Investor mortgage demand falls as housing returns decline

Investment mortgages may be becoming less popular, with a new report from CoreLogic showing a rapid reduction in overall returns from Australian housing over the past 12 months.

According to the CoreLogic Total Returns Index, Australia’s housing market over the past year has been hit by a double-whammy of falling dwelling values and gross rental yields that are close to historic lows, resulting in total annual returns falling from 14.2% in July 2017 down to just 1.9% in July 2018 – the lowest figure since June 2012.

The fastest falls were recorded in Australia’s capital cities, with the total returns for the combined capitals falling from 14.8% in July 2017 down to just 0.8% – the lowest result since May 2012. While the combined regional housing markets also experienced decline in total returns, their fall was much shallower, dropping from 12.0% to 6.6% over the past 12 months.

The state with the nation’s highest total returns was Tasmania, with Hobart experiencing returns of 17.1%, though even this was down from the 19.7% recorded a year ago, as well as the recent peak of 20.2% in September 2017. Regional Tasmania saw return of 12.0%, down from the recent peak of 14.1% a year ago.

CoreLogic research principal, Cameron Kusher, said that this recent data shows a significant fall in demand for investor mortgages, especially in Sydney and Melbourne, which experienced some of the most significant slowdowns in total returns over the past year (-2.5% and +2.4% respectively):

“Given the decline in returns and an expectation that returns will continue to shrink as values decline further, it is anticipated that investor mortgage demand will also shrink, particularly in Sydney and Melbourne. Investors could see renewed interest for housing in other regions of the country where total returns remain positive however, the returns are anticipated to be far inferior to those recorded over recent years in Sydney and Melbourne.”

Home loan specials, the real cost of rewards

More than a dozen lenders are spruiking cash back deals, rewards points and even free electricity in a bid to attract new home loan customers. But RateCity has warned that these deals could leave borrowers up to $85,000 out of pocket. 

The Commonwealth Bank is the latest lender to launch a special offer with some of its home loans, kicking off a $2000 cash back deal from this week.

CBA joins the ranks with Westpac – including St. George, Bank of Melbourne and BankSA – as well as Bank of Sydney, Homestar Finance, Northern Inland Credit Union, P&N Bank, Police Bank, Reduce Home Loans, UBank and Virgin Money.

Sally Tindall, spokesperson for RateCity.com.au, urged borrowers to look beyond these incentives and crunch the numbers over 30 years.

“Don’t go choosing something as important as a home loan based on a short-term perk,” she said.

“Free overseas flights or a lump sum of cash might grab your interest, but most home loans have a 30-year term, by which time the holiday will be a distant memory.

“There are lots of specials on the table at the moment because the banks are eager for your business. Growth in home loans is slowing and that’s got the banks’ marketing departments working overdrive.

“If you’re looking for a home loan, first make sure it is a fit for your finances. Then look for a loan with a low rate and low fees. Any cash or points offered beyond that are a bonus, she said.

Current home loan specials and the extra you shell out to get them

Provider Product Perk Rate Extra cost*
Bank of Melbourne Advantage Package $1500 cashback 4.45% $67,941
Bank of Sydney Expect More package Package fee waived for life of loan 3.58% $3,378
BankSA Advantage package $1500 cashback 4.41% $65,384
Homestar Finance Owner occupied loan $900 cashback 3.54% $690
Northern Inland CU Introductory home loan Up to $1000 cashback 3.69% $12,799
P&N Bank & home loan $1000 cashback 3.99% $27,560
Police Bank Premium home loan $1000 cashback 4.74% $75,848
St George Advantage package $1500 cashback 4.42% $66,023
Ubank Discounted rate loan $1,000 cashback 3.69% $9,069
Virgin Money Reward Me variable loan Max 630,000 Velocity Rewards points over life of loan 3.68% $7,039
Westpac Premier Advantage package 200,000 Velocity Rewards points 4.44% $66,842
CBA Wealth Package Variable $2000 cash back 4.72% $85,051

* This is the extra cost compared to the lowest-rate home loan over 30 years.

