What do I do if I find myself house rich and cash strapped as an older American?

Ralph
00:00:00

Are you feeling trapped in a home you love but can't afford to maintain? Do you find yourself asset rich but struggling to pay for basic necessities? The truth is many older Americans are facing this exact dilemma. So today, I'm going to explore how to navigate being house rich but cash poor. I'm going to share inspiring stories of triumph and discuss a few strategies to avoid this financial pitfall. So stay tuned and learn how you can find balance between your assets and your cashflow and discover the peace of mind that comes with financial stability.

Narrator
00:00:37

Welcome to the Ask Ralph podcast, where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your Host, Ralph Estep Jr.

Ralph
00:01:06

Well, thank you for joining me today as we discuss another great topic. You might feel like you're living in a treasure chest sometimes, but you just can't get to the gold. And I'm going to bring our faith into the equation today. Now yesterday, we talked about why a wealth tax is such a terrible idea. If you missed the show, I got real passionate and I got a little political.

So I'm going to encourage you to go check it out. So I talked about the potential negative impacts such a wealth tax would have on job creation on economic growth, even on charitable giving. And look, it affects us all and you've got to understand it. And like I said yesterday, share it with 10 people.

Now I got a listener question today from Peter and he asks a great question, and unfortunately, this is something that a lot of older people face. I see more and more seniors seeing this type of situation. Especially when inflation is so high as it is today. But here's what Peter wrote. He said, "Dear Ralph, I'm writing to you with a heavy heart. My name is Peter and I'm 72 years old. My wife passed away last year, and I'm blessed with a beautiful home that we bought together 40 years ago. It's worth over $500,000 now, but I'm struggling to make ends meet on my fixed income. I can barely afford the property taxes and maintenance, let alone enjoy my retirement. I feel trapped and really don't know what to do. Can you help?" Unfortunately Peter, your situation is all too common. I hear these stories in my practice all the time. And every one of them breaks my heart. Think about it like this. You poured your love into your home.

Like you said, over 40 years, you built it together. And I am so sorry about you losing your wife. So today, I've dedicated this show to finding some solutions. Now, if you've got questions like Peter, the truth is your questions are the heart of the show. I love helping people. That's my mission field. Just go to justaskralph.com and submit your questions. And don't forget, every Tuesday night at 7:00 PM, you can join me live just by going to askralphpodcast.com/live.

And it's a great time to come together. We have a community there. You can get your question answered in real time and interact with the community. So I'm going to definitely encourage you to do that. Again, that's at askralphpodcast.com/live. Every Tuesday evening at 7:00 PM. Eastern standard time.

Well Peter, I wanted to find guidance from scripture. I was looking for something that could offer us some hope. And I found this in Proverbs 13:22. Now it's not specifically the same issue you're talking about. But it reminds us the importance of wise financial planning and the long term impact of our decisions. So here's what I read. It's and this is, like I said, in Proverbs 13:22, it tells us this. "A good person leaves an inheritance for their children's children, but a sinner's wealth is stored up for the righteous."

Now Peter, your question has really touched me today. It's caught my mind thinking, I'm thinking about what can I say? And unfortunately, it's more common than many of you might think. Older Americans have seen their home value skyrocket over the last 40 years. But here's the problem. Their income remains stagnant. Go to the grocery store, prices keep rising. Everything costs more. I'm not being hyperbolic, but this inflation is killing us and it's definitely hurting those on those fixed incomes more than anyone else. Well, let me tell you about one of my clients and we'll call him John. And John's got a similar situation to you, Peter.

He had this beautiful home in a very desirable neighborhood. I remember him telling me Ralph, this house is valued at about $700,000. Now John was 75 years old. Sounds like a perfect situation, right? But there's a big problem.

John was struggling to cover basic living expenses. The only income he had coming in is from his pension and social security. And his daily expenses were just adding up and growing and growing. Inflation, like I said, was killing him. Like many of us. When we sat down together, he told me about some drastic actions he has taken and this, this just floored me. He said I'm skipping meals Ralph, I'm rationing my medication. Think about that for a second. Here's a guy living in a $700,000 house and he's trying to figure out how's he going to pay for three meals a day and take care of his medication. He was in a dire situation. He was just trying to make it work.

And here's the thing you've got to remember. We've got to be prepared. You can't be too proud to ask for help. And in this case, that's exactly what John did. He called me. We set up an appointment. So you might ask Ralph, it seems like a really tough spot. It was. But you're asking Ralph, what's the solution? Well for John, the first thing I talked about was a reverse mortgage, and I did a show all about reverse mortgages on March 23rd of 2024, and I'm going to put a link in the show notes. I can't get that out of my mouth today. So with John, we tapped into his home equity. And the best part of it, he didn't need to sell or move. And that reverse mortgage gave him a steady income stream and that worked to supplement his income. But that wasn't all we did. We also worked on developing a comprehensive budget.

