The traditional American Dream is home ownership, but everyone who lived through 2008 – 2010 knows that home ownership, for many, became the American Nightmare.
What went wrong? (Aside from subprime mortgages and other things outside of our control):
1. Many people bought a home because it’s the “adult” thing to do … not because it makes financial sense. In fact, for many people, renting makes more financial sense than owning. Unfortunately, too few people actually sit down to crunch the numbers and figure out Rent vs. Buy. They see home ownership as a status of success, and they pay — dearly — for that status.
2. Many people think a home is a good investment. Guess what? Even if you’re one of the lucky few who escaped the Great Recession untouched, and your home is worth more now than it was in 2007, it’s still probably a lousy investment compared to the gains you would have earned elsewhere.
3. Many people forget the costs of homeowners insurance, maintenance, repairs, mortgage interest, and mortgage insurance. When you add these into the picture, your home becomes an even lousier investment.
4. Many people assume they’re supposed to live alone, or live with their partner/spouse, because it’s a status symbol of success and adulthood. Again, you’re paying — dearly — for that status.
If you sincerely despise living with roommates and you’re willing to pay a hefty premium to live alone, fine. But if you kind of liked having company around — especially like-minded roommies who are as clean and quiet as you — then you should move in with them and slash your bills.
The most important thing to consider when determining your housing choices?: Ask yourself: What am I willing to sacrifice in order to afford this?