Notes: Based on an owner occupier loan of $300,000, paying principal and interest. The costs of each loan have been compared to the lowest rate comparable loan on the market, Reduce Home Loan High Lend loan. All loans are comparable in that they have a 100% offset account and unlimited extra repayments with the exception of Ubank. Value of frequent flier points has been calculated on Syd-Melb return flights, 6 months out, opting for the lowest points. Total costs do not include discharge fees.

Bank extends fee waiver for low-rate mortgage

Bank Australia will waive the $595 establishment fee on its variable Basic Home Loan for another three months.

The fee waiver was due to end on 30 June 2018, but this has now been extended to 30 September.

The interest rate for the Basic Home Loan starts at 3.65 per cent (comparison rate 3.66 per cent).

There are no ongoing fees with the Basic Home Loan, although there is a $250 discharge fee.

Anyone who took out a $400,000 Basic Home Loan with a 30-year loan term would have to repay $1,830 per month and $658,742 over the life of the loan.

According to data from the end of May, the average interest rate for the variable mortgages listed on RateCity was:

  • 4.62 per cent for all loans
  • 4.44 per cent for owner-occupied loans
  • 4.86 per cent for investment loans

Macquarie owner-occ mortgage lending jumps 17.5%

Macquarie Bank has been growing its owner-occupier home loans business more than twice as fast as the big four banks.

Macquarie had $21.4 billion of owner-occupier mortgages on its books at the end of April, according to statistics released by APRA, Australia’s banking regulator (see table below).

That was 17.5 per cent higher than the year before and 5.0 per cent higher than the quarter before.

By contrast, the big four banks averaged growth of 6.5 per cent over the year and 1.3 per cent over the quarter.

However, the big four still have much larger owner-occupier home loan books than Macquarie.

Lender Outstanding loans Quarterly change Annual change
ANZ $176.2 billion 1.3% 8.9%
Commonwealth Bank $285.0 billion 1.2% 5.5%
NAB $148.4 billion 0.8% 6.4%
Westpac $252.7 billion 1.7% 6.2%
Big four average $215.6 billion 1.3% 6.5%
Macquarie Bank $21.4 billion 5.0% 17.5%

Macquarie has two home loan products aimed at owner-occupiers – the Basic Home Loan and Offset Home Loan.

The Basic Home Loan starts at 3.69 per cent (comparison rate 3.69 per cent), while the Offset Home Loan also starts at 3.69 per cent (comparison rate 3.94 per cent).

RateCity.com.au money editor Sally Tindall said Macquarie is differentiating itself from the big four banks by offering lower advertised rates.

“Macquarie is trying to ditch their reputation as a bank for the wealthy, making a concerted play for everyday mum and dad customers,” she said.

“They’ve done this with a simple proposition that’s hard to argue with: low-cost loans. Right now, they’re competing at the pointy end of the rate table among lesser-known lenders using a big-name brand.

“For many customers who are cost-orientated but nervous about smaller lenders, they seem to be ticking all the right boxes.

Should I refinance my housing loan? 10 things to consider

Home owners, who have grown accustomed to consistently low interest rates, take note.

Now would be a good time – if you are able to refinance your mortgage – to review your housing loan options carefully.

Interest rates appear to be heading north with more impetus after long periods at historic lows

The Sibor is typically used to price some home loans.

Both the Sibor and SOR rose markedly immediately after the Fed decision, with the three-month Sibor rising to 0.96555 last Friday.

“This would make home financing more expensive, given that the majority of housing loan packages offered by banks in Singapore are pegged to floating rates, with about half of overall banks’ housing loan packages pegged to Sibor/SOR and the rest being board-rate and fixed-rate packages,” she said.

Ms Cheng added that the ability to capture existing favourable rates could help alleviate the cost of servicing one’s mortgage. It would also help to relieve home owners of anxiety amid concerns over rising interest rates, job security and a challenging economic landscape.