Yes. Ralph said budgets. We cut some unnecessary expenses. And in John's case, we just made a few simple tweaks. Well you might be asking Ralph, what was the result? Well, the beautiful result is John is now able to live comfortably. He stayed in his own home. He's enjoying his retirement. He's enjoying spending time with his grandchildren. And listen to this. With the savings and the restructuring of his income and expenses, he's even put some money into a 529 plan for his grandchildren's education. What a wonderful story.

And unfortunately, I wished all these stories had happy endings. But the truth is the economic realities are not always that fantastic. Let me tell you about another client. I'll call her Mary. Now Mary was in a very similar situation at John and you as well, Peter. She was struggling financially. But Mary just kept on putting off the issue. She just put, kicking the can down the road, as they say.

So the difference between her situation in John's is she waited too long to ask for help. Mary figured, you know, I can handle this myself. She was scared to spend the money on professional assistance. One of her children convinced her to come and see me. And that's when we met, we got together, and she laid it all out for me. And here's the scary thing.

Here's the sad part of this. Mary had racked up huge credit card debt. When I say huge, as I recall, it was well over $60,000. And the interest rates were going up, they were killing her. And think about it like this, it was a financial leak that was draining her over time. Because she was just trying to cover her expenses, pay for meals, pay for medication. You know, she needed to eat.

She needed to keep a roof over her head. And it was, it was so sad to see it. I could see the financial stress had taken its toll. It took its physical toll on her. Her blood pressure was through the roof. I remember that day, she stepped out of my office to use the restroom. And her son said to me, he said, Ralph, I'm really worried about my mom. And he said to me, candidly, he said, I can't bail her out. I'm struggling myself. Everything costs me more too.

When she came back in the room, they share with me the biggest piece of this thing altogether. And she had fallen behind on her mortgage payments and they had already started foreclosure. And that was tough. Now I remember, I remember looking at her and looking at him and just saying all we're going to do now, I looked over everything, and unfortunately the only solution that I saw was to sell her home. Her beloved home. And she had to really downsize. As I recall, she went into a one-bedroom efficiency apartment.

And Mary felt defeated. She had put all her love and care into this home. And she was regretful. You might ask, what was she regretful about? Well, she was regretful she didn't ask for help sooner. And to be honest with you, when her and her son left, I felt defeated as well. I thought there has to be something I could have offered them. Maybe I could have helped her if she asked sooner.

So you're asking Ralph, what are these stories really tell us? Yeah, there's a triumphal story and a sad story. But what they really tell us is they show the importance of planning ahead. They show the importance of being proactive and having that financial roadmap. I talk about these on the show all the time. You've got to have your own financial roadmap. And this is especially important as we get older.

So the question is Ralph, how can I avoid getting into this situation in the first place? Because that's really the point, isn't it? That's the big question. How do I avoid getting to this place and, you know, by planning correctly. I'm not going to leave you hanging. I've got some great answers for you. The first thing you must do is you've got to plan for retirement early.

I'm going to say kind of a catchphrase, but take control before things get out of control. Like Mary, she waited too long. She had already ran up her credit card debt. She was in that foreclosure process. And listen, you can't wait until you're 60. You got to have that vision of the future. Listen, I've got this vision myself. As many of you know, if you listen to the show, I live on a farm. And two years ago, I built a guest house on the farm. Now, to be honest with you, the guest house now is for my farm hand, who takes care of the black Angus cows we have here. But the long-term goal is this is a place where my wife and I, when we get to an age where we can't handle the bigger home that we live in, we can move into this 1200 square foot guest house. We can actually sell off a piece of the farm to help fund our retirement.

So I've planned on that. I'm 52 years old and I've already got that plan set up. But the key to the whole thing is start early. Start planning, start investing. Because the truth is the sooner you start, the better prepared you're going to be. You don't find yourself in that crisis situation like John and Mary and Peter. Maybe you're feeling the same way. So that's the first thing. Plan for retirement early.

The second thing is diversify your assets. Listen, you're never going to hear me say home ownership is bad. Home ownership is great. But what are these stories telling us? You can't tie up all your wealth in your home. I did a show yesterday about that wealth tax. Think about that for a second. If you've got all your assets tied up in that home, you don't have any liquid cash, and they impose this wealth tax, and I hope that they don't.

I hope people push back against that. I hope we elect somebody that isn't going to put that in place. But you're going to find yourself in a really bad situation if all of your money, all your assets are tied up in your home. You got to balance these things. Have stocks. Have bonds. Maybe you have some rental properties. You got to understand your risk balance. But here's a deal. Work with a professional.

Find somebody who's an expert in retirement planning. You got to have someone in your corner that financial coach. You can always schedule an appointment with me. And you got to think about it. Like Mary didn't think about it. Mary thought all she saw was an expense. But I'm going to tell you, this is a place to make an investment in your future. So that's number two, diversify your assets.

