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Your Home Isn't An Investment | Series 4.5
Episode 59th August 2021 • Enjoy More 30s: Family Finance • Joseph P. Okaly
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Your home is different than a real estate investment - learn how and why!

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

Joseph Okaly:

Hello, and welcome to the fifth episode of The Your

Joseph Okaly:

Major Money Misnomers series. As always, if you like what you're

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hearing, please make sure to click that subscribe or follow

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us on Apple podcasts wherever you listen. Those stars those

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reviews, they mean a big difference for us and helping

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other young families out there. Last week, we discussed Schedule

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Goals, Achieve Goals to help you better understand how most

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people incorrectly connect goals solely with pass or fail, and

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how changing our mindset to be using goals to instead give

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ourselves a better opportunity in moving forward to some degree

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in a better direction can really produce great benefits, real

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tangible results. So check that out if you haven't already.

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Today, we are discussing your home, the American dream, right?

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But specifically why in most cases, you should not be looking

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at your home as an investment, despite what you likely have

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heard to this point in your life. We're going to discuss

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what you need to know about what really kind of needs to be true

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to define something as an investment, and what you can do

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in changing your mental approach to avoid some potential negative

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consequences as a result of that traditional mindset. Now, when I

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was younger, I hated orange juice, that acidic taste or

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whatever you would call it just was not for me never enjoyed it

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or anything like that. Growing up, though, it was kind of

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always touted or at least that's how I interpreted it as a health

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kind of a drink more or less. Yeah, there's all this vitamin C

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in it, and so on and so forth. So I looked at it as like, oh,

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if you drink orange juice, you're being healthy. Now I can

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picture kids in the commercials drinking it and then afterwards,

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they have you know, that huge smile on their face because, you

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know, they they felt so healthy. And as such, I tried to force

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myself to drink it. Especially when I was sick thinking I was

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doing a really great job. In my adult life, it was pointed out

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to me that orange juice actually has the same amount of sugar

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content drop for drop as a can of soda. And you know, that was

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rather astounding to me. And now I drink water with a vitamin C

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supplement on the side, you know, even better. So if you

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think back, you can probably recall one food or another you

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thought was really good for you growing up that maybe you have,

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you know, changed opinions on down the road as you've grown

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up. So what you need to know is that viewing your home as an

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investment may sound like it makes perfect sense however, if

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you break it down in real terms, and they not exactly look that

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way. Now, you know, I'm not saying to not buy your own home.

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I'm a homeowner. I'm just saying to adjust the way you're looking

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at it and the actual reasons for owning the home. To be an

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investment in just kind of the traditional or basic sense, you

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need to buy something today, have an expectation of it

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rising, and then lastly, an expectation of sometimes selling

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it in the future at that higher value. So you know, I buy ABC

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investment for retirement, I expect it to go up, then when I

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retire, I expect to sell it at that higher price to pay for my

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retirement. With a home if you're planning on living in

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that home long term, maybe forever, then that last part is

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not true. You have no real timeframe when you plan to sell

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it and actually realize a gain as a traditional investment

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would operate. You know, really, if you want to consider it an

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investment then it's an investment for your kids, as if

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you live there forever they are going to sell it after you're

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dead and gone and they will just realize the profits. Now if

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you're buying a real estate property today specifically

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because you think at some point in the future, it's going to go

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up and when that happens, you're going to sell it. So from the

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very start the sole purpose is making a profit, then that is a

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different story. I would agree then that is an investment.

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That's why I didn't say real estate isn't an investment. I

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said your home isn't an investment. You're likely living

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in your home, first and foremost, because it's what you

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feel is best for your family at this moment in time. And that is

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the focus and to me it should be the focus. Whether it be

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proximity to work, the school district for your kids, that is

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by far the biggest reason I'm sure why you're there. So number

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one is being your home. Whether you make money when it's sold 30

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years from now or not, I'm guessing is not your primary

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driver. Same thing if you purchase a second home, by a

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lake or the beach or up in the mountains. It's another place to

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go that your family will enjoy and that you will make great

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memories in. Again the primary driver is not appreciation and

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selling down the road to make a profit. So what you can do is

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adjust that initial mindset. A home is an expense and one that

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you're willing to take on for the lifestyle you want for your

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family. Where people get into trouble with having that home as

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an investment mentality is that it can often cause you to

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overextend yourself. Say you're looking at a home that is out of

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your price range. The realtor might say, "Yeah, but it's in a

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great area, it's up and com ng. It's a great investment for

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you and your family." And you get to thinking, 'hey, yeah, tha

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's true, you know, maybe I sho ld buy this home'. However, lik

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we just said, if you aren't pla ning on selling this house any

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ime soon, and the primary rea on isn't making a profit, the

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this makes it a home, not an nvestment. You will now be in

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situation maybe of having a lar e mortgage, you can't really aff

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rd maybe much less you can sav towards retirement or other goa

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s, or you know, maybe even a neg tive cash flow, potentially mak

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ng your overall financial sit ation worse, is not a good inv

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stment. Same thing goes for a s cond home. When we speak to cli

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nts about another home, if tha is one of their goals we go thr

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ugh if they can't afford the sec nd home, and or, you know how

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that will affect the other goa s and timelines we have alr

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ady laid out. Whether the hou e will appreciate or not, is not

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part of the decision pro ess. Again, it's a second hom

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, there's that word again, not an investment property.

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So a recap of today is that it's really important to mentally

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separate out a property that is your home for one that is an

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investment property. They are two different things. A home is

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where you choose to live with your family for that lifestyle.

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That's 99% of the reason for buying it. A real estate

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investment property is different in that you're buying it

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specifically to make a profit. The goal is appreciation to

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receive a profit. So when dealing with decisions for your

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home, make the primary focus on if it would make you happy, if

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you can afford to do it and if it will cause you to have to

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adjust any of your other goals by doing so. So not investment

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profits again. Now, I personally am happy to share that I plan on

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being on my in my home long term. So when we designed our

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kitchen, for example, we designed it for how we would

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make us the happiest, not what would have the highest resale

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value. So finally, be careful when dealing with home decisions

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to not overextend yourself based on it being you know, quote,

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unquote, a good investment. It just makes you financially

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stretched or unstable, then it's actually a bad investment pretty

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much every time.

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Thanks so much for tuning in today. As always, as we always

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say here at the end, if you're able to implement what we cover

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that is fantastic. You have less to worry about then before and

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we can focus more on just enjoying life. If you are

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wanting help with these things, or have questions you need help

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in clarifying, check out that Ask Joe section on the show's

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website www.enjoymore30s.com. That's enjoy more three zero s

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.com. Again, if you enjoyed this episode specifically, please

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make sure to follow us or subscribe and review us on Apple

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podcasts wherever you listen. There are literally millions of

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young families out there I'm trying to reach and help just

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like you.

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The next episode is Long Term Disability...MORE Likely To

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Happen?, where we're going to break down what statistically is

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actually the more likely insurance you could need to have

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in place to protect your income and family. Until next week

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thanks for joining me today and I look forward to connecting

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with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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registered investment advisor member FINRA/SIPC.

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