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Long-term: Lower Real Borrowing Costs, Higher House Prices

The Liability Advisors focuses on cash and liabilities as they are the key basis for wealth creation. If you can't manage your cash and liabilities, how will you save? Housing is still the largest component of consumer spending - ranging from 32-42% of gross income depending on how you slice the data.

Housing also creates great wealth because of the leverage employed when you borrow to finance an asset purchase. If you have been lucky enough to own a house, it's likely gone up a great deal in value. As Alf shares in this graphic, the majority of that growth came from lower rates - which made housing more affordable and drove prices up. This happened after the financial crisis of 2007.

This time rates are rising, and that will impact cash flow for housing negatively - so now is an important time to take stock of your cash and liability management. It will likely be as challenging this year and next as it was in 2007-8... at which time we may start a new round of easing and lower rates... be cautious with your spending.

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