Let's look at number three. Maybe you've got to consider downsizing before it becomes necessary. And this gets, this gets overlooked a lot of times. I feel like you've got to constantly assess your situation. And then you can use that equity strategically. Maybe it's time to simplify your life. Is your home becoming too large? I don't know how many retired people I have that have second story master bedrooms.

And I say to them, have you thought about that for the long term? When you're not as agile as you are now, and you can't move as easily. That's the one thing my wife and I, and our main home and the guest house both have this first floor master suite. In fact, the guest house of the farmhands house is just one floor on a concrete slab.

It's pretty simple. But it's functional. You got to ask yourself tough questions. Is it getting too expensive to maintain this house? So my takeaway is maybe you got to consider downsizing while you still have the financial strength to do it. Just a couple of weeks ago, I met with a client. Husband and wife in their late fifties.

And they see the writing on the wall, they need to downsize. And they said to me, Ralph, we're doing it now when we have the financial ability to do it. And quite frankly, when we have the physical ability to actually move. So they're being proactive even in their fifties. So that's number three, consider downsizing. Number four. You got to stay informed about financial products. If you listen to my show, you know I say this all the time.

Knowledge is power. The more you know, the better off you'll be. That's just a true statement. At all stages of your life, you've got to understand your options. You got to understand those off-ramps. Maybe you study reverse mortgages, like we talked about. And like I said, I'll put a link in the show notes. Maybe you got to have a better understanding of home equity loans or home equity line of credits.

I did a show about these on July 29th, 2024. I put that in the show notes as well. The key to this is you've got to understand your options and then plan accordingly and be proactive. I'm not telling you to become an expert in these areas. Just gain some understanding of the basics and take the first step. And don't be afraid to ask for help.

Don't be like Mary and let it go too late. So that's number four. Stay informed. Number five. Regularly review and adjust your budget. Yes, I call your intentional spending plan. It's all about that intentional spending plan. It's the cornerstone of all of this. You've got to start making choices that match your goals. You can't just set it and forget it though.

You've got to review it. You got to manage it. You got to make appropriate changes. You got to see what's going on in your life. Identify potential issues before they're a crisis. That is the key. And one of the things I say to clients all the time, you've got to be flexible and you've got to be willing to adapt to your current situation. And things happen.

Life is not this, it is what they call that a bunch of roses. Sometimes things get tough. And you had to make difficult decisions. That downsizing decision isn't easy. But sometimes it's the best thing to do. So that was number five, regularly review and adjust your budget. And last but not least. You got to seek professional advice. I've said it at least three times today.

I say it on the show all the time. Make an investment in yourself. Reach out to financial advisors, those who understand the situation and who will work to create a personalized plan for you. Not some cookie cutter approach, not send you down some YouTube worm hole or go watch this TikTok or go do these seven things and you'll find retirement success.

It just doesn't work like that. You got to find somebody who understands your unique needs. Build that dream team and be proactive about it. Remember this. Being house rich and cash poor is a situation that can be addressed. There is hope, but it requires action on your part.

Let me ask you a few questions. Maybe you feel overwhelmed with your finances. Do you feel overwhelmed with your finances? Do you feel like you're all alone? Do you want to find financial freedom? Do you want to escape the bondage of debt? Do you want align your finances with your faith? Do you feel like your dreams are slipping away? Do you feel like you're living in financial instability like you're living paycheck to paycheck.

Do you feel frustrated? Do you feel hopeless, and do you feel stuck? Well guess what? There is hope. I invite you to join the Ask Ralph show insiders group. We have a community of people who feel the same as you. People who are facing these same challenges.

But they're mastering their finances. They're living out their dreams. finding peace of mind. To feeling those same pain points and seeking to balance their finances with their faith. And best of all, the insider's group is sharing answers. We're sharing solutions and we're sharing hope. Apply to join our community. Just go to askralphpodcast.com/group and complete the questionnaire. Do it now, become a member of the insider's team.

Remember, our homes are more than just financial assets. They're the places where we built our lives and our memories. By planning ahead and making wise choices, we can ensure that our homes remain a blessing rather than a burden as we age. Don't let your home become a burden.

Now tomorrow, I'm going to be discussing the best ways to save money when you sell them. Maybe you've considered downsizing, or you know somebody who is, tomorrow's episode is going to be packed with valuable tips and strategies on how to save money when you sell a home. Remember, my passion is to help you achieve financial success.

That's my goal. That's why I turn on this microphone. I turn on this camera. I plan out these episodes. I want to see you achieve financial success. I want to see you live out your dreams and those big hairy audacious goals you've set for yourself. I want to see you grow in your faith because that's the most important thing. And I know together, we can master your finances from a Christian perspective. So as I always end this show, I want you to stay financially savvy out there.

Get a good financial education. Like I said, you don't have to be an expert. But understand some basics. So as I part ways today, I want to just remind you this. God loves you and may God bless you abundantly.

Narrator
00:19:31

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