The 5 Wealth Killers No One Talks About - Part 1: It Starts Here

In this episode of Your Retirement Guide podcast, George Jameson, a certified financial planner and founder of Capital Wealth Group located in Columbia, SC introduces a series titled 'Five Wealth Killers No One Talks About.' Listen to Part 1: It Start Here now. 

 Welcome to "The Retirement Guide" Podcast! I'm your host George Jameson, owner of Capital Wealth Group, a Fee Only Advisory firm. Whether you’re nearing retirement or already retired, Join me each week as we explore the world of retirement planning and equip you with the knowledge and tools you need for a successful retirement.

Thank you for tuning in to this episode of The Retirement Guide. If you enjoyed this episode, please subscribe & leave a review. If you'd like a free 30-minute retirement review, visit our website at www.capitalwealthplan.com to schedule.

This is for education only.It is not tax, legal, or investment advice. Before  acting on any information consult your tax, legal, or investment advisor.

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Capital Wealth Group is a Flat Fee-Only Advisory Firm located in Columbia, SC , serving clients locally in South Carolina and North Carolina and virtually nationwide.

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Transcript

George Jameson: 0:18

Welcome back to Your Retirement Guide podcast. I'm George Jameson, certified financial planner and founder of Capital Wealth Group. Today we're kicking off a brand new series. I'm calling the Five Wealth Killers. No One talks about. These are the sneaky, often well-intentioned choices that can quietly derail your financial life if you're not careful. So let's jump into the first one and maybe the most common wealth killer of them all. This is no surprise, but buying too big or too expensive of a house. Now, hold on before you click off. Don't get me wrong, home ownership is often a great financial move, but only if done wisely. One of the most dangerous traps I see people falling into is becoming what we call house rich and cash poor. I'm sure you've heard the term, it's when someone has a large, beautiful home, maybe in a fancy neighborhood, but they're barely able to cover the bills each month. They put their retirement savings on hold. They have little to no emergency fund, and often very high stress. And it's not always about showing off. Sometimes it's a young couple buying their forever home before they've built a strong financial foundation. Sometimes it's those retirees or empty nesters, upsizing instead of downsizing because they want the extra space for family visits. It doesn't always look irresponsible on the surface, but beneath it can be financially suffocating. So let's now talk about why buying too much house is so damaging to long-term wealth. Number one, it doesn't stop at the mortgage when you stretch to buy a bigger or pricier house, the costs don't end with the mortgage payment. You often have higher utility bills,, bigger maintenance and repair costs. A bigger roof means more expensive replacement, more bathrooms, more plumbing issues then you'll often have higher property taxes and higher insurance. And then number two, it limits your financial flexibility. If too much of your income is going toward housing costs, it squeezes out everything else that builds wealth or for those retirees, it means less money for having fun. You're not saving, you're not investing, and you're probably not giving. and you definitely aren't prepared for unexpected expenses. Many financial experts often recommend keeping total housing costs, which may include mortgage, property, taxes, insurance, maintenance, and so on below 28% to 30% of your gross income. But many people are pushing 40%, 50%, or even higher, and that's not a wealth of building formula. And then number three, the emotional trap. Let's be honest, houses are emotional. We grew up believing that success is a big home in a nice neighborhood. We all have watched HGTV, which makes it seem like marble and granite countertops and large walk-in closets are just the baseline. But lifestyle creep is real. We often upgrade not because we need to, but because we feel like we should, and before we know it, we've sacrificed long-term goals for term appearances. And look, I'm not saying don't enjoy your home. I'm saying know what you're sacrificing for it. And make sure it aligns with your long-term priorities. And number four, this is for those nearing retirement. So age 50 and above. Now if you're in or nearing retirement. This topic gets even more important. Many retirees, are still living in large homes with extra rooms with big yards, to maintain utility bills that reflect the size of a house that no longer is being fully used. So what's the result? More cash flowing out every month for a lifestyle that may not even match your current needs or wants. So downsizing even early can be a powerful way to reduce your financial stress and free up capital. It doesn't mean giving up comfort. In fact, many retirees find that moving to a smaller home with a smaller yard to maintain, or even a condo with no yard and or a property closer to town essentials like doctors, groceries, restaurants, and so on, actually improves their quality of life. Not only do you reduce your bills, but you may also tap home equity when downsizing to beef up your retirement accounts potentially reduce withdrawals from your portfolio and it may even allow you to delay taking Social Security. That can be a huge long-term win in retirement, and if your retirement plans include moving anyway, maybe to be closer to grandkids or to enjoy a warmer climate, then ask yourself why not do it sooner? Holding onto a house at a sentiment or routine can quietly drain your wealth in retirement, and for many a strategic downsizing is the difference between just scraping by and truly enjoying those golden years. So in general, what should you do instead? If you're shopping for a home or know someone who is or considering upgrading or downsizing? Here are a few guidelines I share with my clients. Number one, buy below your means, not at the top of your budget, just because you can get approved for a$600,000 loan doesn't mean you should take it. And then number two, stick to the 28 36 rule. So that's no more than 28% of your gross monthly income going to housing, and then 36% total on all debts. And then number three, consider your future cash flows. If your cash flow will potentially be changing in the near future. For instance, if you're planning to retire early. Maybe start a business, maybe work part-time before you fully retire, or even when one spouse stops working your home needs to fit that future lifestyle too. And then four, think of your house as a place to live, not a status symbol. True. Wealth isn't often what you see. It's often what you don't see. It's the savings accounts, the investment portfolio, the freedom to walk away from a job you don't love. That's true wealth. And then number five, for those soon to be retirees or those who are already retired. So I'm talking about those 50 and above. Again, looking to downsize or relocate, I highly recommend paying cash for a house. Especially given the current mortgage rates, it also gives you a peace of mind to be debt free when you retire. And it can greatly reduce your monthly expenses in retirement to free up that often needed cash flow. So some final thoughts. Buying a home is often the largest financial decision we make. Done right? It can build security and long-term wealth for you and your family, but buying more than you need, or more than you can truly afford is a recipe for decades of financial stress and missed opportunities. So before you fall in love with that big house on the hill, ask yourself, what am I giving up for this? And is it worth it? And our next episode, we're going to look at the second major wealth killer. Thanks for listening. If you found this helpful, please share it with a friend or leave a quick rating on your favorite podcast platform. I'll see you next time and have a great day.