Additionally, my 6-acre property has substantially appreciated in value, providing a valuable asset. If needed, downsizing would unlock a considerable amount of tax-free equity, supplementing my retirement funds.
This strategic advantage is unique to homeownership. Renters don't have the option to tap into their residence's equity or benefit from long-term appreciation.
The housing market has always had its ups and downs, but it's true that this time feels different. Having a portfolio manager will save you a lot in the market. My coach has helped me expand my portfolio by 200% over the past few months.
Your rent is the maximum you will pay -- this month. Or for the rest of your current agreement. Landlords are increasing rents to near predatory rates at the time of this writing. In my area I know examples of rent going from $1750 to $2200 or even $2300 in the past two years. Meanwhile my mortgage has stayed exactly the same (though my taxes did go up due to the market) Great episode!
Yeah exactly and in the areas like LA. The price of your home increases steadily every year. In 5-10 years one could easily be up 200-500K up on their home equity. Which obviously outweigh the maintenance cost. One must be smart and do their research as well rather than just listening to some dude on a podcast.
I've been guilty too of the $3 questions vs. the 30K questions... I toiled at Target (literally) whether to buy the organic grapes (I didn't) and found out TODAY that my 403b financial advisor commission is a whopping 1.62%!!!!!! I am a teacher and can totally relate to Ramit relaying the story of his mother being a teacher and how teachers really don't understand the financial aspects of their retirement accounts... He is absolutely 100% right! I am now teaching myself about finances and trying to get out of this actively managed 403b, but learned that to do so, I would need to pay a "surrender charge" of over 2K... If Ramit ever wants to have a teacher on his show- I'm raising my hand! 🙂 Thank you, Erika, for such worthwhile content!
You should open up another account at Schwab or Vanguard and then transfer your portfolio there. I believe Ramit's book might have tips on how to do the transfer. I'm not sure.
The surrender fee might actually be worth settling just to get out sooner. Look at all the effects but it is usually best to get out sooner. Please do the calculations.
Thank you so much. I am 38 and trying to come back from the onset of catatrophic illness 5 years ago. I ended up homeless. It's been so scary and I am now disabled, but I am slowly starting take back control of my finances. Just listening to podcasts on this topic gave me panic attacks 6 months ago... The simplicity and detailed explanations here are so helpful, and not panic or shame inducing.
- Cook at home - Use bus and uber - Walk when you can - When you buy something ask yourself - > How many times will I actually use it? - > Could I just borrow it from someone? Buy classic clothing trends that won't go out of style and take care of your clothes.
The things that I took away from you both: 1). Invest in your health and things that bring you joy (I love books and what I do is read them for free from the library and purchase the ones I know that are valuable and want to read again and again) 2). That 1% fee for financial advisors blew my mind. I liked Ramit's suggestion on hiring someone on a hourly basis to go over your investment portfolio and automating everything else. Excellent podcast. I read Ramit's book after you suggested it. I read the Rich Dad book after you recommended it too. Hey Erika, I think it's time for you to write a book. I would read it for sure! 😊 P.S. I am watching Ramit's Netflix show right now!!! 😉
Rohit taught me that a home is worth only 25% of my income… so if buying a home is more than that, I take too much risk… and he is right! My rent is exactly 25% of my take home salary- great!
Home ownership is the most secure item that I could have bought. The peace of mind of a family base is priceless & it increases in value & the owner gains bargaining power.
If you need a house it’s worth it but if all you can afford is a mortgage then it is not worth it. Homes are only an investment when you sell it. If you just live in it, you will loose money. That’s how it is. He didn’t say don’t buy a house but he said look at the numbers to see if it’s worth it. If you don’t plan on selling the house then the house going up in value means nothing.
If you can truly afford the home and you have kids it makes much more sense to own then rent even if financialy it's not as good just because of piece of mind.
@@au123ful not true, home is an asset you can borrow against the equity, the interest on the mortgage is tax deductable which means its the only "good" debt you can ever incur, you can even apply for a HELOC loan if you have a mortgage and build your own little real estate empire if you so choose and invest wisely. Only downsides are really maintenance, upkeep, property taxes (which tend to go up as the home value goes up). Think you will be paying the same rent 30 years like you would in a mortgage payment?
Home Ownership is a LIABILITY. Especially, if you're not financially secure or ready to handle or afford the phantom cost that come with owning a home.
