The Sentinel: Money Matters

Lender makes home loan process easier for buyers

Vanderbilt Mortgage and Finance, Inc., a Berkshire Hathaway company and Illinois Residential Mortgage Licensee, has launched a new video promoting its easy loan process.

"Getting a home loan should not be an intimidating and difficult process, and we are continuously working to make the home financing journey - from application to closing - as easy as possible," said company president Eric Hamilton "A seamless home loan process greatly improves the customer experience, which is at the heart of our business."

Vanderbilt also enhanced its online application to simplify the process for customers on the company website.

Along with making the loan approval process easier for customers, Vanderbilt is continuing a program offering no payments for 60 days. This program automatically extends most new customers' first mortgage payment due date for 60 days after closing. While there are some additional requirements and restrictions, the program gives customers extra time to focus on paying the costs of moving in, without worrying about their first mortgage payment.

Over the last two years, the mortgage company has published an updated version of their home loan guide that contains helpful articles designed to explain the loan process to customers and valuable tips to ensure they are prepared during each step along the way.

Guest Commentary: Decisions determine our destiny

By Glenn Mollette, Guest Commentator

2021 is here, and will it be just another year?

If it's just another year then that won't be bad at all because too many will not have another year. The opportunity and privilege to have another year is the gift of life. Being alive and living your life is about as good as it gets. Aim for being alive this time next year.

Make some decisions about 2021. Where do you want to be this time in 12 months? Would you like to be ten pounds heavier? Maybe you would like to be ten or twenty pounds lighter?

If you cut back on your portions and get off the couch you can lose a pound a week on average. This is daunting but just think about where you can be the first of March if you start today? Don't start tomorrow. Start right now. Today. This minute. Throw all that junk cake and pie in the trash. This is a tough decision because we hate to say goodbye to all those holiday cookies and candies. Your body will thank you and you will feel so much better very soon.

Decide about financial habits. Millions of Americans carry credit card debt. Minimum payments on $3,000 of credit card debt is like swimming up river. If you have missed a few payments your credit card company may be anxious to hear from you. Ask them if they will consider a settlement payoff. A friend of mine owed $5,000 and his credit card company settled for a $2800 payoff. Your company might or might not but it never hurts to negotiate. You might be able to sell some things in order to erase that back breaking high interest debt.

Make some money in 2021 - if you want to. Most Americans need to make money in 2021. Work on job applications. Peruse the newspaper. Search online. Consider places you have heard about and call them, go see them. Knock on doors of opportunity. You get nowhere if you do not try. You might complete 20 or 30 applications to get one job interview. Complete the application thoroughly. Give them a reason to consider you. Put together a good biographical sketch, resume. Have a friend or two to review and edit because two heads are better than one. Have some good trusted references. Wherever you work do a good job because you want them to say a good word about you. A good word may seal the deal on your next job opportunity.

Jobs sometimes are scarce. Consider your personal knowledge and abilities and what might you do to make a dollar or two? What do you know that others need to know? What can you offer that others need or might want? Can you make something? Can you fix things? How can you help others? Creating your own life and business might be the financial and mental sanity answer for you. If you create your own work and are good at what you do, you will not run out of something to do.

Our decisions determine our destiny. Whatever decision we make we have to put into action. Faith without works is dead. May your life be good, healthy and filled with wonderful love, family and friends in 2021. Let's work together for a good year.

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Dr. Glenn Mollette is a syndicated American columnist and author of American Issues, Every American Has An Opinion and ten other books. He is read in all 50 states. The views expressed are those of the author and are not necessarily representative of any other group or organization.

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This article is the sole opinions of the author and does not necessarily reflect the views of PhotoNews Media. We welcome comments and views from our readers.

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Money Matters: Three businesses that would be great to have in St. Joseph

by Jake Pence, Guest Columnist

As St. Joseph and small towns across the country face stagnation (lack of growth) it is important that they prioritize their local economy.

