Millennials Choosing to Rent

According to several recent studies the younger generation today would rather rent than own their home.  True, the recession has done a number on their job opportunities.  Plus, many are busy paying down debt and working hard to make themselves ready to own one day.  But unfortunately we all know tougher mortgage credit requirements are eliminating “too many” good, potential home buyers.

What’s alarming is that a greater number that can buy are simply choosing to rent.  And the main reason… well, you guessed it: they are saying that they aren’t ready to settle down.  They possess a strong desire to travel and explore before they get more “serious” with life.

So what’s the concern? Well, a couple things come to mind.  First, the obvious negative effects on our economy from less Americans owning homes.   Second, if this group chooses to rent for a long period of time before they purchase a home their personal wealth could suffer long-term.   With the time-value of money principles working against them and delaying this traditionally effective form of saving (building equity) through home ownership at young ages, some of this generation may never replenish the cost of such a delay.

Getting Back on Course

On a camping trip with the kids this past weekend, my daughter stayed in the woods to cut down a tree branch… my friend and his kids continued hiking back to our campsite.  When she had finished, we picked up our gear and began our trek to catch up with everyone else.  But unaware, I took a wrong turn and led us deeper into the woods.  After about ten minutes of hiking, it was apparent to her that we were lost.  A few minutes later she started to tear up and become afraid.

Having hunted in these same woods over fifteen years I knew we were safe.  My frustration was that I had led us in the wrong direction… and I knew it would take much longer now to get back to camp.  Her shoes were wet, her spirit beginning to break, and all she wanted was to be back with her friends (and to eat lunch).  Can’t say I blame her… as an eight year old (like her) I remember getting lost in my Mamaw’s neighborhood one time.  The word “fun” has never been used to describe that experience. 

Now, in the woods with my daughter, I began to experience a different fear… “what if” my six year old son had turned back for us and not continued on with my friend and his kids?  JB could easily assume that my son had stayed with me and would likewise be unaware anything was amiss.  That meant my son could be lost in the woods by himself… perhaps even feeling like I did as a lost child?  And to make matters worse, I left my cell phone in the tent, so there was not any quick phone call back to make sure all was okay (or to get a simple four-wheeler ride back to camp).

The mind began to run… and in a short while I was starting to feel a little panic like my daughter.  I had no control over my son’s situation and that is difficult for a parent.  But that’s when a simple thought landed.  I had a choice… to feed my daughter’s fear, or to turn our current situation into a learning experience.  We stopped, I said a quick prayer for my boy (and for us) and then began to point out signs to her.  Observing what was around us, we rather quickly found our way out of the woods and onto a familiar trail.  Then I let her take over and she eventually led us out to the road.  From there, we were back at camp within a few more minutes only to find her brother roasting s’mores over the campfire.

Thinking back on this experience I am reminded how easy it is to get caught up in hype, fear, or chasing trends with our investments that the “noise” around us soon causes us to lose focus.  We become distracted, and before long realize we aren’t following our plan.  We have taken a wrong turn and are no longer on course… or we simply become afraid, which can lead to emotional decisions that aren’t good for us.  There is much value in learning to stop and observe before we take action.  Through this practice we can make better decisions to get us back on track, and it’s how my daughter learned to get out of the woods!

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Thoughts on Investing…

Earlier this week I held an enrollment meeting for a 401(k) retirement plan and several new employees attended.  Most were young, in their early to mid-20’s.  As the meeting progressed, several good questions were asked about the plan.  Then as we discussed investments in the plan, and fluctuations in a typical market cycle, several of the younger employees began to question if investing was a good thing.  That’s when one employee, just re-hired at age 61, spoke up and shared some of his experience with investing.  He told them, “In 2001 and 2002 I lost half of my account, but I kept investing and within 2 years I was back at my highest account value plus some.”  A few of the younger heads popped up and began to listen closer to him.  He also shared a similar experience in 2008.  He finished by telling them to not only get into the plan and “save now” while they were young, but to “stick with it” even when times get rough.  He told them “it will pay off in the long run.”  I added some additional thoughts, but really didn’t need to say much to his wisdom – the point was made. 

On the drive back to the office I began to think about the meeting.  I thought about a friend who calls every time the market goes through a large correction and says “it’s a good opportunity to buy while the prices are low.”  He’s in his 30’s and understands that time is still on his side.  He also doesn’t panic and keeps a good perspective on things as the market gyrates.  Disciplined investing does take time.  It also can certainly have its pain along the way.  Yet as you move through these experiences you learn, and over time can grow.

 I’m reminded of a verse that says, “For the moment all discipline seems painful rather than pleasant, but later it yields the peaceful fruit of righteousness to those who have been trained by it.” (Heb. 12:11)  In much the same way, this can be true with investing.  For the moment (in the short term) we sometimes feel pain… yet if we stick to our plan, we often may see a good yield down the road (in the long term).

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