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Top Five Mistakes Men Make With Their Money
1. Funding early retirement with a home equity line of credit.
Given the big run-up in real estate values over the past five years, many of you are sitting on sizeable home equity. That's great. What isn't so great is that some equity-rich homeowners are hell-bent on living off that equity. Continue below.
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This seems especially alluring to men, who use the equity as an escape hatch. They feel emboldened to quit their jobs and not work. Or quit their jobs and start their own business. Or keep their jobs and use the home equity to buy that $60,000 sports car they "deserve" for working so hard. Essentially, they view their home equity as an ATM waiting to be tapped.
And this drives the woman in their life crazy. My email inbox and calls into my cable show are flooded with women trying to figure out how to tell their men they don't want to take on so much risk.
I'm with the women on this one. Using home equity as an open checking account is bad for your finances, to say nothing of the stress it adds to a relationship. Oh, sure, you only intend to use it to live off for a year. But don't kid yourself; more and more people -- especially men -- who leave the workforce choose to stay out, so they just keep draining the home equity.
The problem is that you can't bank on the notion that the tap will never run dry. Unless you've had your head in the sand all year, you're aware that we're in an official real estate cool-down mode. Home prices are moderating, and even falling a bit, in some of the markets that were the hottest just a year ago.
That means slower equity buildup. So it's foolish to plan on another round of huge home-value increases to give you even more equity to tap. If you run through all your equity and then still need more income to live off of -- or pay for whatever you bought with the tapped equity -- where is that money going to come from?
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