Class Discussion & Podcast: A Financial Advisor Takes a Hit in the Housing Market

Teaching Tip:  This is a fascinating podcast that describes how a financial advisor got sucked into the housing boom and suffered a sad ending.  The podcast isn’t that long, only a bit over 17 minutes, so it isn’t too much to assign.  It can also be played in class.  What makes this such a good podcast is that it lays out in very simple terms how he bought into the housing bubble – it is an excellent podcast for explaining how and why the housing bubble took place and the financial pain that it caused.

In a recent Planet Money podcast, “A Financial Adviser Bets the House,” Carl Richards, a financial advisor and New York Times contributor tells how he got beaten up in the housing collapse.  In Chapter 8 of Turning Money Into Wealth we explore in depth The Home and Automobile Decision including the recent housing bubble.   This podcast and subsequent article takes things to a very personal level, letting you in on the logic that led a very smart financial professional to jump into the housing market at the very worst time.  Mr. Richard’s story is also related in a recent New York Times article, “How a Financial Pro Lost His Home.”

You might yourself thinking about three of the Ten Principles of Personal Finance as you immerse yourself in Mr. Richard’s story.  Principle 1:  The Best Protection is Knowledge; Principle 6:  Waste Not, Want Not – Smart Spending Matters; and Principle 9:  Mind Games and Your Money.

Take a listen to the podcast.  This is just one story of the pain and heartache that the recent housing market bubble caused.

Discussion questions:

  1. One of the changes Mr. Richards mentions is that before his housing tragedy, he focused on the probability of events (for example, very bad financial events) happening.   This has changed, now rather than simply focusing on the probability of an event happening he now focuses on something else, what is that thing?  Why do you think he focuses on it?
  2. What is a short sale?  In his New York Times article, “How a Financial Pro Lost His Home,” Mr. Richards describes how he views the “moral obligation” he had to his bank and the difficulties he had in coming to terms with a short sale.  What do you think of a short sale?
  3. How might any one of the mentioned Principles of Personal Finance made a difference for Carl Richards?
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