Ramit Sethi, a self-made millionaire and star of Netflix’s “How to Get Rich,” says young Americans have been “put in an untenable position” when it comes to buying a home. The prices are too high for many, yet it is still the epitome of the American dream.
Financial experts say that home ownership is also the key to getting rich. So when they can’t afford to buy, they feel like a failure, which can have ripple effects throughout their financial lives.
Deep down people think rent is for losers. They’ve been told that to be successful in America, you have to buy a house,” says Sethi luck. “Every day they wake up feeling terrible. I don’t want you to feel terrible.”
It has become one of the most controversial and controversial claims of personal finance experts: “Renting can be a tremendous financial option.” Homeownership can be a good move for some, he says, but it shouldn’t be viewed merely as an investment when for most it’s a lifestyle choice.
Viewed from a purely financial point of view, it is possible to make more investments while leasing, says Sethi. People often compare a mortgage to paying monthly rent to prove ownership status, but that ignores all the other costs of home ownership, including closing costs, utilities, maintenance, insurance, taxes, and so on. In his eyes, this means that home ownership can quickly become a “bad” investment, depending on your financial situation.
Much of Sethi’s work as a personal finance expert—in addition to writing books and hosting a Netflix show, Sethi produces a finance podcast every week to help couples manage their money—helps people overcome the financial myths they’ve been taught to get what they really want out of life.
For example, Sethi suggests that those who want to buy a home ASAP write down those feelings and question them. Why is there a need to buy a home now? Where does the message come from?
“Americans are really good at making decisions that they think will make them happy but make them very unhappy. Let me destroy my social network and move to the suburbs and pay insurmountable amounts of money in order to own a home,” he says. “You know we don’t have to do that? You can choose what your rich life looks like.”
He also suggests reframing the lease in your mind. Is it really a “waste of money”, or does it fulfill a need you have, which is to have a place to live.
And of course, run the numbers. Sethi says that because of the emotional toll that comes with buying a home, many people don’t think about what they can actually afford when it comes to the biggest purchase of their lives.
“People spend more time comparing the price of soup at the grocery store than they do understanding an consumption schedule,” he says, pointing to the tool that shows you how much you’ll pay in principal and interest over time.
He continues, “I refuse to accept that you’re going to make a seven-figure purchase just because your mom, dad, or uncle told you that real estate is only going up.” “It’s not right and you need to understand the numbers.”
Sethi encourages people to define their own “rich life,” or how they would ideally live, rather than just checking someone else’s boxes. Do you want to retire in your 30s? Try every new restaurant in town? Building wealth to distribute to your children? Traveling for half the year?
Be clear about the details, and consider whether home ownership fits in with that. And that very well could be—homeownership doesn’t always build wealth, but it has profound effects on lifestyle, Sethi says. Perhaps you want to design a space to share with your spouse and children, provide a place for your parents to live, or simply the stability that comes with owning. This works too, as long as you know what you’re getting into and it aligns with your values.
“What do you want? Most of us never think about it,” he says. “Be thoughtful and intentional about it.”