10 factors to weigh up before you refinance

Refinancing or re-pricing typically refers to a situation where the property owners move from one housing loan package to another – within or outside the existing bank – with the intention of saving money by reducing interest rates or capturing favourable rates.

But before you rush in, do consider if you are better off:

•Sticking to your current housing loan package;

•Converting to a different package with your existing bank; or

•Taking up a refinanced package with a different bank.

1. INTEREST RATE OUTLOOK

If interest rates are on the rise, it makes sense to refinance at existing favourable rates.

But if interest rates are falling, it is better to keep an eye out for an opportune time to refinance at a lower rate, said Ms Cheng.

Home owners can consider a variety of home financing solutions, including a fixed rate, a floating rate and even a combination, said Mr Lim Beng Hua, head of secured loans at United Overseas Bank (UOB).

2. TANGIBLE BENEFITS

Ms Lee Mei Ling, OCBC Bank’s head of home loans product management, advised that home owners can consider refinancing if there are tangible benefits such as savings or an additional facility for investment purposes.

3. LOCK-IN PERIOD AND CHARGES

The lock-in period for home loans usually ranges between one and three years.

This is the period during which the borrower has to keep the mortgage with the bank.

Redeeming the loan prematurely results in the borrower having to fork out charges associated with refinancing.

Consider the various charges and penalties to determine if the potential interest savings outweigh the costs.

They include prepayment penalties (usually ranging from 0.75 per cent to 2 per cent of loan amount redeemed), cancellation fees (0.5 per cent to 2 per cent of loan amount cancelled), legal fees (about 0.4 per cent of loan amount), valuation fees and clawback of subsidies given by the existing lender, said Ms Cheng.

Ms Lee said that in such a scenario, you should refinance your loan only if the savings from the reduced commitment are greater than the penalty charges.

4. SUBSIDIES Some banks

offer subsidies to encourage prospective customers to take up their home loans.

The subsidies help to defray the cost of refinancing your home loan and usually pertain to legal fees, valuation fees and free fire insurance premiums.

For instance, OCBC provides cash rewards of up to $2,000 for this purpose.

5. INTEREST RESET DATES

This applies to loan packages pegged to Sibor or SOR.

So if you have such packages, bear in mind that you may incur penalties for redeeming the loan outside the specific interest reset dates.

“Let us assume you take up a loan on March 1 which is pegged to three-month Sibor. Since the loan interest rate resets every three months, you may redeem the loan only on March 1, June 1, Sept 1 or Dec 1. Otherwise, you may incur a penalty that usually ranges from 0.5 per cent to 2 per cent of the loan amount redeemed,” said Ms Cheng.

6. REFINANCING REGULATIONS

Switching from one bank to another or changing the pricing package within the bank is subject to prevailing regulations on refinancing.

One such regulation is the Total Debt Servicing Ratio (TDSR) framework which requires a comprehensive assessment of affordability, taking into consideration a borrower’s present and future commitments.

Ms Lee pointed out that the Monetary Authority of Singapore (MAS) has fine-tuned the framework to allow borrowers more flexibility in managing their debt obligations.

This is in response to feedback from some borrowers who are unable to refinance their existing property loans owing to the application of the TDSR threshold of 60 per cent. From Sept 1 this year, the two key changes are:

•TDSR need not be computed or applied to a borrower who is refinancing a housing loan on an owner-occupied residential property.

•TDSR need not be computed or applied to a borrower who commits to a debt reduction plan comprising a repayment of at least 3 per cent of the outstanding balance over a period of not more than three years.

In order to help potential home owners determine their TDSR for mortgage loan applications, UOB launched an online property loan calculator last year.

“This free service makes it easier for property buyers to find out how much they can borrow before they submit their loan applications to the bank.

“It also offers customers the option to pledge financial assets such as unit trusts, shares and bonds, and structured deposits as additional income streams for a detailed mortgage analysis,” said Mr Lim.