St. Joseph is a desirable place to live for many reasons. We have a great school system, small town values, a low crime rate, proximity to jobs and everyday necessities, the best El Toro in Champaign County and numerous local businesses. I could go on and on. However, if population growth isn’t a desired outcome then population retention is pivotal to the long-term livelihood of the community.

What’s the best way to improve the desirability and longevity of a small town? Create a thriving local economy that isn’t too dependent upon one industry.

That said, this article is dedicated to three businesses I believe would improve resident retention and add a welcomed vitality to the local economy in St. Joseph.

BUSINESS IDEA #1:
BBQ & Craft Beer Restaurant
Location: East of Jack Flash

Yes, we already have a great selection of restaurants in St. Joseph and this is by no means a knock against any of them. I thoroughly enjoy a burrito loco from El Toro, the frisco melt from Roch’s and anything on the menu at The Wheelhouse. I’ve also eaten my fair share of China King, Padano's, Scratch, Subway, Monical's, and Dairy Queen over the years.

Despite all of these options, what we're missing is delicious portions of pulled pork, beef brisket, burnt ends, cornbread, potato salad, coleslaw, and craft beer.

To scratch that itch, residents of St. Joseph and surrounding communities have to drive to Urbana or Champaign.

Have you heard of Burgers & Beer in Gibson City? How about Gross’ Burgers in Westville? I’m guessing you have heard of one if not both. What do those restaurants have in common? First, when my family drives past them we stop and eat. Second, they are demand drivers for their local economy.

I firmly believe that a BBQ and beer focused restaurant would develop into a staple of the St. Joseph food scene and drive demand to the rest of the local economy. For proof of concept, visit Edley’s next time you’re down in Nashville, TN.

BUSINESS IDEA #2:
Boutique Assisted Living Facility and Memory Care Center
Location: Southwest of the middle school or a new residential development

Based on the recent traffic I’ve seen at my proposed location, this could very well be in the works.

Why do most people live in St. Joseph? They grew up here and this is where their family lives; therefore, we should prioritize the health, housing, and livelihood of all residents from newborns to great grandparents.

One of the hottest trends in real estate is assisted living facilities because the baby boomer generation is approaching the age where this assistance may be necessary. Additionally, Alzheimer’s rates are rising and quality memory care facilities are becoming more important than ever.

The addition of a boutique assisted living facility and memory care center to the community would be ideal to provide a much needed service to the older generations of St. Joseph. Instead of having to drive to Champaign, Urbana or to other facilities in the surrounding area, families and caretakers could make a five minute drive across town to check-in and visit loved ones.

For proof of concept, check out my colleague Loe Hornbuckle at Sage Oak Assisted Living based in Texas - https://thesageoak.com/.

BUSINESS IDEA #3:
Home Remodeling General Contractor
Location: Vacant lot on 2nd Street south of the Kickapoo Rail Trail or your garage

How many of you have completed a home remodeling project during COVID-19? My guess is 50% of the people reading this article have done one or more improvements to their home. How many of you ENJOYED the process of completing your home remodeling project? I’m going to say 10% - and if you’re in that 10% then pay close attention.

In my opinion, St. Joseph has a housing situation that is bottle-necked by supply and demand issues. That has resulted in the village not experiencing the population growth many once thought it would thanks to stagnation. If we aren’t going to develop new housing – a topic for another day, then we must continue to revitalize and renovate the current housing supply.

There are already businesses in town that do this and do it well – a shoutout to Roger Beals - but these businesses are always booked out weeks, sometimes months in advance. There is a shortage in supply and a surplus in demand for contractors; therefore, there is an opportunity for a new company to balance out the market with a much needed service.

With minimal overhead costs, diligent customer service, and an active social media presence, I don’t think it would take long to create a thriving business with many opportunities to expand into nearby markets.

