Q&A with Personal Finance Expert David Bach
Did you join personal finance expert David Bach on his last Live Chat? If you missed out, here’s an excerpt with some common financial mistakes and how to avoid them. Sign up for the next Live Chat on the DebtWise Facebook page.
Unnecessary Insurance Policies
Q: Do you suggest that it’s necessary to have a Gerber baby life insurance policy on your child? I have two policies, and that’s $14.58 a month. What are your suggestions?
David Bach: It’s brilliant marketing and completely not necessary. Insurance for a baby? Seriously? And the amount of insurance is so small…what is the point? You would be much better off to put that money in an investment account or buy insurance for yourself and your husband. Sorry, Gerber Insurance—not a fan. I would never sell it or let anyone I know buy it.
Missing the Big Picture
Q: I just finished re-reading Automatic Millionaire on homeownership. You mentioned that to rent a place, first you need to determine if the rent will generate positive cash flow. What if it doesn’t generate positive cash flow? Do you still rent it out?
David Bach: If you don’t rent it out, you have negative cash flow. Any cash flow is better then no cash flow…and the biggest mistake landlords make is waiting months to rent something because they won’t lower their rent. I just watched a landlord here in Tribeca sit on an apartment for nearly two years because he wanted $15,000 a month for rent, and he wouldn’t take $12,000. He lost over $250,000 in rent (cash flow) while he waited to find a tenant that would pay him his $15,000 a month in rent. Hope that helps!
Too Scared to Take Advantage of Opportunities
Q: I know that everyone always says that recessions are when you can make the most money, but I’m a little nervous to get back on the horse. Any advice? I feel like I should just play it safe.
David Bach: I feel your fear. Here’s what I can tell you: recessions do create millionaires. The stock market is up over 95 percent from its lows. People who kept investing in their 401(k) plans through this recession are now wealthier then they have ever been. According to Fidelity’s recent study, retirement accounts are at an all-time high. And real estate deals are everywhere, with prices down 50 percent in many markets. People will be kicking themselves for not buying real estate five years from now. My apartment that I bought in 2009 is now up 35 percent! Recessions make people rich. You need to get back on the horse in a smart way and take advantage of this recovery. Good luck!