👋 Hey there, welcome to the WalletBurst monthly newsletter for the month of February 2022.
🇺🇦 Russia’s invasion of Ukraine is obviously on everyone’s mind after the events of the past week, and although this is not the personal finance content you may be expecting, I think it's important to understand why the conflict is unfolding. I found this video by YouTuber RealLifeLore titled Why Russia is Invading Ukraine to be helpful for understanding what is going on right now in Eastern Europe. A key takeaway is that Russia’s core motivation for war is control over the oil and gas resources that were recently discovered within Ukraine.
🏠 I found Ivy Zelman’s recent interview on the BiggerPockets podcast to be an interesting contrarian take on the direction of the US housing market and a great listen for anyone considering buying into the crazy real estate market right now. Ivy is a prolific housing analyst who is widely considered to do some of the best housing market research on Wall Street, and she correctly called the housing market top in 2005 and the subsequent bottom in 2012. Her core thesis is that population growth slowing to record levels combined with a multi-decade high of new housing supply in the pipeline will lead to plateaus and corrections in the coming years. She is most concerned about housing markets in the Southeast, Southwest, aube.com/watch?v=zZzAk0qnF8knd Mountain states which have the most new supply in the pipeline.
Her general advice is that if you are in a situation where you can wait to buy, particularly in these regions, then it is likely that you will have better buying opportunities in the future. What strikes me about her analysis is that she sees a slowdown and possibly correction even before even considering the impact that rising interest rates could have on home prices and demand.
🇨🇦 Financial Samurai presents a perspective on the flip side of the real estate predictions coin in his article If The U.S. Housing Market Gets As Hot As The Canadian Housing Market. Right now, the housing markets in even the hottest US cities look affordable for buyers compared to major Canadian cities like Vancouver, Toronto and Montreal. In fact, the US housing market as a whole is one of the most affordable in the world when considering the ratio of home price to income. While there are some structural differences in the Canadian market that he details, Sam's thesis about the US housing market still being relatively cheap resonates strongly.
🤔 Recently I was considering if I should max out my 401k this year, and I came across Nick Maggiulli's article titled Why You Shouldn’t Max Out Your 401(k) which prompted me to run my own numbers which I detail in this article. The takeaway from Nick’s article is that maxing out your 401k likely has a smaller benefit than you would expect, and it comes at the high cost of locking up much of your money until your 60’s, making it inaccessible for things like a down payment on a house. After reading Nick’s article and running my own numbers, I concluded that going forward, I will only contribute to my 401k up to my employer match so I can allocate more to my taxable brokerage and to real estate in the future.
🛫 Travel Is No Cure for the Mind by Lawrence Yeo is an excellent essay about how travel and novelty in general is not the answer to long term happiness in life. Lawrence weaves together this idea of wherever you go, there you are with the theory of hedonic adaption in his illustrated essay. Hedonic adaptation, also known as the hedonic treadmill, is a theory that when you add new pleasures to your life, they increase your happiness temporarily, but then the novel additions wear off and you return to a steady, baseline level of happiness. Lawrence writes that practicing gratitude is an effective way to avoid getting stuck on the hedonic treadmill. Here are a few of my favorite excerpts from his essay:
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