All of these businesses will take a certain level of industry specific knowledge and access to capital to start, but that can be acquired through partnerships, research, and over time. Entrepreneurship isn’t about reinventing the wheel or coming up with a Shark Tank-esque idea. It is about finding opportunities in the marketplace and taking action to meet an unfulfilled demand.

As an investor and entrepreneur, I am personally very interested in exploring all three ideas. There may be others in your circle who feel the same way. Start a conversation. Discuss the possibilities and the opportunities. Quite frankly, I think conversations about entrepreneurship and taking calculated risks aren’t talked about enough in our community, yet we are home to some of the brightest minds and hardest workers in the area.

It is time to make entrepreneurship a priority in St. Joseph. So let’s get to it!

About the author:

• Jake Pence is the President of Blue Chip Real Estate and a consultant for Fairlawn Capital, Inc.. A 2019 graduate from the Gies College of Business at the University of Illinois, he is a 2016 graduate from St. Joseph-Ogden High School where he was a three-sport athlete for the Spartans. You can view his latest acquisitions and advice on his YouTube channel here.

Pritzker says state has reached a "critical juncture"

On Tuesday, Illinois Governor J. B. Pritzker ordered state agencies to identify areas of their 2020 budgets that can be cut by 5% as well as 10% cuts that can be made in their spending plans for the next fiscal year should Congress fail to provide additional COVID-19 relief funds.

"Any cut to the Illinois state budget is a win for taxpayers," said Jim Tobin, President of Taxpayers United of America (TUA). "However, a broad cut to the state budget is not enough."

Tobin says the state of Illinois’s financial woes are due to the vast amount it spends on lavish, overpromised retired government employee pensions.

"This is why Pritzker is really cutting the budget, he wants to divert pay from current Illinois government employees to retired Illinois government employees," Tobin said in a release this morning. "Every year former Illinois government employees eat up even more of the state’s budget.

In fact, the primary motivation for a $5 billion state income tax hike that passed a few years ago was to transfer wealth from taxpayers to the black hole that is the Illinois pension funds."

Pritzker calls the current state's budget woes a "nightmare scenario".

We've reached a critical juncture for our own state finances in this COVID induced financial crisis," he said during his press conference in Chicago.

In June, Pritzker signed off on $43 billion dollar budget that began July 1 relied heavily on federal aid and borrowing to fill revenue shortfalls due to the COVID-19-induced economic slowdown.

A memo from Deputy Gov. Dan Hynes and budget director Alexis Sturm to agency directors stated the state's current budget "is only affordable in its current form with federal support to bridge the pandemic-related shortfalls and that now appears not to be forthcoming."

Illinois stands to lose out on $6.5 billion in revenue this year and next year. Agency heads were given until Oct. 2 to outline their reductions for the current year. This includes taking necessary measures from hiring freezes to renegotiating on any planned spending commitments.

Tobin points out that governor's Illinois progressive income tax is purely a move to raise taxes.

"Pritzker’s income tax increase amendment, better described as an income theft amendment, is not what Illinois needs," he wrote. "Illinois taxpayers should vote no on November 3rd to the proposed amendment change, and demand Pritzker to cut spending further."

Money Matters:
Expected returns and investment experience

This is the fourth and final article Money Matters series by guest columnist Jake Pence. You can read part one What's the best way to invest in your future here, part two on the importance of Liquidity and diversification and part three covering real estate taxation here.

by Jake Pence, Guest Columnist

This is what so many people get caught up in "Expected Returns". In other words, which investment vehicle will make more money.

In reality, this is like comparing apples to oranges. The most convenient way to compare the returns is using the S&P 500 and a Vanguard Real Estate ETF and throwing them up side by side.

If I’m being honest, I think this is a lazy methodology and it is only used because of the convenience. In general, the returns will be comparable, but it will come down to the specific investment opportunity and it is lazy to make blanket statements about returns. Obviously, you need to invest in an asset that will create a return; however, there are other items to consider such as the investing experience, diversification, taxation, risk management, liquidity, and your financial goals.

Finally, something that is often overlooked in any investment is the experience of that investment.

