Jim Cramer's Stay Mad for Life by James J Cramer

Author:James J Cramer
Language: eng
Format: mobi
ISBN: 9781416577409
Publisher: Simon & Schuster
Published: 0101-01-01T00:00:00+00:00

5

FAMILY FINANCES

This is not just a book about making money. Growing your capital is only step one. Plenty of people score big and then can’t afford to pay for the truly important things because they never thought about how to preserve their gains. I’ve told you how to fund your retirement, but what about all the other big stuff?

As far as I’m concerned there’s nothing more important than family, and while married couples, especially those with children, are in tax-break heaven, raising a family is an expensive proposition that comes with a lot of other costs. Raising a child and paying for college can easily cost half a million dollars over the first twenty-two years, and that’s if you don’t continue helping out your children with money after they graduate. Good parents don’t need to shower their kids with money, but raising a child will never be cheap, and I think most parents would like to be able to help out if their adult children ever got into financial trouble. But I am not about homilies; I am about money. Teaching your children about money is perhaps the single best thing you can do for them. Paying for the things they need is just as important, which is why I’m trying to make you as much money as possible using any technique that allows you to pay lower taxes and shelter the money for as long as you can, while teaching your kids how to do the same!

And then there’s buying a home. Obviously, home ownership isn’t just for families; it’s practically built into the American dream. Once you start a family, though, owning a home seems a lot more important. Not so long ago, buying a home was considered the perfect can’t-lose investment, the ideal way to build equity. Everyone wanted a piece of the action because the housing market was on fire. Starting no later than 2005, people who never would have been able to get a mortgage because of their credit at any other time began to qualify because the mortgage issuers—typically brokers, who didn’t have to worry about burning their deposit base as a bank would, because they sold the loan immediately—became too confident and lowered their lending standards. It was so easy to make money in real estate. Whenever you heard about “subprime” on TV or in the paper, you were hearing about these people with bad credit buying homes. They typically either didn’t have a lot of money in the bank or had no documents, or, alas, were undocumented themselves! Many of these buyers took out really bizarre, exotic mortgages that had fixed low rates or even no interest for the first two years, and then switched to an adjustable rate for the next twenty-eight years. That didn’t seem like a big deal at the time, when interest rates were really low, but when these mortgages started resetting in 2007, rates were a lot higher, courtesy of the seventeen straight interest rate boosts put

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