Good advise overall. However, going into retirement my house will be paid for and I will have no more housing cost. Additionally, it’s on 6 acres and has appreciated greatly. So if I need any extra funds in retirement, I could easily down size and use the extra cash for retirement. You can’t do that if you always rent.
It's a very good and important point about spending more on things you love and not spending anything on things you don't. The longer I live the more I appreciate that principle.
I think that your advice should be directed at higher learning professionals in big cities. I'm a working Joe and I made a Smart buy on a house and sold it for four times what I paid for it. I didn't stretch my budget to buy the house, I didn't spend lavishly on upgrades, and I did most of the work on it myself.
I disagree not buying a house. I puchased my house in 1994 for $225,000. Now my house is worth over 1 million dollars. House is now paid off, zero mortgage payment. Retired now. The feeling of owning your house free and clear is good. If I rent now, I will have to pay over $4000 per month. I probably have to move to a mobile home.
So you’ve never had to maintain this now million dollar home? Water heater never failed? Roof never leaked? Windows lasted forever? A/c unit never died? Lawn care was a replacement for your gym membership? Never had a plumbing issue? How did you avoid all the hidden costs?
You're delusional if you think you can own your so called house in America. You can't own a house, you will never be able to own a house. Your state, city, govern ment is the real OWNER of your million dollar property, that's why you're stuck in paying taxes on it until you die, you are still RENTING the house you think is yours.
Here are hidden costs which I did/didn't know which really made me think of why I bought a house, some of which you can do without, but most house holds would need it. - Pest Control - Lawn Upkeep - Termite Protection - Home Insurance - PMI, if putting below 20% - Property Tax - Security - HoA
yes, all true. But if this guy thinks getting a 30 year fixed mortgage is a bad idea, but thinks his rent will be the same price 30 years from now, well he will likely be dead wrong. Also home mortgage might be the only thing a regular person can get "good" debt from. Large corporations can issue bonds as debt to build their businesses up, which can also be "good" debt. But for regular people, the only "good" debt is a home mortgage due to the tax breaks on the interest paid. Also it is an asset that can build generational wealth.
I do property management. Most people take for granted how much work and money it takes to repair roof, HVAC, landscaping, security, electrical, plumbing, fire suppression, pool maintenance.
When i was 24 i bought my home for $1800 in a nice neighborhood...i bought 3 vending machines for $1800 that paid my rent monthly...then retired at 42 from investing
An investor client bought a foreclosed property at 85k cash in 2007, in Houston Tx. Over the years, maintenance/repairs about another 30k. The property has been bringing rental income average 15k to 18k annually for the past 16 years (current tenant been staying for more than 10 years) to pay for the maintenance, property tax, all the costs. If the investor sells the property now, it could be sold for more than 200k. Owing real estate is still the only way to accumulate wealth. Start early and start with something you can afford comfortably is the key.
@@justthebrttrk also that yes, they made that 85k back but factoring all the maintenance costs over the years, they probably were at a loss if anything.
Wow Erika, had not heard of this guy and I think he is so awesome. Most all (scratch that- ALL) financial gurus want to tell you how to live your life based on THEIR values. Ramit is refreshing in that he says, as long as you can afford it, you decide what is worth spending your money on. I am in the same boat (no pun intended) as far as cars, don't really car much about them as long as they're safe and reliable and start every day. But I did not always think that way, had many fancy cars in my life, and that is out of my system. And totally agree with the flying thing, expect for me it is about 2.5 hours max for coach. That will pretty much get you anywhere in the US if you're flying north/south, but if going from coast to coast I upgrade. Once you have enough, you can't take it with you. Great interview Erika, you've been killing it lately. Happy for your success.
I always tell people the only thing I can't afford in life are international business class tickets for family vacation. Having a great life is not that expensive. I have cheap cars and a cheap house for my income. No stress!
I showed my daughter about expense ratios on investments. Her 0.60% expense ratio in her company 401K fund will cost her 200,000 over 40 years at 500 per month. She was stunned.
@@au123ful I told her to get the match and do Roth IRA, and she can get .03 or .04% expense ratio. Even the company that is administering has some lower cost funds, but they’re not even an option for her.