When I say experience, I mean how is your investment going to make you feel, affect your sleep, make a societal impact, and so on. To this point, this article has been fact-driven, but the remainder of this section is 100% my personal opinion and it is absolutely biased towards real estate.

The stock market is great for people who want to put their money into a system to generate a long-term return without having to make many decisions. I worry about people who have all of their money tied up in the stock market and/or retirement accounts that are exclusively invested in the stock market (you can use them to invest in real estate too). The reason being, I don’t trust the decision makers that control these financial markets and I would rather have my money in Main Street real estate than on Wall Street.

Real estate is great for people who want to have more control over their investment, make a societal impact, and generate long-term wealth.

I love being able to create my own business plan, to meet my residents and give them a place to call home, and the proven path to create a generational financial impact. I worry about real estate investors who think that they will be able to get rich quick and think it will be easy money.

News flash … it’s a grind. There are a lot of bad actors in the industry that only care about money, and I think that is short-sighted in that this is long-term game.

In conclusion, the answer to this question should come from within and it should complement your financial goals and individual skill set.

To me, that means I should heavily invest in real estate and opportunistically invest in the stock market. To you, that could mean an entirely different investing strategy.

I encourage you to further your research on both of these topics and seek out reputable investors that have experience with both real estate and/or the stock market. When talking with other investors, make sure that you come into the conversation with an open mind, do your best to leave your biases at the door, and give yourself the chance to create a better financial future.

About the author:

Money Matters:
The taxing side of real estate investing

This is part 3 in this Money Matters series with guest columnist Jake Pence. You can read part one What's the best way to invest in your future here and part two on the importance of Liquidity and diversification.

by Jake Pence, Guest Columnist

For the majority of investors, taxation should never be the main driver behind an investment. However, taxation should absolutely be considered in an efficient investment portfolio. At the end of the day, how much money you keep is more important than how much money you earn.

The Internal Revenue Source (IRS) has written a painfully long book called, "The Internal Revenue Code" otherwise known as the tax code. The tax code isn’t painfully long and dense because of the many different ways the IRS can collect taxes. In fact, the collection of taxes is rather simple. If you make “X”, then you pay “Y.” Rather, the tax code is so long because of the many ways you can legally reduce your tax liability.

Individuals are able to reduce their tax liability if they perform actions that the government likes. One of the government’s favorite actions is providing housing to the public; therefore, there are many great tax benefits for real estate investors. One of the great real estate tax benefits is depreciation.

Real estate depreciation allows you to deduct the costs of a property over its useful life (as determined by the IRS) which reduces your taxable income. This is known as a “paper loss” because on paper it looks like the value of your investment decreased when, in reality, the value of your property likely increased due to appreciation and you collected monthly cash flow from the property if your income was greater than your expenses.

The tax benefits of real estate are very powerful and warrant their own article; however, this is how the wealthy stay wealthy. They buy real estate and legally reduce their taxable income, so they keep more of their money and then use that money to buy more real estate. It’s not complicated, and it’s 100% legal.

When it comes to taxation, real estate is the belle of the ball; however, stock market investors are able to place investments in tax efficient accounts and control the timing of their capital gains. The main tax benefit available to stock market investors is the ability to defer taxes through retirement accounts such as 401(k)s, 403(b)s, and IRAs. Additionally, you are able to choose the timing of the taxation by electing the account to be a “traditional” or "Roth" retirement vehicle.

With a traditional IRA, you are able to deduct your contributions in the year they are made, but you must pay taxes on them once you withdraw the funds. This is ideal for someone who thinks they will be in a lower tax bracket once they are retirement age. You contribute after-tax dollars to a Roth IRA, so this is ideal for someone who thinks they will be in a higher tax bracket once they retire. If you hold a specific stock for longer than a year, then you are no longer subject to the highest capital gains tax and this will allow you to keep more of your earnings.

