This blog is the answer to a question that needed more than a simple responding tweet. It needed a blog.
The tweet was that ‘a home is not an asset because it takes money out of your pocket’. Twitter folks love making this comment. A long time ago Robert Kiyosaki made this point and people have been using it to justify renting and bashing home owners. Stop it.
These twitter people go on and on about how property taxes mean you never own your own home or you will have to spend money in upkeep, you have to pay a mortgage and for the first 15 years its all interest, blah blah blah.
This conversation is what I am always taking about ‘wealth building on an elementary level’. We have got to level up.
That said, I would argue that even if a home takes money out of your pocket it is STILL an asset.
First, lets actually analyze the money going out of your pocket. 1) This is money you would be spending ANYWAY since you have to live somewhere 2) The offset is actually in your favor as you will see equity and debt pay down 3) Home ownership when done right is force savings. You need to still buy right, don’t just buy something you can barely afford and then blame the home when you need to blame yourself .
Not to go off topic but a lot of times smart people will say that when you pay off a home you actually pay twice what it sold for. For example, you pay off a 200k mortgage and including interest overtime you actually paid 400k. Not many know that, but even still, that 200k home, after those thirty years, is likely worth a mil. I was in a neighborhood in Whittier over the weekend where homes were selling for 800k plus. I looked at how much the home sold for and the guy paid 130k, in Cali, back in the eighties.
The truth is everything costs you money. Costing you money or taking money out of your pocket should not be the deciding factor on what you buy as it pertains to everything you buy.
Cashflow should not be the only deciding factor for what you buy. This is the problem of understanding things at an elementary level. We preach cashflow because it makes sense, but sometimes not cash flowing makes sense. Generalities and sweeping statements will have you looking foolish when you come up against someone who studies the space.
So, how is a home and asset? Well stats show that families that own their own home have more money saved for retirement, they have more stable finances, they send their kids to college more, they have less troubled children, they don’t have kids who have children out of wedlock, they perform better on the job, they get promoted more, the list goes on and on. This is worth the money to me. People spend more to get less.
What’s more, owning your own home isn’t’ just for you. You are focused only on the money that goes out of your own pocket and that is selfish, stop that. As I shift toward building a family and not just getting cashflow to buy things I have a new focus on life. I have a bigger focus and this gives me much more insight into the things I should be doing not just a one liner from Robert Kiyosaki. Therefore, I am paying all this extra money for my kids fam. Every mortgage payment is wealth for my heirs even if It costs me interest to get it.
When I read things I don’t just take everything they say. Rob says some great things but I can’t rock with everything he says especially not from a book that is over twenty years old.
At one point in time I wrote a series of blogs that I will post in my twitter thread breaking down all the reasons you should buy a home but to conclude, I will just say that just because its not an asset doesn’t mean you shouldn’t buy it. It doesn’t depreciate like a car, it will create more stability for you and your family and your income will dwarf that mortgage over time. I encourage you to level up your financial wisdom and don’t merely quote financial literacy zingers. You are better than that.
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