I recently met a woman in her late 40’s who was feeling frustrated by the fact that she had no time for a social life. She is balancing a job as a freelance make-up artist with the costs and care associated with her home.
[Related: Tip from the Rich: Don’t Tie Up Money in a Home]
This woman’s frustration was rooted in the fact that she couldn’t see her how most important life goal, having a family, would ever come to fruition. “When I think back on my childhood, I always remember saying I can’t wait to get married and have children,” she told me. When we reflected further on her childhood, another image that came up strong was her grandmother’s mantra, “Every time you make a dollar, save half of it so that you can grow up and buy a home.”
The messages we hear in childhood have a tremendous impact on what we do — often without us realizing it — when we are adults. This woman was dutifully taking her grandmother’s message to heart, but it was coming at a tremendous personal cost.
Many of us are told that homeownership is the best path to lasting wealth from our parents and from society. There is no question that it is one of the smartest ways to build generational wealth, but as this woman’s story illustrates, just like all financial decisions, the choice to buy a home should be made within the context of your overall life goals. A survey by interest.com found that 1 in 4 people regret buying their home.
“Owning your own home is an integral part of the American Dream. Like every dream, however, it isn’t necessarily the right decision for everyone,” says Rick Kahler, president of Kahler Financial Group.
“Long-term renting can be a wise choice when renting costs substantially less than owning. It may make sense if you want to move to a beach area or big city. It also may make sense, when you move frequently, or when you invest enough to assure your financial independence,” says Rick Kahler, president of Kahler Financial Group.
3 things to consider when determining whether you want to rent or buy:
- What can you afford? You should spend no more than 30% of your after tax income on housing costs.
- How long do you plan to stay in your home? If you’re not there for at least 2 years, you may want to rent.
- Mobility — you may be at a stage in your life or your career where you want to be able to move to pursue opportunities.
If you do decide to rent, be sure to you’re creating long-term financial security in the financial markets. “Long-term renting can be a wise choice when renting costs substantially less than owning. It may make sense if you want to move to a beach area or big city. It also may make sense, when you move frequently, or when you invest enough to assure your financial independence,” says Kahler.