About the author:

Money Matters:
Why liquidity and diversification is important in your investment plan

This is part 2 in this month's Money Matters with guest columnist Jake Pence. You can read part one What's the best way to invest in your future here.

by Jake Pence, Guest Columnist

Next, picking up where we left off, we need to talk about liquidity.

To keep it simple, liquidity is how easily an asset can be bought and/or sold. Another way to think about liquidity is how easily the asset can be turned into cash. The stock market has a clear advantage in terms of liquidity, but it still warrants a discussion.

Stocks are very liquid. In fact, stocks are so liquid that last summer, I was able to sell Amazon for $1,800/share, Tesla for $250/share, and Zoom for $85/share without Robinhood tapping me on the shoulder and saying, “You might not want to do that …”

Those companies now trade for $3,300/share, $1,700/share, and $275/share, respectively, and I still live in my parent’s basement.

I don’t tell that story to downplay liquidity because having quick access to your capital is advantageous in many scenarious; however, I tell that story to highlight how liquidity makes it easy for an investor to make emotional, rash, and in my case, downright stupid decisions. At that time, I did not have the trading savvy or financial discipline to hold a stock for more than a year.

All in all, if you value having easy access to your capital and have the financial discipline to manage that liquidity, then the stock market will better suit you.

Real estate, on the other hand, is a relatively illiquid investment. Whenever you want to pull money out via a refinance or cash out of the investment via a sale, then there is going to be a process that you must follow. The process will likely take a few months. Depending on the transaction, you could fall on either side of that timeline; however, it doesn’t take seconds like it does with stocks. If you don’t need your capital in the short-term, then real estate investing will be a great option for you.

Another important criteria is asset diversification. Diversification is the act of placing your investments in a variety of asset types, industries, etc. so that your exposure to any one asset type is limited.

Diversification is extremely important in an investment portfolio because if you’re only invested in airline stocks and then a global pandemic halts all air travel … well, you’re in trouble.

It is easier to diversify your portfolio within the stock market than it is real estate. You can still diversify your real estate portfolio, but it will take more than a few hours on Yahoo Finance to do so.

To make diversification even easier for stock market investors, you could buy a mutual fund that is already diversified. In real estate, you can diversify your portfolio by purchasing different asset types (apartments, self-storage, single-family-homes, etc.) in different locations (Illinois, Indiana, Tennessee, etc.). This will take more time, capital, and energy; however, it can and should be done.

I firmly believe that a well-balanced portfolio should include both stocks and real estate.

If your entire portfolio is in stocks, then you are heavily reliant upon company executives, Wall Street, and government decision makers for your financial future. If your entire portfolio is in real estate, then the cyclical nature of real estate markets will present challenges. Overall, a combination of Wall Street and Main Street investing will create a balanced portfolio.

In my next installment I will briefly discuss taxes and how investing can potentially lower your tax annual liability.

About the author:

Money Matters: What's the best way to invest in your future?

by Jake Pence, Guest Columnist

"Real estate or the stock market - which should you invest your money in today?"

This is a fundamental question that many investors must answer at some point on their investing journey. I have consumed hours and hours of content on this exact topic and if there is one thing that I know for certain, it is this … the people creating the content are biased, myself included.

I heavily favor real estate investing over the stock market because it best compliments my goals and skill set, but I also opportunistically invest in stocks.

So … let’s weave through this complex topic and discuss five key points in an objective, fact-driven lens rather than a lens clouded with my personal agenda and bias. The key points I’ll discuss will be barriers to entry, liquidity, diversification, taxation, expected returns, and investment experience.

Barriers to Entry

A widely used economic term, a barrier to entry is a start-up cost and/or obstacle that prevents an individual from easily doing business. When it comes to real estate and the stock market, knowledge and capital will be the two most prominent barriers to entry.

I have found that the barriers to entry for real estate are often overstated because of how easy it is to buy a stock. For better or worse, the barrier to entry to the stock market is almost nonexistent.