What I know is during the pandemic and those hard times people who had mortgage agreements had more assistance and better arrangements as far as government aid. Some even got a mortgage reduction. The renters however were at the mercy (except in very limited cases where the owners had a heart) of the the owners of the properties and suffered pending expulsion or dramatic raises in rent. Each has pros and cons, but ownership does have it’s privileges
When Ramit spoke about having a usb port in his 17 year old honda and that he will not buy a new car because he doesn't need one, this is exactly me, I will not buy a car until mine has been run into the ground lol
Owning a home is more than an investment. Most of us want to own if we can so we have a place that is ours. That is about everything beyond a financial portfolio it’s about being a human, making memories and sharing our lives with friends and family. Sadly many people use real estate as an investment and consequently it has become outrageously expensive to own and out of reach for too many. A mortgage (even when calculated for final costs that include everything) is still less than rents where I live. Want to pay double? Rent.
But the house isn’t yours until you pay it off. Just like any other thing you finance . And whoever inherits it will have to make payments if it’s not paid off in 30 years. The best Advantage to having a house is space and freedom from neighbors on top of you. That’s it.
Plus 50%? That's ridiculous. Replacing my oven this week. It is 50 years old. My boiler (furnace) is 53 years old and still works perfectly. My last roof lasted 36 years. No way are expenses 50%.
I don’t think people really understand what this gentleman is saying. He’s not saying to Not Buy a house but to do your due diligence. Always repairs, maintenance, monthly expenses and property taxes.
I went DIY and during the pandemic spent time looking at how poorly our investments were doing and the fees. I did feel like vomiting. Had a coworker tell me she was afraid to ask her financial advisor what she is paying in fees. Best thing I ever did.
There are other things to consider than just monetary costs. My Brother and Sister in law were forced to move out of their home in California because the rent increased considerably on their home when the lease renewed. Had they owned the home, the Rent would not have increased, and would not have forced them to ultimately relocate the family. It's a huge burdon to move the kids from school. Particurlarly since the oldest will be a senior in HS next year. Not an ideal time to start over!
I would say in a lot of instances it is better to buy BUT even with a fixed rate mortgage don't be fooled your mortgage can still go up an uncontrolled amount due to taxes! One of the biggest mistakes we(husband and I) made as first time home owners was not considering that fact...one yr in our taxes increased over 100 a month! This was a home that cost is just over 100,000 and was in rural Ohio so this is a low end example! Home ownership SUCKS sometimes! When I received a water bill that was over 3X normal and found out not only did I have to pay that bit I also had to fix the leaking pipe in my front yard UNDER my cement steps talk about gut wrenching cost us almost 3,000 for everything invloved...this was right after Christmas and my child's bday when we all had covid when it rains it pours and homeownership is no exception!!
Great points! While the mortgage would stay the same, the property taxes also fluctuate aka increase with inflation. I saw several pandemic buyers switch to selling just a couple years later because of often unseen costs such as this, as well as factoring in needed improvements as he said. As long as ALL the numbers are run (not just mortgage), then comparisons become clearer. I’m sorry this happened to your family and many others.
@@sarahculbertson1541 for the most part, its a no brainer, buying a home is an investment, renting is just an expense that only goes up forever and you have nothing to show for it. Yes, property taxes, home improvements, maintenance, etc, but also owning an asset that creates generational wealth and tax benefits on "good" debt and a fixed mortgage. As long as you don't over extend yourself and manage it well, owning a home is the way to go.
Owning a home that you cannot afford is not better than renting. Also property tax can go up so total coat for the house goes up. Unless, upu CAN afford the house, you should not be buying a house. Also, buy a house for assets not liability. Means buy rental properties. Buy a house and rent so you can earn money.
The only problem I have with not buying a house is I can control my mortgage amount every month but I know of people who’s rent has doubled because their landlord has raised it and the market is that expensive all around .
The conversation about car purchasing stings my soul. My husband steamrolled me when I was attempting to negotiate the purchase of our 2023 Chevy Bolt EUV. He kept saying, "See, the payment is in the range of what you want..." I'm like, whose side are you on? The dealer or ME/US!!!?!?! If I had my choice, my payment would be 100 less than what it is now. I didn't want to talk about what I wanted my payment to be, I wanted to talk about the total cost.
I sat down one day and really ran the numbers on owning a home in the city where I work and I came to a similar conclusion - owning a home here may be good for the ego, but it's probably not the best financial decision for me. It was oddly freeing.
