MCP Help Blog

It’s not just the sixth-grade drop-outs who are having mortgage problems. And not just the “greed is good” Wall Streeters either. And not the big spenders who partied like it was 1999 even though it was 2009 and they weren’t pulling in the big bucks anymore. And the Realtors? The ones who many think stretched the truth when talking up property as a great investment? A lot of them are in more trouble than anyone–because they bought into the hype more than anyone. After all, you have to be pretty enthused about a product to sell successfully. Lots of these folks have no business coming in and a lot of houses going into foreclosure–including their own.
Financial experts, too. And middle-aged folks who saved money and invested like crazy (and not in jewelry and flashy cars) to make sure they’d have a nice retirement. And stockbrokers, who were in many cases as optimistic about the market as anyone. Perhaps more, because historically stocks have outperformed just about everything in terms of return on investment. And these people watched their carefully hoarded investments crash–according to CNNMoney, $500,000 shrank to $370,000 in 2008 for a typical investor.

Well, okay. The stock market always comes back, and while it’s down is the time to invest even more. That’s a typical strategy, often referred to as dollar cost averaging, and it’s a good one. As long as you don’t lose your job when your investments are in the toilet. As long as your business doesn’t depend on real estate, banking, construction, or investing. As long as you’re not retired and needing your funds now–forced to sell low.

Educated Stupidity
For example, an investor with a lot of years in the property business, a finance degree, and a chunk of money from the successful sale of some apartment buildings ended up completely underwater on expensive golf course lots with no way out but short sales. And of course all the profits went down the drain.

A couple with a six figure income saved thirty percent of everything they made and invested in funds with longstanding reputations and great histories–only to lose over a million dollars in investments and home equity within 18 months. They are in the processs of getting a mortgage modification. And a commissioned salesperson who made about $250,000 a year ended up going nearly nine months without a pay check, borrowing against his retirement, finally selling all stocks at their lowest, and looking into bankruptcy.

Doing ALMOST Everything Right Isn’t Enough–Keep Emergency Funds Where You Can Get Them Easily
These people did almost everything right–except having an emergency fund on hand that didn’t depend on the stock market to maintain its value. So while CDs and savings aren’t sexy and the returns are pitiful, it pays to keep several months’ of expenses in this type of vehicle. Oh, and just for the record, one of the people in those stories was me. But it won’t be again.