As a Weak Parent and just your normal around-the-way sucker, I have led this family towards $160,000 in bad investments… that’s a lot of Air Jordan’s. I always learn from LOSING, and so should you. These are the questions I now ask myself before taking a costly leap (or plunge):
Do you know how the money flows?
If you do not understand how the money is made, and then how the money is distributed to you… don’t invest. This goes for stocks and bonds as well. Learn about it, and understand it’s an up and down roller coaster before you bail at the first drop. I’m not against stocks, and I “own” plenty, but study it first.
Does it sound too good to be true?
So you’re telling me, I make this one-time payment and I’m set for life… c’mon man?! So why isn’t the whole world doing it? Anyway, we need not speak further on this… intuition will be screaming at you.
Is there room for growth?
Once, I bought a two bedroom $300,000 condominium in San Diego. That same year, contractual military obligations ordered me to move to Hawaii. We did not realize until we returned to San Diego three years later, with two extra family members in tow, we had out grown our first mistake. Examine all possibilities and probabilities of your family’s future before signing that check.
Can you see yourself as a consumer of the product/service?
Invest in Diamondback Energy because your car needs gas, but don’t invest in Reynolds American… because you don’t smoke. You don’t understand that life! You like Gap, buy GAP; you like hats, buy a hat. I hate vacuuming, but buying a thousand dollar Kirby vacuum that looks like it’s still stuck in the George Jetson future is not going to make me hate vacuuming any less.
Does it inhibit your mobility?
If your commute to and from work takes over an hour… then you better own that house. And if you do own that house, I’d say it’s hindering your ability to relocate. As of this writing, I am a proud Renter, mainly because I move to different parts of the country every three years, but also because I enjoy the freedom renting allows me. Someone else will have to replace this water heater soon, not me; and when opportunity knocks on my door with plane tickets back to Hawaii… I won’t give it a second thought.
As a side note… I’ve met many military members who buy a new house every time they relocate to a new state every three years, without considering if it’s a “buy” or “sell” market. When I ask why, the usual response is, “it’s cheaper for us to buy rather than rent”. Can someone explain this to me?