A few years ago, my cousin bought a house down in Philly. She works as an Art Gallery Curator and has a Ph.d in Art History, what you would consider an intelligent woman. With the sub-prime stuff going on, she got a $220,000. mortgage on a $200,000. home! (
something that just doesn't happen in Canada) She also had a really low interest rate for the first few years, and was up here bragging about it. Of course her big plan (like everyone elses) was to bank her extra money, and when her interest rate increased, buy down the mortgage. Well, like everyone else, she neglected to save, and has now lost her house (
My Aunt told me just last week).
I feel that not only were the banks at fault for coming up with such a stupid idea as a sub-prime loan, people were at fault for buying into it!
In Canada, if you put less than 20% down on a home, you have to take out government mortgage insurance (
CMHC Mortgage Loan Insurance charges you 1% of the loan amount) to cover the risks of a declining housing market. That helps protect everyone involved, the homeowner and the lending institution. Since I hate giving anyone extra money, I have never purchased a home without having at least 20% down. I know not everyone is able to do that, but it did save me money in the long run.
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As for investing, I have always been very conservative. I am not a gambler, so I've never done high risk stuff. I invest mainly in the manufacturing, land and natural resource sectors. I've always stayed out of technology and other higher risk areas. The recent downturns of both the DOW and TSX didn't affect me in the least. I know that higher risks bring higher rewards, but I'm just not that guy
Thanks to Carol's website, we have more than enough money to retire very comfortably. We own 3 homes that are all paid for, and don't have single debt. We both have fully loaded RRSPs (registered retirement savings plan) and could actually retire right now if we wanted. The thing is, with an eleven year old son at home, we have to do something, so we just keep dong what we do. We did downsize a few years ago to get rid of the stress and pressure, and mainly work to stay busy and have fun.
I do feel quite sorry for the people caught up in all this as people have seen their entire retirement plans go out the window almost overnight. I don't know what I would do if I had to start all over again at my age.