Summary: The Four Principles in Action
• Americans (as well as Canadians) have ADDED significantly to their personal balance sheet allocation to housing over the last few decades. Housing can ADD to your net worth over time. However, even a small decrease in the value of housing can also SUBTRACT value from your personal balance sheet, and the effects of this subtraction can be MULTIPLIED if your household is over-allocated to housing.
• A more rational way to approach your need for shelter is to DIVIDE your spending on a primary residence, if you are a homeowner, into an allocation for shelter (meeting your consumption needs for shelter) and an allocation for investment. Another rational approach that has been advocated by a number of financial ...
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