Erika and Ramit, thank you so much for this very informative and thought provoking podcast. I appreciate having actionable items. I am totally on board for keeping that which you love and get rid of that which doesn't actually mean something to you. Your insight on Financial Advisors was simply empowering! I've been struggling with whether to hire someone or not. Keeping things simple is awesome. :)
Stealth wealth. I love when rich, sensible people walk and drive around like "normal" person. You will never know if they are rich by how they dress or what they drive. He drives a Honda that doesn't even have Bluetooth!
I intuitively have managed my money exactly as Mr Sethi recommends on this Podcast. I feel like contributing to a Fidelity managed target fund is like being a ship on top of water. Sometimes the ship sails along swiftly, gaining miles rapidly, sometimes the ship is in choppy stormy waters, moving back, forth, side to side. But the ship is still the same ship
Everyone in the comments with their paid off home stories missed the point. Many people dont think about the phantom costs when buying a home and put themselves in a bad situation. For every person in the comments who paid off their home, there is someone out in the world who lost their home to foreclosure. You have to run the numbers before making the biggest purchase of your life.
I spent $250k to build my house last year. It’s now worth close to $400k. My mortgage is 25% of my income. I save and invest 50% of my income in mutual funds and credit unions which guarantee a return of 5%. I have no other loans besides a mortgage. I’m concerned about intergenerational wealth.Renting creates a future class of landlords. People show refer to the story of the ant and the grasshopper. Your children should not have to rent if you are able to sacrifice for them.
He makes good points. However he doesn’t mention the insecurity of your rent doubling. But a big difference between now and 40 yrs ago is that many more men then had multiple skills. My dad could fix plumbing, electrical, hvac, replace the roof, resurface hardwood floors. Today, the many more men don’t have skills in home maintenance and repair. A well built home will have repairs, that is physics. You have choices when you are the owner that you don’t have as a renter. Investing even in the S&P 500 during some 15 year time periods wouldn’t leave you with a great return. Shelter is important. Bought a home new in 2000 valued at $160,000. In 2023 the home is worth $485,000. Not a bad return on investment. If I’m short on the returns compared to the S&P, I would say that the S&P didn’t provide a roof over my head, safety, security and memories.
Anybody who bought a house between 2009 - 2019 made the right decision. Unbelievable low fixed interest rates would have been a game changer for these people. However, buying a house that is affordable and within your means like max spend 28% of annual gross income would be the key.
I loved this episode from the podcast! Agreed that it can be disheartening to look at someone with something, and think, that we can never have it. Investing isn’t just for people who are already rich!
only thing I strongly disagree with that he points out is the owning vs renting ideas. Owning a home can be a money pit, but it also can create generational wealth and a mortgage is the only debt I have ever had that gave me a tax break on interest payments. So mortgage is the only debt that is "good debt" most people will ever have, if managed correctly of course.
More people using money with care for not being brainwashed,would help to reduce the social risks and could help those innocent great foolish spenders to realise their future obligation. Thanks.
The rent vs own only makes sense when rents are reasonable. Where I live, a one bedroom rents for min $2,500 and you have no security against increases or being renovicted.
House owner here that rents it out. If you want to grow your net worth, the math can be better for the renter option. But in markets where there is housing shortages, it's nice to have the peace of mind of being the owner
Not owning a house is the Best decision I have made ❤ it allowed me to use my money ro travel all around the world 🌍 while I was young & healthy. 🏃🏻♂️ I turned 60 this year, enjoying a comfortable and simple life.
@@VitalBigras Time is the only thing that has value. Home owners are mostly delusional about the true cost of "owning their home"... IE renting it from the government. My friends think being $500k in debt is the definition of success. He didn't even mention inflation as well. When you account for inflation, most houses are lucky to break even over time.
@@TanManFixes Did you pay a down payment? That payment could have gone to stocks which average more than real estate. What are taxes and maintenance on your home. Again more opportunity costs. Stocks have averaged more than real estate for over the last hundred years. Home ownership is forced saving though for those that won’t invest in stocks. It’s just less wealth than those who go the stock route rather than real estate route.
Rent also includes interest, property taxes, HOA and maintenance fees. You don't personally pay them but your landlord does using your money. Buy a house if you can afford, period.
I bought my first house for 311k with 15k down. House is now worth 850k. I turned 15k to half a million. If you rent, you will never see that money ever again...😮😮😮
Incorrect. You're not telling the whole story. WHEN did you buy your house? 10 years ago? 20 years ago? How much did you pay on property taxes during that time? Interest? Maintenance? Utilities? How much is left on your loan? You make a bold statement which could trap people into a mortgage they can't afford.
