Life is full of risk every day in every way. Acknowledging this is not pessimistic; it allows thinking people to be proactive. Risk management requires that we hope for the best while trying to drownproof an uncertain future.
Cultivating health is job number one. Beyond our bodies and environment, this means minimize debt, keep costs and spending well below our income, buy insurance, maintain liquidity and direct longer-term savings in ways that enhance future resources.
Over the past year, I have encountered many well-intentioned people who have come to believe that the best way to help young people is to assist them in buying homes priced at 5 to 15 times their household income.
Many have borrowed personally to help with downpayments or co-signed to enable off-spring into properties they will struggle to maintain and indebtedness that will last decades.
Few have considered the probability that home prices may be flat or considerably lower a few years hence than they are today, and that many may need to sell before prices recover.
Already, recent surveys show that 20% of Canadians regret how much they’ve borrowed, and 45% doubt they will be able to cover living expenses without going further into debt.
The best time to prepare for both difficulty and opportunity is before they arise. The best time to reduce spending and risk is before we are forced to. Solid financial plans require optimism and drownproofing.
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