Time is Ticking

September 12, 2014

ticking clock_thumb Concerning the economy, there’s a general sense that we’re still spinning our wheels after six years recovering. Growth has been anemic at best, punctuated with occasional quarterly contractions, and this sense of malaise has compelled many individuals to hold off on planning for the future. Because they feel no forward momentum with the economy, they aren’t moving forward with their own finances. This, however, is folly; now is the time to get your financial house in order! Eventually the economy will recover, and when it does you need to be ready for it.

If you subscribe to a demographic-focused approach to economic modeling, as I do, you can understand our current economic malaise by looking at trends in demographics. The Baby Boomers began retiring in 2006, causing a drop economic activity and in consumer demand. Generation X simply wasn’t large enough to replace the Boomers. It won’t be until the Millennials reach economic maturity in 2020 before the economy begins to recover. After years of hearing about ‘green shoots’ and ‘Recovery Summers,’ a meaningful recovery has yet to materialize. Just this year, we learned that new-home construction starts collapsed versus the year before. No amount of government spending can mimic the same quality of economic activity as was lost when the Boomers started retiring.

This means we are roughly half-way to a full economic recovery. Six years may seem like a long time away, but time is quick to pass: You’ll want to start ordering your finances now, in preparation for the future. For many, this means ensuring their current liabilities are structured as efficiently as possible. It means moving credit card debt to low-interest cards and, ideally, paying off the debt altogether. It means taking advantage of low interest rates to get your mortgage payment as low as possible. For veterans with a VA loan, the Interest Rate Reduction and Refinance Loan, or IRRRL, is an option to be familiar with; for those we got into their home utilizing an FHA loan, an FHA streamline may be an option to consider as well. These programs, along with simple no-cash-out refinances for conventional loans, are great for simply reducing your payment.

If you’re interested in taking advantage of the hundreds of high-value properties on the market for flipping or renovating and using as a rental, a cash-out refinance is a great option for sophisticated and disciplined borrowers. You can take cash out of your current home (assuming there is sufficient equity) to use toward a down payment on another property. Similarly, the FHA 203K program allows even amateur investors with little investment capital to rehabilitate run-down properties.

There are a multitude of financial products available to help individuals take advantage of the many real estate investment opportunities out there. But these properties won’t be around for long. Time is certainly ticking, even if the economy feels like it’s stuck in the mud. Whatever your future financial goals may be, now is the time to begin planning. Whether it’s paying off debt or leveraging current assets for a down payment, it’s important to begin as soon as possible.

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