I was actually listening until he compared a tesla to a camery without factoring in that the tesla battery usually gives out around 150k miles and cost 20k.
Landlord here, he is incorrect if you buy low, rents go up as mortgage go up, it never goes down. The people who wait too long can also face inflated house prices. If you lose your job you can also get evicted. Only rent forever if you want to be mobile and wants to be able to move somewhere.
True. You are very likely to doormen more money in rent every month than to pay a mortgage. Also, they come up with the idea that people change homes every 15 years. Baloney. I keep my cars for 20 years. My mother still owns the home she bought 45 years ago. Worst case scenario you rent the house and move somewhere
I love hearing what I have always believed about not using a “financial advisor”. Who better than you would take better care of your money. It is so easy. I feel the same about taxes.
I hate his maximum/minimum comment because it doesn’t account for the yearly increases in rent that move up with inflation whereas a mortgage payment stays the same for 30 years and it is inflation protected. As well, if you have to move from your rental your rent can increase in an unaffordable way because you are at the mercy of the rental market. My parents just experienced this and they have a rental increase of 30% with a much smaller older rental.
A mortgage payment is not "inflation protected" just because the payment stays the same. The interest that you pay on the mortgage is making money for the bank net of inflation.
I 100% agree, that buying isn’t for everyone but when you look at the costs, home buying beats renting most of the time in the long run. Yeah you pay property taxes, insurance etc but guess what, you do as a renter as well. What? You think landlords just absorb that cost? Hell no, we pass it on to the renter and on top of that we get to expense costs like a new roofs 😊. If you haven’t settled into your career or you’re not sure where you want to live, then buying may not be for you but if you are settled, raising a family and likely to stay in place for the next 10-15 years, then housing makes more sense. (Full disclosure…..I’m a Realtor….LOL).
You can write off mortgage interest when you do your taxes. You can't write off rent. The appreciation on my home bought in 2018 sure beat my investment in the S&P. In my experience over the years owning real estate hands down has beaten all other investments
In order to retire comfortably you have to have housing cost taken care of meaning either paying off the mortgage or buying a duplex and have the tenant pay the mortgage eventually. I don't know any millionaires that are still renting.
Wow! It's so fun to see how fast you've grown your you tube channel because of all the value you bring to us. I remember when you posted you first few videos. Keep it up! Great content
When he said 1%, that hit me. Most people don't understand compounding, that's why most people don't understand the long term affects of inflation, they see the now. I'm a day trader, if I make 1% of my portfolio in a day, I am ecstatic, because I know the growth of these repeated small gains can be. For example, if you start with $150 in your account, and get 3% a day, it will take 250 trading days (about 1 year) to get to a quarter million Edit: it is near impossible to get 3% a day, there will be losing days, always manage risk, or avoid trading in general. He is right. Investing is so much safer, and much less stressful, do that.
Renting can be better than buying depending on the area. My mortgage on my 3 bedroom, 2 bath is 2/3 what it would cost to rent a 1 bedroom apt in my area, so it makes sense for me to have bought. I can also rent out a bedroom or setup and rent out a tiny home for money on my property. Plus, my house has almost doubled in value in 4 years. However, if I could rent for half my mortgage, I would be renting and investing my money. That being said, he's also scared of owning a home - maintenance is not 50% of home cost - so a lot of this is about his fear too.
The only problem with renting is the bill never goes away. If you buy the house, it will get paid off and your cost of living becomes your taxes. The rent keeps going up. Your 90 years old and still paying making the landlord rich.
I can tell you the mortgage never goes away either. Because when you get the first home almost paid off, you upgrade and buy another, and then it repeats. 50 years later, you are still paying a mortgage. But it is all about the numbers. I've owned my own home (several times) and I have also rented for years when the numbers told me it was more sensible. Do the math, every time.
I’ve heard him say it might not be a good idea to own a home on his show. I agree if you can’t afford it but with rent being so expensive now, it seems home ownership is the best way to go. But numbers don’t lie and I think that’s his point. Doing the math makes sense. Buying a home was the best thing I could have done for my family. The repairs have been minimal compared to the amount of rent we would have paid.
