Five Financial Rules of thumb that just aren't true!
And is it better to buy a house or rent? The answer might surprise you.
Financial expert Mark Lamkin from Lamkin Wealth Management is here to bust five money myths that could cost you big bucks.
1. Buying a home is always better than renting. Buying Versus Renting
Reality check: During the last real estate run-up, this mantra was repeated ad nauseum. The truth is, sometimes paying rent may make a lot of sense. In exchange for that rent, you get a place to live without the commitment and costs that come with owning a home. For a lot of people, the added responsibility is more hassle than it's worth.
2. Avoid adjustable-rate mortgages like the plague. ARM's= BAD
Reality check: If you're absolutely positive you'll only live in your house for a short time, an adjustable-rate mortgage (ARM) may save you money - even when rates are rising. This is especially true for hybrid ARMs, where the loan's interest rate may remain fixed for, say, three or five years before readjusting.
3. When planning for retirement, assume annual stock market returns of 10 percent.
Reality check: Between 1981 and 1998, when the stock market was averaging annual returns of almost 13 percent, this figure seemed conservative. Since then, the stock market has seen the bursting of the dot-com bubble, followed by a second crash in 2008, and the drop we're even now enduring. According to some experts, the stock market may return as little as 4.5 percent annually going forward.
4. You should close any credit accounts you no longer use. Close Credit Cards
Reality check: Credit card companies see long-held accounts - especially those lacking negative reports - as proof of credit responsibility. Because a portion of your credit score is determined by your borrowing history, as well as the ratio between the balances on those cards and your total available credit, it's often wiser to keep your unused credit accounts open.
5. When planning for retirement, anticipate replacing 80 percent of your pre-retirement income.-- Retirement income=80%
Reality check: The problem with this rule of thumb is that it assumes expenses will stay the same in retirement, when for most people, nothing could be further from the truth. For example, kids move away, and people may pay off their mortgage and/or downsize to a smaller home. For many reasons many retirees will spend far less than they did in their working years.
Lamkin Wealth Management
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901 Lily Creek Drive Ste. 102
office: 502-961-6550 Office
toll free: 866-961-6550
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