Imagine living paycheck to paycheck, and being so cash-strapped that you are forced to tap into your home equity just to pay for your day-to-day living expenses. Hopefully you are not one of those people.
But if you are, you’ve got plenty of company. About 24 million other American homeowners are in the same dilemma. And they come from a wide spectrum of American society–millennials, low-wage earners, you name it.
The unfortunate thing here is that no person should have to borrow against their home just to pay for basic items such as groceries, transportation, repairs, utilities, etc.. As Bankrate’s Greg McBride said, “regular household bills should be funded by a regular household income, not home equity.”
Likely, this measure is a last-resort, meaning that most might already have tapped out every other means of debt, such as credit cards. But it also signals something much more systemic.
It reveals the darker side monetary/economic manipulation, and how many of these Americans happen to be victims of it. What else can you expect if wage growth has been slow for decades while household expenses INFLATION has been rising?
There is hardly any “wiggle room” when faced with higher costs and stagnant wage growth. In addition, consider these stats:
- Approximately 1 in 4 Americans do not have adequate savings (according to a Bankrate study).
- US homeownership has fallen to a 50-year low; there are few American homeowners now than ever before.
- Yet US household debt, at a record high of $13.3 trillion, is continuing to rise even higher (according to the New York Fed as reported in August).
Much of that debt is also due to mortgage borrowing. From April to June of this year, mortgage debt rose by 3.5%, up to $9 trillion. In addition to this, home equity interest rates are also on the rise and are at the highest since the 2008 financial crisis.
Home Equity Lines of Credit (HELOCs) are on the upswing.
For those who are stuck in this situation, there isn’t much to do other than to work on decreasing expenditures while increasing income. But for those of you who are in a better financial position, note that you may need to increase your cash flow and protect your purchasing power.
Hopefully, you own a portfolio that can provide you with additional income (dividends and yields), cash flow (from selling high-growth stocks), and a means to protect your purchasing power from the corrosive effects of inflation (gold and silver).
If not, you might want to seriously consider it, as our current situations looks like it might get much worse before it begins to improve. Check out our Definitive Guide to a Self-Directed Retirement to learn how to build a portfolio that can achieve both high growth and capital preservation.
There is absolutely no reason to depend on a system that offers no improvements in wage growth while allowing inflation to rise and at the same time denying that the inflation rate poses no threat to Americans’ way of life.
There is no reason to passively depend on such low prospects when you can actively self-generate and sustain wealth on your own terms.