People keep thinking just because it's electric car, they automatically saved. But they don't factor in, they already over paid for EV, and now a day you still have to pay for charging. Are these people thinking they don't pay for charging their EV? If you think about it, you just switching pay for gas to pay for electric.
He mentioned Fighting Chance at about the 12 minute mark. I've used Fighting Chance for my last car purchase. Was able to get a factory ordered car for less than dealer cost in 2016. Highly recommend.
When u pay rent u pay for taxes, insurance, property management, and keep up. If houses cost 1-2M in your area either make a lot more or move to a low cost area, we live in mid Missouri house 3b/2 b 2 car garage was 138K with insurance and tax at 2500 per year so thanks but no thanks for renting❤️
I just turned 31 and have lived in the low tax bracket ALL of my life. I want you both to know after this video, 15 years or less from now my net worth will be in the millions….. and that is thanks to both of your input and information. ❤🎉cheers to the wealthy life!
The only time his home advice is accurate is when insurance + property taxes rival rent costs. There are plenty of places where that's an issue. For areas where property taxes are low, as well as insurance, owning is 100% better than renting. Don't forget that renters SHOULD carry renter's insurance, which equals a portion of the cost of home insurance
Renters insurance is usually in the low hundreds, home owners insurance is thousands. Property tax and insurance are not the only costs of ownership. HOA, Upkeep, and maintenance are expensive as well.
Home ownership = savings account you live in. Do you pay the bank more than your home is worth? Yes. Has home ownership created more financially security? I think 100% yes. I think Ramit generates enough free cash flow not to care if he rents or owns. Most people won't be able to do that.
I feel bad for anyone who took his advice and didn't buy a home a few years ago because they "ran the numbers." The numbers sure have changed since, for home prices, interest rates, and rent.
12:09 I researched the heck out of my cars and negotiate and it might be hours later but I get what I want. I drove it 17 years 270k BMW 325is...loved it
Hey @Erika, Always a pleasure to watch your videos. Am from Belgium and still follow some of your podcasts and interview. Even though the US vs Europe systems are drastically different in terms of tax, social security and health coverage, « rules of money management » are universal. Really appreciate this video with Ramit and surprisingly I naturally do what he mentions. Even though I thought I don’t need any advise, we learn everyday and I love the principle of « automate ! » your savings, investments and debt payment ». And use that freed up time to focus on other creative things. 👏 BRAVO ! Hope we could do the same type of shows here in Europe where many people still struggle with their financials.
Dag Hus! I’m also living in Belgium. I’m finding it hard to find RUclipsrs who talk about financial advice/ Tax optimization/ Mortgage in Belgium or Europe. By any chance do you know any?
I really loved this video and enjoyed this content so much! I'm this type of mindset and I always think that paying taxes is a good thing if you're making so much money bc it goes towards infrastructure and welfare for those who need it. I am always so proud of when I get the numbers owed to the govt and state of HI. Paying taxes means I participate in the function of this country
Ramit, a few years ago as I really wanted a USB port in my car stereo to plug in my phone. I paid $200 for the new stereo and $100 for installation. I was thrilled. You can do that for your Honda stereo- and add bluetooth at the same time.
Ramit Sethi great advice , this a tip for you, you can replace the original car radio for a smart radio under $ 200 or less. and the come with Bluetooth, apps and usb. and I have 1997 car and still running, I keep until i die lol.
I'm a CPA in California, I don't agree renting is better than owning a home; You can deduct property tax, and your mortgage interest on your tax return. And you mortgage payment stays the same for 30 years; for example, in San Francisco, a mortgage with property tax is 5k a month; 30 years later, the property tax will only increase a little bit while the mortgage payment stays the same. 30 years later 6k is nothing. But your rent will keep increase could be like 10k a month in 30 years.
@@dec1slh property tax and mortgage interests together will be higher than standard deduction, so the answer is yes, you will qualify itemized deductions
@Someone on Earth not for most people (outside of a HCOL). I live in the Midwest, my property tax and interest were no where near the standard deduction when I had a mortgage.
Great talk. However, $3 decisions are sometimes necessary when you are trying to find extra cash to pay off credit card debt. $3 x 30 days = $90 per month. Once you’re out of high interest debt, I agree, it is less relevant.
What happens when the rent in the area you want to live goes up by 50% to 100%. What happens when the landlord decides they are going to move into the house, and not renew your lease, and that house you wanted to buy 8 years ago is now 4 times as much. And there are no other rwntals in town that you can afford, and you have to then pull your kids out of school and move them to school district that is half as nice as the one they were in.
