Almost everyone has savings in the bank, right? Well, the data from the Bureau of Economic Analysis (BEA) shows that despite our personal income increasing, our personal savings has decreased .2 percent during the months of October and November of 2005. That was even before the Christmas season. Recent data shows that for sixteen straight months, there has been a negative savings number.
What does this data mean? It means that on average, the typical American family is spending more than it earns. That amounts to increased use of credit cards or reducing our savings accounts. Ultimately, we are heading down the path of destruction.
Did you know that financial planners and those books you read on personal financial planning, including “Personal Finance for Dummies” by Eric Tyson, states that you should have three to six months of living expenses tucked away as an emergency fund?
Obviously, most Americans do not have this emergency fund. Most Americans do have a lot of equity in their homes due to the appreciation of their homes over the last few years. So there is a simple solution to many Americans lack of establishing an emergency fund.
So how does a mortgage save your life? Simply, it allows you to have an emergency fund available and ready for you. This will allow you to survive during an emergency situation. As in the case of unemployment, if you do not have the funds, you may not be able to pay your mortgage monthly and will end up in foreclosure, likely resulting in complete loss of all equity, no matter how much you had. It may even give you the money needed to pay for medical procedures that are required to save your life. It will definitely relieve stress in your life, keeping you healthier overall, just by knowing you have money available to pay the bills if necessary.
Also, in a disaster such as a hurricane, which would you rather have, $100,000 in equity in your home or $100,000 in cash or other investments? You can ask the mayor of Port Arthur, Texas that question. His statement after his house burned down in the aftermath of Hurricane Rita was, “The sad thing is, we just paid off our house!” Remember, the money you keep in liquid investments can pay your bills for months, even years.
The solution is to take out a mortgage in some form now, before the emergency happens. One reason is if the emergency keeps you from working, you will not qualify for the new loan at the time you need it. Also, if the house is damaged, you are not likely to obtain a mortgage until it is repaired. If you do not have an emergency fund, and you have some equity in your home, you need to look into your mortgage options now, before it is too late.
Robert D. Ashby is President of Solid Rock Mortgage, a licensed Mortgage Brokerage Business in the state of Florida. He has been in the financial services business since 1998 and obtained his Series 6 and 63 Securities Licenses as well as Life and Health Insurance Licenses in the state of Virginia. He moved to Florida in 2002 and decided to focus solely on mortgages, obtaining his Mortgage Broker License for Florida in 2003 and then opening Solid Rock Mortgage in 2004. He has become Florida’s first Certified Mortgage Planning Specialist and Florida’s Debt and Equity Management Expert.
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