If you have a bank account, a smart phone, and a pulse then you can create a Robinhood account and start trading stocks. Therefore, everyone has access to the stock market and can start trading.

In my opinion, that’s a pro and a con, but it does provide equal opportunities and people with small amounts of capital can start putting it to work. Before you put your capital to work, I highly recommend educating yourself on the stock market and how to make educated investment decisions.

While I have found real estate barriers to entry to be overstated, they are still more difficult to overcome than entering the stock market.

Knowledge, capital, and time are the roadblocks you must overcome to invest in real estate.

Knowledge is the easiest to overcome because books, podcasts, and the internet have all of the answers you need. I’m extremely grateful for my education at the University of Illinois, but I learned more about real estate investing from books, podcasts, and YouTube videos than I did in my 400-level real estate investing class from one of the best finance and real estate programs in the country.

Capital is the next obstacle and this one held me back for a few years, but real estate investing should be treated as a team sport. If you have the knowledge, but no capital, then partner with someone who has the capital, but limited knowledge.

If you’re wondering how a cash-poor 22 year old who lives in his parent’s basement, writes articles, and makes YouTube videos is a full-time real estate investor … it's because he partners with people who do have the capital (but limited time and/or knowledge) to invest in real estate.

The last obstacle is time and the common saying to disparage real estate investing is, "I don’t want to get called about a leaky toilet at 3AM."

Well, you’re right. That can happen. However, there are also additional ways to invest in real estate that don’t require that time commitment, such as becoming a passive investor in a real estate syndication.

Before you decide real estate investing isn’t for you, make sure you educate yourself on the different ways you can invest in real estate.

In my next article we will look at the next two key points, liquidity and diversification.

About the author:

Money Matters: Five tips to weather the COVID-19 recession

by Jake Pence

The National Bureau of Economic Research’s Business Cycle Dating Committee has officially announced that the United States has entered a recession. The United States has seen a record 128 consecutive months of economic expansion before COVID-19 bottlenecked the nation’s physical, mental, and economic health. However, this article is not going to be a COVID-19 or recession pity party; in fact, it will be quite the opposite as a mentor once told me, "Never let a good crisis go to waste."

Before we dive into the weeds, let’s preface these tips with the fundamentals of money management in a recession. First, you must live within your means and minimize discretionary spending. Second, you must prioritize saving and building an emergency fund of at least six months worth of expenses.

Third, you must continue to make your debt payments. If you want to learn more about any of those fundamentals then you’re a google search away, but my goal is to give you tangible, long-term tactics that will set you up for success both during and after this recession.

ANALYZE YOUR SPENDING

To effectively live within your means, you must understand where your money is going and be proactive with your cash flow management. In the book Good to Great by Jim Collins, he wrote, “You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be.” Well … it’s time to confront the brutal facts about your spending and adjust your budget accordingly.

Whether your budget is in an excel document, on a piece of paper, or in your head, it is important that you have an understanding of the money you earn and the money you spend. In a recession, it can be difficult to earn more money; therefore, it is important to spend less money.

You can do this by checking your bank account, credit cards, and wallet on a weekly basis to see how much money you spent and what you spent it on. This will allow you to confront the brutal facts of your spending and identify what is necessary (groceries, housing, insurance, etc.) and what is discretionary (eating out, new clothes, subscription services, etc.).

IMPROVE YOUR CREDIT SCORE

Recessions affect almost every nook and cranny of the economy, especially credit markets. When credit markets tighten, it becomes difficult to get approved for a mortgage, car loan, credit card, or any other type of financing. Although it may be difficult, it is NOT impossible to gain access to financing in a recession. Access to financing is often what separates individuals who capitalize on the opportunities a recession presents, discounted asset prices, from those who don’t. Consequently, individuals with strong credit scores will be first in line at the credit market.

