The phrase Chinese fire drill is synonymous with a lot of confusion and chaos which is exactly what is happening in the Chinese markets right now they are in a subprime crisis and hundreds of billions of dollars are going to default similarly to what happened here in the United States in 2006 but on a much larger scale. We don’t know when exactly it is going to happen but we do know that it’s happening. We need to protect ourselves from the upcoming “Chinese fire drill”
There’s a few ways that you can be prepared for the upcoming chaos and control your own destiny. The housing market here locally is very stable and very aggressively growing, which gives us a few options on how to protect ourselves from the international markets that may be collapsing. If you have a home with equity built up and debt outside of your mortgage, like a car payment or credit card, you can consolidate that into your mortgage. That way you have more money available to pay off your loans sooner, build your emergency fund, or buy an investment property. Another couple of great reminders, spend less than you earn, make sure you are eliminating your debt, build up your emergency reserve, and have three to six months of savings set aside just in case something were to happen. These actions will give you a great jumping off point to be able to build your retirement, as well as protecting yourself in this ever changing international economic climate. If you make the decision to purchase now while the rates are low, values are increasing, and inventory is at a 20 year low, that will improve your stability, because our local housing market is growing at a very sustainable rate.
The next step in protecting yourself is to follow the market, so you can be proactive instead of reactive. If you have an interest rate above 4% you can refinance and boost your saving by simply lowering your interest rate. For example, if you own a 200,000 home and you can lower your interest rate by one percentage point you can save around $160 a month. Now what if you already have a low rate, but you still have 20-25 years of payments left. You could still refinance, your goal would be to get into a 15 year loan instead of a 30 year. Both of these are great options to protect you from the uncertainty of the international economy. If you follow these few steps toward a stable financial future, you can give yourself immunity from the “Chinese fire drill”.