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Financial Options in a Unpredictable Economic Climate

25 January, 2015

The US is currently seeing historically low interest rates around 0.99%. These rates might seem like a godsend for the first time home buyer or refinancer. However,these low rates are rewarding risky behavior such as more borrowing on a large scale,more risky borrowing,and more chances of defaults. To spur the slow moving economy back from its inevitable decline using low interest rates,the US has actually rewarded the type of behavior that has gotten the US into the financing mess. More importantly,low interest rates are inadvertently hurting savers (especially retirees),penny pinchers,and the fiscally responsible among us. 

For example,assume I am a retired 60 year old single man with $500,000 in my ING high yield savings account. Four years ago,my annual interest rate fluctuated between 3.50-5.50% per year. Let's take a low annual interest rate and say it was 4% for the year. 4% of $500,000 is $20,000 of interest. Today,that conservative saver is living on his savings and earning only 1% of $500,000 which is $5,000 a year. For someone who has his home paid off and might also have some bonds and CD (also historically low),it is really going to be cutting into his savings because he is without $15,000 of interest that was consistently there a few years before the economic collapse.

What to Do With My Money?

The US Stock Market (actually the Mexican stock market has outperformed the US stock market for the last ten years….separate article entirely)

I grew up listening to financial advisors talk about the strength and resiliency of investing in the stock market for the long haul with a conservative,diverse,and low risk approach. It sounded great until my in-laws lost 40% of their portfolio 1 year before they we going to retire……….do I need to go on. Everyone knows someone who followed all the rules that our financial gurus professed and got burned along with many millions of others. I used to invest and had a friendly financial advisor too for some reason(everyone else had one),but I gladly stopped drinking that soda years ago. 

A High Yield Savings Account 

That was a joke,please re-read first paragraph of article. The most responsible among us are up-ending their lives and retirement just because that were not willing to blindly trust in the stock market. 

Real Estate

This is not all encompassing. I am not talking about some local market where the talk of the town is if there will be 1 or 2 new schools in the neighboring township depending on the local newlyweds baby-making abilities. I am also not talking about saturated markets like Florida and Nevada that were developed and financed with cheap money that cater to a mostly home-grown American tourist and the US retirement market. I am talking about real estate in a affordable and international destination that is still largely undeveloped and full of opportunity. 

I am talking about an area of the Riviera Maya that has 47 countries represented,has the best beaches in the world according to Conde Nast and MSNBC,and is getting a new international airport in 2012/2013. I am talking about a real estate market where 95% of the deals are cash which makes it a truly conservative and stable market. I am talking about buying and investing in real estate (raw land for those who get in early) in the path of exponential growth in one of the most beautiful areas in the world. I am talking about Tulum,Mexico. 

Notice to reader

I am not a financial advisor,stock broker,or a pension fund manager (you know,the people that we have been told to trust with our hard earned dollars since WWII). I am a former economics instructor and real estate professional from the states who unfortunately is watching the American dream become scarcer by the day for thousands of Americans. In 2009 alone,there was an average of 7,700 foreclosures per day in the United States. Currently,1 in 7 Americans now live below the poverty line which is defined as a family of 4 earning less than $22,000 per year. In short,I am someone who has already seen that there is different and even better way to live,invest,and experience life then what we are all sometimes taught or wired to believe. 

Like many expats already living here in the Riviera Maya,I am no longer relying on "financial professionals" to help me make conservative and obvious choices with hopes that things turn out OK in 5,10,15,or 30 years. I am choosing to invest and plan ahead on my own,in something that I can see,touch,smell,and experience. The world has changed and the global playing field is certainly leveling out,that is why I,like many people,are going to have to go against the grain. 

Take responsibility for your retirement,your kids' future education,and at least come see what everyone is now talking about. I challenge you to come take a tour of the Mexican Caribbean coastline and see if you need to start researching or investing on your own….you will not be alone,there are more and more likeminded people visiting every week. However,I doubt you will see your financial advisor down here. Challenge the savings and investing status quo and come visit. You may just make the best financial decision ever,after some scuba diving and a virgin Margarita that is.

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