The Year Gone By and The Year Ahead…

There is one main reason we do what we do at The Shred Method™ – to create freedom and options for individuals and families. Sometimes, the decisions we make are questioned by those who don’t fully understand this method, however, this year was a particularly important one to Shred debt. 

My goal in this email is to look back and then look forward to help you make educated decisions when it comes to your hard earned income. 

Here’s to the year gone by and the year ahead!

In looking back on 2022, it’s easy to point to a number of challenges in the financial markets:

• The rising interest rate environment; mortgage rates more than doubling in 6 months and HELOC rates increasing
• The crypto crash and current winter (not to mention the FTX meltdown)
• Inflation at the highest level in 40 years causing sticker shock at the grocery store and the gas pump
• Housing sales slumping to a multi-year low near the end of the year

It seemed that consumers were attempting to find the highest investment returns, but in a market that was going down or sideways most of the year, cash was sitting on the sidelines hoping to find a decent high yield savings account.

While at the same time, our Shred users have collectively managed to eliminate hundreds of thousands of dollars of interest, built millions of dollars in equity in their properties, funded hundreds of thousands of dollars in cash value life insurance, AND participated in real estate syndications and other passive income plays. 

For Shred users, it was a great year to blast away debt. Many of our users took advantage of low interest rates on HELOCs to blast away long-term amortized debt like mortgages, student loans and car loans. They realized guaranteed returns by knocking out that debt, and have more equity to put to work than before. 

Remember…as interest rates continue to rise, there’s a bit of an inverse relationship between the interest rate and the HELOC balance you should be carrying. If you have a significant HELOC balance, consider knocking it down over the next couple of months by not making lump sum payments on the mortgage. If you have questions, hit us up and we’ll help you with your plan. 

As we look ahead to 2023, there are more headlines than ever before about the “pending recession”. I had a conversation with a real estate development company executive recently who said we won’t really experience the effects of a slowdown until late in the year, but early 2024 could be hairy. Reason being, housing sales pump money into the local economy but they are a lagging indicator. My plan is to keep spending and expenses in check and limit major lifestyle changes… for what it’s worth!

While real estate sales slumped big time in Q4 because of rising rates, one thing to keep in mind is 3% interest rates ARE NOT NORMAL. It’s not normal to have homes on the market two or three days and have multiple offers over market value. It’s not normal to have a week or two of inventory for home buyers to choose from. What’s happening currently is the pendulum is swinging back through normal and may end up on the other extreme towards the end of the year. 

Based on conversations with a number of people in the mortgage industry, there are a significant number of homes currently either in foreclosure or pre-foreclosure in the US. Here’s why – during the pandemic, there was a moratorium on foreclosures and lenders were bending over backwards (per government interventions) to keep people in their homes. But now that we’re out of the thick of it, these missed mortgage payments are being tacked onto the back of the mortgage putting some people so far under water they’re better off walking away. 

It underscores the power of having a paid off (or nearly paid off) mortgage. 

And for some, it will create an opportunity to pick up homes that will need to be sold by the lenders who own them. So, if purchasing rental real estate is of interest to you, give the market a few months and you’ll likely start to see the REO (real estate owned by banks) inventory go way up. 

As for the stock and equities market, prepare for a bumpy ride. But in times like these, I’m reminded of Warren Buffett’s advice to be fearful when others are greedy, and greedy when others are fearful. There will undoubtedly be stocks on sale in the coming months – I’m watching for stocks hitting 52 week lows and buying a few shares at a time. Consult your financial advisor before making any major moves!

You’ll continue to hear from me and my team throughout this year about strategies, updates, and potential opportunities to consider. (One of those opportunities – If you’ve been with Shred for some time and your mortgage balance has gone down substantially, you might consider recasting your mortgage which could dramatically lower your monthly payment.) It’s one strategy among many that allows people to achieve a level of freedom. 

We appreciate you more than you know! Here’s to an exciting year ahead for a variety of reasons!

–Adam