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Personal Finance Funk

Today, I’m sitting in a library realizing that I’m in a kind of personal finance funk lately and that I made a lot of personal finance mistakes these past years, but now I’m down the road so far that it’s hard to imagine going back and rethinking my choices.  Things have been set into motion and objects altered based on the decisions that I’ve made and I’m finding it hard to fix matters.  Today I’m going to write about my personal finance mistakes and the possible options I might have to alter them in a “talking to myself” format.

einsteinsilly

Money Trapped in the Equity of my House Problem

For a while, I was debt free and even afraid of debt.  I created an accelerated debt repayment plan and executed it with a great degree of success.  I knew that such a plan would guarantee that I force myself to stick to it and get it done.  But on the negative side, now I have a good chunk of my money tied up in home equity that hasn’t really appreciated in my city much.

On the positive side, I had great peace of mind during “The Great Recession” since I was totally debt free during that period of time.  I admit, it was a good move that made me almost stress free a good portion of the time during that horrible period.

So what am I complaining about?  Well, when I started to make payments to pay off my house early, I knocked out a 7% borrowing rate, but later (during the last three or so years) I refinanced at 4.5%.  Had I just pumped the money into my 401k (or other investments), I would have a much healthier balance today.  I’m not saying that my balance today is unhealthy, but it would definitely be a larger amount.

So what is one thing that I can possible do?

Well, I could buy a new home and get a mortgage at the still relatively low rates, then take money from the sale of my exiting home and invest the money is some conservative investments that earn me a higher interest rate than my mortgage interest rate.  This is one option that would free up my money, while at the same time take advantage of the lower debt interest rates.  While I’m a little late to the boat on this one, it would still be to my advantage.

My Portfolio is Out of Balance

Overall, I’ve done well in the stock market these past few years, and this creates a most unusual problem for me.  My stock portfolio has too many speculative stocks that now make up a percentage that is too high for my portfolio.  While on the surface this might not seem bad, after all one want speculative stock jump up in value, right?  But the problem is that such stocks also can drop just as quickly.

What I’ve done, and still need to do…

First, I’ve already sold some of the stock when it was double what I initially invested, so I took my initial investment out (this was awesome)!  Unfortunately, my shares kept rising so much that I stopped this basic rule and started letting it ride (boo).  While I’m still up in the stocks that I left alone, they have come down a bit so that I just left them alone now.  What I need to do is take the hit and take out my principal as I should have done at the beginning of this year when the stocks were up over 100% vs my investment in them.

Next, once I sell my speculative winners and losers, I need to invest the money in some stocks like dividend stocks or something more stable.

So neither of my personal finance problems are unfixable, but sometimes they seem that way.  The steps to resolve such financial imbalances is to think it through, develop a plan, then execute it.

Thanks,

Don

3 Responses to Personal Finance Funk

  1. Interesting thoughts Don. I was curious when you did pay off your mortgage how you’d feel.

    I’m in a situation where I’m levering up AGAIN on another house with panoramic views in SF and am considering paying off my rental property mortgage which is at 3.375% vs. 2.5%. Would you do that?

    • Hi Sam,

      I felt great! Top of the world and a huge financial hurdle cleared!

      Sounds like a great piece of property! I don’t think I would give up cheap money now. In fact, if I sell my house, I probably wouldn’t put all the money from the proceeds back into a new house or rental property.

      Hope all is well on your end of the country! 🙂