Buying a House But Not for an Investment

1180382_houseWe all do not need to be told that US economy is passing through a turbulent phase. Talk to any individual who has slightest interest in economy and/or investment process, they will tell you the housing is the root cause of our economic malaise. One would imagine that everybody would learn from past mistakes (i.e. particularly mortgage practices) and hopefully do not do repeat it. Sometimes I do not get that feeling, and many times who will feel stakeholders have different objectives and hence knowingly they keep repeat it. continue reading rest of the article….

What is value of Net Worth?

In personal finance, Net Worth is referred to as an individual’s financial state at a given point in time. In a very simple form, it is the value of assets minus the value of liabilities.

When we individuals include all the assets in our financial planning, we tend to include value of our house, value of car, and other capital goods items. Here I am talking about assets that we use in our daily lives (not the ones we use as investments). The way I look at it is, instead of tying my financial resources in non-performing assets, what if I used it to generate more cash flow. If I have one million dollar, and I buy a house, then my capital is lost. It is not going to generate more money. Well yes, anticipating value appreciation and expecting to cash in 20+ years down the line is the different issue. Even after 20+ years, one will need a place to live! To buy a house 20 years down the line one will perhaps need more money (time value of money and inflation!), and if one does not down size, perhaps all the capital appreciation will go into a new place. continue reading rest of the article….

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