This is so helpful! Great confirmation about my personal finance knowledge! Helps to know I’m on the right track! Thanks for sharing from a wealthy persons perspective!
Thank you, Erika. This is a very different perspective on money and the different ways to use it, invest it and how to TAKE care of it. My grand-daughter will sure get much useful information with this podast...
I would rather rent an apartment that is in a really nice location rather than owning a house that isn’t producing anything and equity is like whole life insurance: it takes a long time to get there
nah, owning a home can create generational wealth and is fixed mortgage, where rent will rise at a much higher rate with inflation and there is an end game with paying off a mortgage, tax breaks on the interest paid, and owning an expensive asset. Yes, property taxes go up, maintenance and improvements are expensive, but overall, owning superior to renting.
A nice location is also probably closer to jobs and/or transit therefore eliminating less need for a car. Car expenses are huge! And suburbs require a car to get anywhere.
Depends. Hosing is similar to the market. You have to exploit people being irresponsible. Renting is not a bad option but you can make a lot of money if you get in at decent times. I’m not saying to time the market by any means.
@@IL_Bgentyl you are right because you do not know when the owner of that building or house is going to lose the right to ownership through divorce or death or ill health.. and you have to be moving out with a short notice.. I always always always keep important papers in a climate-controlled storage facility and live like a minimalist if I'm a renter
This was a great show. Just found your channel and subscribed. I look forward to more of your content and following Ramit, as well. Thank you for the great information!
I used to think every investor lose out during recession, meanwhile some make millions. I also thought everybody went out of business during the great depression, but some went into business. Bottom line, there's always depression for some, and profits for others. it all starts with having the right mindset. That said, I've set aside $265k for future, unfortunately I'm a complete noob.
With around £120k invested in Tsla stocks, any suggestions for additional stocks to diversify across various markets? Looking for a well-rounded portfolio that balances risk aversion with returns meeting yearly inflation concerns.
Consider hiring financial advisors, estate planners or tax experts. They can provide specialized knowledge and help you navigate complex financial decisions.
Certainly, I've been consulting with a Certified Financial Planner (CFP) since the outbreak. Beginning with an initial fund of $80k, my advisor makes decisions on when to enter and exit positions in my portfolio, which has now expanded to around $350k.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
The Tesla vs Camry argument for cost of ownership is completely wrong. Don't forget the additional cost of the additional infrastructure you need to continue to charge your EV, then parts are exponentially more expensive, labor and then you'll dump thousands when you need to replace the battery or dead cells. Limited range is the ultimate caveat. Maintenance on a camry or any other affordable and economical japanese car is extremely low. Ev's are a great luxury to compliment an ICE vehicle as your main vehicle, but you'll be dead in the water if it's your sole mode of transportation and japanese engineered vehicle's trump the majority of all other vehicle competitors.
Additionally, my 6-acre property has substantially appreciated in value, providing a valuable asset. If needed, downsizing would unlock a considerable amount of tax-free equity, supplementing my retirement funds.
This strategic advantage is unique to homeownership. Renters don't have the option to tap into their residence's equity or benefit from long-term appreciation.
The housing market has always had its ups and downs, but it's true that this time feels different. Having a portfolio manager will save you a lot in the market. My coach has helped me expand my portfolio by 200% over the past few months.
Could you recommend your advisor? I'll be happy to use some help.
Rebecca Noblett Roberts is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Searching her name online led me straight to her website. Thanks for the tip, you've saved me hours of research!
Your rent is the maximum you will pay -- this month. Or for the rest of your current agreement. Landlords are increasing rents to near predatory rates at the time of this writing. In my area I know examples of rent going from $1750 to $2200 or even $2300 in the past two years. Meanwhile my mortgage has stayed exactly the same (though my taxes did go up due to the market)
Great episode!
Yeah exactly and in the areas like LA. The price of your home increases steadily every year. In 5-10 years one could easily be up 200-500K up on their home equity. Which obviously outweigh the maintenance cost. One must be smart and do their research as well rather than just listening to some dude on a podcast.
You can protest your property taxes at your City appraisal. Could lower your property taxes if you have no intention of selling
You mean landlords?
Indeed. Buy a house everyone! Trust me i know.
And when you pay your house off, well, how on earth is this a bad thing????
