. Judging by the media coverage so far, many see it only as the story of the most populous American city ever to enter Chapter 9 bankruptcy. However, this event contains an underlying important financial lesson for American homeowners and the financial professionals who advise them.


As we are told, the city of Stockton finds itself in this unfortunate situation because of the housing crisis. Apparently, the bulk of Stockton’s revenue comes from property taxes levied on homeowners, but due to plummeting real estate values, recent revenue has fallen short.

Stockton city officials unfortunately failed to understand – or took for granted – a fundamental and incredibly important financial lesson: It is not prudent to plan financial sustenance around the assumption that the value of a house – or any other piece of real estate – will remain constant, or increase, for that matter.

This is just basic common sense which you probably already knew. I’m afraid, however, that millions of American homeowners are making the same mistake, to some extent, by basing their future financial sustenance – retirement income in this case – around a similar assumption about the equity in their homes.

In fact most folks would even argue – wrongfully – that the safest means of supporting one’s income needs in retirement is by building equity in your home. Of course, we all hope that over time the value of our houses increase so that we can build more equity. But that’s a dangerous proposition around which to base your livelihood, isn’t it? The result that impacted Stockton could also affect you – what happens if the value of your home decreases through no fault of your own?

Hopefully, this critical lesson will become apparent to the millions who may be ignoring reality or, quite frankly, are being led astray by unrealistic financial advice. If you'd like to manage your equity based on solid, realistic, factual, and savvy ideas, you'll be interested in my book, Savvy Strategies for Turning Your Mortgage into a Goldmine. 
Call us today at  877.656.9111 or visit us on the Web to schedule your no-strings-attached consultation!

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