7. HOLISTIC VIEW

It is a common myth that home owners should refinance with another bank to enjoy a better loan package, said Ms Tok Geok Peng, DBS Bank’s executive director of secured lending.

“We urge home owners to speak with their banks first. As most of us will not be able to remember the details of our loan package, speaking to your bank helps you understand the features of your current loan packages and know if there is any lock-in condition and fees payable if you refinance with another bank.

“Share your concerns with your bank as they could advise you to either reprice your loan with another loan package which better suits your needs now, or help you explore other options,” she added.

  • How high can rates rise?

  • MR ALVIN LIEW, UOB SENIOR ECONOMIST:

    “The US Federal Reserve, as widely expected, raised the policy Fed Funds Target Rate by 25 basis points from 0.5 to 0.75 per cent in the December 2016 FOMC meeting with a unanimous decision. We are now more hawkish for the Fed rate trajectory in the coming years.

    “As we expect the Fed Reserve to adopt a pragmatic approach towards the likely Trump fiscal boost, details of which will only gradually become available, we believe that the Fed will remain on hold in the first quarter of 2017.

    “Thereafter, we expect a faster trajectory with three rate hikes of 25 basis points each in the June, September and December FOMC meetings in 2017.”

    MS SELENA LING, OCBC BANK’S HEAD OF TREASURY RESEARCH & STRATEGY :

    “If you look over 2016, both three-month Sibor and SOR have trended lower over the course of the year until very recently. In fact, Sibor has actually been very stable from July-October, whereas SOR is more reactive to the currency gyrations.

    “Post-Trump victory and the ensuing bear-steepening of the US Treasury yield curve, domestic short-term interest rates have begun to edge higher as well going into the year-end, when liquidity and trading volumes traditionally also lighten up.

    “Our forecast remains for the three-month Sibor and SOR to climb to around 1.3 per cent and 1.35 per cent by the end of next year.”

    MS GRACE CHENG, CO-FOUNDER OF GET.COM:

    “The US Federal Reserve has just announced a quarter-point hike to the Fed Funds rate, with an indication of three quarter-point hikes next year and a projection of three additional rate hikes each year in 2018 and 2019.

    “Based on recent historical records of actual US Fed rate movements coupled with a volatile global economic landscape, the general market consensus is that further interest rate increases, if any, would be maintained at a gradual pace in the near to medium term.”

Ms Lee suggested that home buyers and owners take a holistic view that goes beyond just pricing.

“As a home loan is a long-term commitment, they should consider the overall package which best meets their needs, including the advisory service from the mortgage specialist,” she said.

In addition, consider the benefits of refinancing in conjunction with one’s decision to sell the property.

Home owners can consider a range of home-financing solutions, including a fixed rate, a floating rate and even a combination, says Mr Lim Beng Hua, head of secured loans at United Overseas Bank.

Ms Cheng said home owners who are not looking to sell their property within the next few years could enjoy interest savings by refinancing at a lower rate.

But those intending to sell in the near term may see the cost of refinancing negate the potential interest savings.

8. OTHER OPTIONS TO MANAGE YOUR HOME LOAN

There are several options to manage your home loan commitments, such as reducing the loan size by paying down the capital lengthening your loan duration.

Ms Tok noted that more home owners (about 10 per cent more) perform capital repayment to reduce their loan amount at the beginning of the year, probably using their bonus or savings.

“This is a good practice to reduce your financial commitment, especially if these are spare funds where you are unable to get a yield higher than your loan rate.

“Generally, we advise home owners to use cash instead of CPF funds since CPF pays at least 2.5 per cent and the funds could be used for retirement or for a rainy day,” said Ms Tok.

Regardless of interest rate trends, she advised those who have a mortgage to service to set aside funds as a buffer against rate hikes or any unforeseen circumstances.

“Ideally, home owners should set aside some savings in cash, CPF funds or liquid assets that can be used to pay their monthly instalments for the next two years.

