Your Home Can Be a Great Asset, But Don’t Make It Your Primary or Your Sole Asset
When you think about your assets, you should now definitely count your home among them, just like the value of any car you own free and clear, the cash value of your life insurance policy, or any retirement money you’ve squirreled away in stocks, bonds, or mutual funds.
As with all assets, you don’t want all your wealth tied up in your home. You’ve no doubt heard the investing advice that you shouldn’t pour all your money into a single stock.
Whether you’re talking about a house or stocks, “putting all your eggs in one basket†is neither safe nor prudent in terms of diversifying your assets. That’s one reason why, if you’re every going to tap your equity, it might be wise to utilize that equity in your home — after careful consideration and planning — for other investment purposes.
I’m not suggesting that you tap into your equity to go play the stock market or make an unwise business gamble. But I am pointing out that for any asset you have — home equity included — you must always think about “opportunity costs,†or what you might be sacrificing by tying up your money in one investment when another, higher-paying alternative might be available elsewhere.
“Ask The Money Coach†is a syndicated column written by personal finance expert Lynnette Khalfani-Cox , co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.