I’m actually sick of prefacing all of my writings with the old, “We are in tough economic times” line. But, we are in tough economic times. However, this blog entry has a completely different perspective.
I had a nice conversation with a friend of mine yesterday. Here is a little background. He is a brilliant guy who has a great job, and makes a great deal of money. He has always had this way about him. He can take a terrible situation and find a way to benefit from it. He doesn’t exploit the situation, he simply finds a way to make the best out of a otherwise tough situation. It is an unbelievable skill that I truly envy.
We were talking about finding opportunities in today’s “it hit the fan economy”. He had a perspective that I have, frankly, never thought of. His theory was that these markets (financial and real estate) are providing an opportunity to him to increase his lifestyle. Let’s examine this for a moment. Many people are seeing long term investment opportunity in this market, but I have yet to hear his particular perspective. He had figured out that he can increase the quality of his lifestyle (real estate) by making a leveraged bet. He can buy 300% more home (in terms of home value in a “normal” market) right now by only paying 200% more than he is currently paying. In other words, he can buy a gigantic house right now for a huge discount.
Here is what is interesting to me about this. Many people in these economic times are trying to batten down the hatches. Many people are trying to live on less. Many people are trying to accumulate extra cash. But, my friend is using this opportunity to make a long term play for his lifestyle.
So, I guess, you have two ways to handle this economy. Search your gut to find discipline to secure your current financial realities. Or you can search your gut to find discipline to greatly enhance your future lifestyle at a major discount. I think that he is being tremendously risky, but that is not for me to judge. His job is pretty recession proof, but doubling a gigantic mortgage payment in the worst economic client in 75 years is pretty gutsy.
BTW, I don’t recommend that any of you do this. I even told him, that he should reconsider (based on some unprintable factors).
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.