“This gives them sufficient time to restructure the loan or even sell the property should they run into any financial issues,” she said.

9. HDB HOME OWNERS

Home owners who take a home loan with the Housing Board enjoy a fixed rate – now at 2.6 per cent – throughout the loan tenure.

HDB offers housing loans at a concessionary interest rate of 0.1 percentage point above the CPF Ordinary Account rate.

Ms Lee said: “Do note that once a loan is refinanced out of HDB, the loan cannot be refinanced back to HDB. Hence, customers should be very sure of settling mortgage commitments with a commercial bank once a loan is refinanced out from HDB.”

10. REVIEW YOUR HOME LOAN

Review your housing loan once every few years to see if it would be more advantageous to continue with your existing package – particularly after your lock-in period.

Ask your bank for repricing options before checking with others.

Keep these points in mind before applying for home loan

Most of us dream to own a property, but lack of requisite amount leaves us with no choice but to go for a bank loan.

Getting a home loan from bank is stated to be easy now, but it involves criteria like showing your monthly income, your capability to repay debt and your current assets to avail the facility.

If you fulfil the bank’s criteria, your home loan process moves towards the next step. The real difficulty arises when you fall short of certain eligibility.

According to Bankbazaar report, there are five important tricks which can support your eligibility for a home loan.

Income and Tenure

Usually loans and interest charged on them are termed as earnings for banks, therefore it becomes very important for lenders to check your capability to repay that debt.

Banks look at your monthly income to assess whether you can accommodate your EMIs along with your other expenses.

In case, your net income meets all the obligation but is lower than expected EMI for a home loan, then banks refrain from lending you money. EMI obligation can be taken care, if you increase the tenure of the loan.

 

Save money on home loans: Here are 5 ways you can do so

If people had their ways, they would never take loans. After all, who wants to pay interest. But reality is that prices of real estate are beyond most people’s reach  and hence, people do need to take loans to buy their dream homes.

Home loans run into several lakhs and in many cases, crores. So even if there is a small chance of saving even a small percent somewhere, it means savings lakhs during the full tenure of the loan.

Here are 5 ways in which you can save money on home loans that recommended by Tata Capital:

Check and leverage your CIBIL score

Lenders might tell you that your credit score is not good and hence, they cannot offer you loans at low rates. But you can counter them if you have already checked your CIBIL score and found it to be satisfactory. So make sure to check you CIBIL score before applying for home loan. Lenders give loans at lower interest rates to those who have high CIBIL score.

Look for options

Do not go and take loan from a bank where you have your savings account. Many lenders are ready to offer better rates and borrower friendlier terms. So visit multiple lenders and evaluate their basic offers. It’s possible that you might get a loan offer which is much better than what your long-time banking partner is offering.

 

Grants and Loans for Women-Owned Businesses

The following excerpt is from the staff of Entrepreneur Media’s book Finance Your Business. Buy it now from Amazon Barnes & Noble | iTunes

In 2016, there were an estimated 11.3 million women-owned businesses in the United States — a 45 percent increase since 2007, according to The 2016 State of Women-Owned Businesses Report from American Express. This percentage increase exceeded the national average of business growth during the same time frame by five times. It also illustrated what we already know: Women entrepreneurs are having a tremendous impact on the small-business landscape nationwide.

Yet to continue to be competitive and grow, these entrepreneurs have to find funding for their ventures. And, alarmingly, women entrepreneurs are increasingly being turned away by banks for small-business loans. Thankfully, they have other options, given the rise of technology-driven financial lending sources, such as online loans, peer-to-peer loans and crowdfunding.

Then there are government grants. While not widely known or used, these grants are another great option for women seeking extra funding for their business ventures. They just take a little more work.

Understanding grants

Business owners often turn to grants because they’re not required to pay them back; essentially, you can look at grants as “free money,” although they come with stipulations. Also, understanding and navigating the grant process can be complex.

First, you have to research and find a grant for which you’re eligible. Then you have to understand the strict application and compliance guidelines you must meet to be eligible. You must devote time and energy to the lengthy application process, and then wait for approval. You have to compete with other businesses for the same pool of money. And finally, if you’re awarded a grant, you must report on how you used it. In a nutshell, you need to have all your ducks in a row, upfront and afterward.

Finding federal and state grants

Many business owners think federal grants are just a click away. We’ve all seen the ads promoting free federal money to start a business, but this is a huge misconception. While there are federal grants available in the areas of medical research, science, education and technology development, no such grants exist specifically for women-owned businesses. You may find grants funding projects that empower women, but such funding is often set aside for nonprofit corporations, not for-profit businesses.

When researching grants specifically for a woman-owned business, start at the state level. Most states offer grants for women-owned businesses in some capacity. Each state website has a business section where you can find grant and funding opportunities for women and minority-owned businesses.

Related: 5 Essentials for Raising Your Growth Round of Financing

Another great resource is the Minority Business Development Agency (MBDA). The MBDA is an agency of the U.S. Department of Commerce that assists minorities in establishing and growing their businesses. On its site, you can research grants and access links to state agencies that work with women-owned businesses for funding opportunities. The MBDA provides a list of state agencies here.

Private grants for women

To help in your search, here’s some information on a few private grants for women:

The Eileen Fisher Women-Owned Business Grant Program. Five grants are awarded annually. The businesses must be 100 percent women-owned and have found­ing principles of social consciousness, sustainability and innovation, plus be ready to move to the next phase of development.

FedEx Opportunity Knocks Small Business Grant Contest. Applicants are encouraged to share their visions to receive a portion of the $100,000 awarded in grants. Part of the judging involves the general public voting for the final­ists, so participants may promote their businesses while garnering votes.

Idea Café Small Business Grant. The Idea Café is a free gateway that hosts different grants on its site. One grant is the Small Business Grant, which awards one $1,000 grand prize to a business with the most innovative idea. Visitors to the site vote for the winner.

InnovateHER: Innovating for Women Business Challenge. This business challenge is sponsored by the SBA’s Office of Women’s Business Ownership. The top three finalists split $70,000 in prize money for submitting ideas that have an impact on the lives of women.

Small Business Innovation Research. Eleven different federal agencies participate in this awards-based program, which incentivizes and enables small businesses to explore their technological potential.

Small Business Technology Transfer Program. The STTR program reserves a specific percentage of federal research and development funding to provide funding opportunities to small businesses.

Zions Bank — Smart Women Grants. This Utah-based bank’s grant annually awards $3,000 across six different categories, including business.

Applying for a grant

Once you find a funding opportunity, there are multiple steps required to apply. Here are a few tips to assist you:

  • Make sure your business is eligible for the grant: Read the grant synopsis guidelines and eligibility requirements.
  • Create a checklist for all the required documents.
  • Follow the rules. Grant applications can be very technical. It wouldn’t hurt to have a second (or even third) set of eyes review the application to ensure you have provided all necessary documents.
  • Start early. Since the application process can sometimes be long, it doesn’t hurt to get a jump on things.

If you find the grant application process too daunting or lengthy, online lender Kabbage is committed to supporting small-business loans for women business owners. Because its application process is fully automated and online, Kabbage can quickly provide small-business loans of up to $100,000. It uses simple, meaningful revenue data from your business to approve your loan — not elaborate documentation that takes extensive time to gather.

Nintendo’s Animal Crossing mobile title hits 15 million downloads less than a week after wide release

Animal Crossing: Pocket Camp marked Nintendo’s most significant mobile title launch since Mario Run and it seems like the game has already delivered some significant downloads, with data from SensorTower suggesting that the title, which lets users chat with animals, catch fish and shake trees for fruit, has already been downloaded 15 million times in its first six days of availability on Android and iOS.

We’ve reached out to Nintendo for confirmation.

The site also noted that this launch doubled the downloads for Fire Emblem’s mobile launch, but was less than half of download totals for Super Mario Run, which totaled 32 million downloads after six days of availability on the App Store and Play Store.