Your credit score consists of five components: total accounts, length of credit, credit inquiries, utilization rate, and missed payments. The most important components are the credit utilization rate and missed payments. To best explain your credit utilization rate, let’s say you have a credit card with a $1,000 credit line and a $500 current balance. This is equal to a 50% credit utilization rate ($500/$1,000).

You should maintain less than a 30% utilization rate across all forms of credit to improve your score. Missed payments are self-explanatory; however, it may become tempting to skip a credit card payment when times are tough. Do not give into this temptation as missed payments are the most important component of your credit score and will affect your score long after the recession ends.

REVIEW YOUR TAX PLAN

Does the word "taxes" make you cringe? Cry? Worse? Well … taxes, taxes, taxes. For most individuals, taxes will be the greatest expense over the course of their lifetime. However, there are many LEGAL ways to pay less taxes so that you can keep more of your hard earned money.

In fact, the overwhelming majority of the United States tax code discusses how to legally reduce your taxes. You do not need to read the entire tax code, but you need to talk with an accountant who (hopefully) understands the tax code and will create an efficient tax plan for your unique situation. There is a critical difference between an accountant who prepares your taxes and an accountant who prepares your taxes and minimizes your taxable income through proper tax planning. When you can no longer increase your income or reduce your expenses, then focus on (legally) keeping more of your money.

If you don’t currently have an accountant or you file using a free online platform, then simply start by scheduling a meeting with a local accountant to review your financial situation. Most accounting firms will offer a free consultation to decide whether or not you will benefit from tax planning.

One other critical tip, you often will get what you pay for in terms of accountants and not all accountants are created equally. Don’t be afraid to pay a little extra for a great accountant who saves you far more money than a cheaper alternative, so be sure to focus on how much they save you rather than how much they cost you.

DIVERSIFY YOUR INVESTMENT PORTFOLIO

The purpose of diversification is to mitigate your risk. There is risk associated with any investment, and that risk is amplified in an economic downturn. Therefore, it is important to have a variety of investments in your portfolio. For example, if the stock market crashes and you have 100% of your investment portfolio in stocks, then your portfolio value will take a tremendous hit.

Alternatively, if the stock market crashes and you have 50% of your investment portfolio in stocks, 25% in bonds, and 25% in real estate, then your portfolio will not be as severely affected. When it comes to your financial portfolio, it is important to spread your eggs in a variety of baskets rather than loading them all into one basket.

Diversification can be done within each asset class. Let’s take a look at the 50% stocks, 25% bonds, and 25% real estate portfolio as an example. Within the 50% of your portfolio allocated to stocks, you should own stocks from different industries with a range of company valuations. An example would be owning shares of Amazon (e-commerce), Visa (financial services), and Caterpillar (industrial).

Within your 25% bond holdings, you can get a CD from a local bank or buy a government municipal bond; within your 25% real estate portfolio, you can own a single family home rental property in St. Joseph, IL and a duplex rental property in Champaign, IL. A few asset classes that you should consider investing in are stocks, exchange traded funds, bonds, real estate, real estate syndications, and precious metals such as gold and silver. Overall, prioritize diversification so when one sector of the economy is negatively affected, all of your chickens don’t come home to roost.

FOCUS ON THE BIG PICTURE

If you’re going to take away anything from this article then let it be this: don’t become emotional with your finances due to the recession. The next few years contain a lot of uncertainty, but don’t lose sight of your long-term financial plan and jeopardize your long-term financial security due to short-term economic events.

Whether this recession lasts 6 months to 3 years, it is still a very small period of your life. Make the necessary adjustments to your portfolio, live within your means, and actively manage your cash flow; however, do not become emotional and make rash decisions that will affect you long after this recession ends. We are in this for the long-haul.

Warren Buffett is a world-renowned investor and once said, "Only when the tide goes out do you discover who’s been swimming naked." Well … the tide is making its way out and time will tell who has prepared for this moment. If you feel vulnerable, then don’t become emotional or make rash decisions. Instead, cover yourself up while you still have time and make sure that you too, don’t let a good crisis go to waste.

About the author: