Page 49 - Book3E

Saving for College before Saving for Retirement
Orman cautions not to put your future at risk by channeling all your money into the kids' college accounts. Think first, she says, about where you’ll be 20 or 30 years down the road. If you have no savings, will retirement be possible? Will you be able to keep up your mortgage payments if you are forced into early retirement? In attempting to do too much to help your kids with school, you could end up becoming a huge worry and financial burden for them. It’s much more sensible to ensure a secure retirement and have the kids use student aid and loans to finance their education.
Using Your Home as a Credit Card
The TV and radio ads are getting louder and bolder in their attempts to entice us to turn our homes into our personal banks. Orman says people are tapping equity to pay for just about anything: a vacation, a new car, or even to pay off the credit card debt they amassed with expensive clothes and extravagant dining.
Living on one paycheck means never using your home as an ATM. Should you get laid off, become ill, or decide you want to scale back your work to have more time at home with the family, having a hefty home equity line plus your mortgage greatly increases your financial risk. Orman advises that home equity loans come with variable rates, and tapping a home equity line in a period of rising rates means you could be looking at higher and higher payments. Can you manage all this on one paycheck? Keep in mind that your home is the collateral in your home equity loan. If you encounter difficulties and can’t make the payments on the equity line, there’s a possibility you’d need to sell your home to pay off the lender.
Living Successfully on a Single Income 41