There are some significant differences here, other than the fact that Mario is, of course, Nintendo’s heaviest hitter IP-wise. Super Mario Run was the first mobile game launch from Nintendo and launched exclusively on iOS, and was picked up by Android only months later. SensorTower’s 32 million download figure for Mario Run captures the first six days of sales on both the App Store and Play Store.

Pocket Camp is certainly a different experiment for Nintendo, given the way it approaches monetization through in-game purchases to expedite gameplay (you can buy “leaf-tickets” to craft furniture so you can make friends… a little odd but Animal Crossing fans are familiar with the bizarre). Pocket Camp is currently ranked 72 among all iPhone apps for revenue on the App Store in the U.S.

Nintendo has detailed Super Mario Run went on to have 200 million downloads, though the company noted it was disappointed by the revenue it earned from the title.

For now, the game is a bit light when it comes to multiplayer gameplay, which is something Nintendo appears to have had trouble leveraging its own IP for compared to Niantic’s all-star showing with Pokémon GO.

Money Doesn’t Matter. Until it Does.

My cover as a blogger was blown last year when a story about us went viral.

I knew something was wrong when the blog went down. When it finally came back up, I had over 30,000 page visits and it was still before noon. On that day, we weren’t so anonymous anymore.

Save

We then started getting texts from friends and relatives:

Hey, you’re on Yahoo!

You have a million dollars? What???? Huh??

To my surprise, it turned out to be a much less painless experience than I had assumed. No one asked us for money. No one treated us any differently. I was hoping that the article would trigger some interesting conversations about money, but that didn’t happen either.

Life moved on. Except for one person who did want to talk money.

Aunt K Loves Her Job!

One family member was excited to learn about our secret lives. The first conversation took place last year when we had the big publicity. It went something like this:

  • Aunt K: That’s so awesome that you’re planning to retire! Congrats!
  • Me: Thanks! How about you? At what age do you see yourself retiring?
  • Aunt K: Not any time soon. I absolutely love my job. I’d do it for free! I’d like to retire, but probably not until 65.
  • Me: That’s wonderful! If you’re doing what you love and you happened to get paid for it, that’s hardly working.
  • Aunt K: I know! It’s amazing.

Unfortunately, Aunt K’s bliss was not to last. A couple months ago, we saw her again and she was singing a different tune. While Aunt K loves her core job, there are other problems. She works in a school district that has issues with administration. The state that she teaches in is also mismanaging the teachers’ retirement fund, so she’s worried that all of the money she’s saving may be blown by politicians.

I feel bad for Aunt K. She loves teaching, but the circumstances around it have changed. Just last year, saving money wasn’t a priority and she dismissed the idea of financial independence. Now, she worries that she’ll never be able to stop working when she’s finally ready to.

Excuses, Excuses, Excuses

I hear folks making excuses for not saving AllTheTime. Here are some of my favorites.

“I love my job!”

Aunt K’s excuse is the most common one that I hear. If you love your job, that’s awesome! What an amazing gift in a world where many folks dread their 9-5! You’ve got something wonderful there.

However, will your job always love you? Plenty of folks who worked at Enron loved their jobs too. There are always other factors at play. Robots and artificial intelligence are going to start taking more and more jobs. This will be a major societal change that you don’t want to be on the wrong side of it.

“I’m going to die young.”

This is the favorite excuse of a good friend. He insists that he will die before he’d ever retire, so he doesn’t save. I’m not sure why; both of his parents are in their 90s and he has no serious health problems.

And why would you want to bet on an early death anyway? What’s the backup plan if you don’t die?

“The money won’t be there for me anyway, so why bother?”

Bad things happen to good folks. Maybe you know someone who retired in 2008 right before the Great Recession clobbered us all. Maybe a family member got taken by a Bernie Madoff character. This stuff happens, but not to most. Put your money away and stop worrying.

“I could never do that.”