I've been guilty too of the $3 questions vs. the 30K questions... I toiled at Target (literally) whether to buy the organic grapes (I didn't) and found out TODAY that my 403b financial advisor commission is a whopping 1.62%!!!!!! I am a teacher and can totally relate to Ramit relaying the story of his mother being a teacher and how teachers really don't understand the financial aspects of their retirement accounts... He is absolutely 100% right! I am now teaching myself about finances and trying to get out of this actively managed 403b, but learned that to do so, I would need to pay a "surrender charge" of over 2K... If Ramit ever wants to have a teacher on his show- I'm raising my hand! 🙂 Thank you, Erika, for such worthwhile content!
NEVER cash out a retirement account. Just leave it be.
You should open up another account at Schwab or Vanguard and then transfer your portfolio there. I believe Ramit's book might have tips on how to do the transfer. I'm not sure.
Teachers never invest. They rely on their fat pensions
The surrender fee might actually be worth settling just to get out sooner. Look at all the effects but it is usually best to get out sooner. Please do the calculations.
That’s right, transfer to a Vanguard index fund that has very low fees.
Nothing wrong with buying a house, problem is most people buy houses they want not houses they can afford. Buy a cheap house.
Thank you so much. I am 38 and trying to come back from the onset of catatrophic illness 5 years ago. I ended up homeless. It's been so scary and I am now disabled, but I am slowly starting take back control of my finances. Just listening to podcasts on this topic gave me panic attacks 6 months ago... The simplicity and detailed explanations here are so helpful, and not panic or shame inducing.
Your not late. You can and will do it!
Be strong and courageous!!!!
You know someone is bright when they can take complex things and explain them simply. Very helpful.
Love the perspective that mortgage is the minimum amount you pay versus rent is the maximum you pay. Thanks Erika for the value added contents!!
Wrong, with Rent you have cold and warm rent. Means lots of rent things are not included. No water/electricity and internet and so on and on.
- Cook at home
- Use bus and uber
- Walk when you can
- When you buy something ask yourself
- > How many times will I actually use it?
- > Could I just borrow it from someone?
Buy classic clothing trends that won't go out of style and take care of your clothes.
The things that I took away from you both:
1). Invest in your health and things that bring you joy (I love books and what I do is read them for free from the library and purchase the ones I know that are valuable and want to read again and again)
2). That 1% fee for financial advisors blew my mind. I liked Ramit's suggestion on hiring someone on a hourly basis to go over your investment portfolio and automating everything else.
Excellent podcast. I read Ramit's book after you suggested it. I read the Rich Dad book after you recommended it too.
Hey Erika, I think it's time for you to write a book. I would read it for sure! 😊
P.S. I am watching Ramit's Netflix show right now!!! 😉
You sound like me. Books are my thing and I read everyday. Buy those I want in my library. Well, vinyl records, too!
Rohit taught me that a home is worth only 25% of my income… so if buying a home is more than that, I take too much risk… and he is right! My rent is exactly 25% of my take home salary- great!
25% of gross income is actually the LAW here in the Netherlands how much you can borrow for your mortgage.
Home ownership is the most secure item that I could have bought. The peace of mind of a family base is priceless & it increases in value & the owner gains bargaining power.
yeah, that was one issue I totally disagreed with him on.
If you need a house it’s worth it but if all you can afford is a mortgage then it is not worth it. Homes are only an investment when you sell it. If you just live in it, you will loose money. That’s how it is. He didn’t say don’t buy a house but he said look at the numbers to see if it’s worth it. If you don’t plan on selling the house then the house going up in value means nothing.
If you can truly afford the home and you have kids it makes much more sense to own then rent even if financialy it's not as good just because of piece of mind.
@@au123ful not true, home is an asset you can borrow against the equity, the interest on the mortgage is tax deductable which means its the only "good" debt you can ever incur, you can even apply for a HELOC loan if you have a mortgage and build your own little real estate empire if you so choose and invest wisely. Only downsides are really maintenance, upkeep, property taxes (which tend to go up as the home value goes up). Think you will be paying the same rent 30 years like you would in a mortgage payment?
Home Ownership is a LIABILITY. Especially, if you're not financially secure or ready to handle or afford the phantom cost that come with owning a home.
Good advise overall. However, going into retirement my house will be paid for and I will have no more housing cost. Additionally, it’s on 6 acres and has appreciated greatly. So if I need any extra funds in retirement, I could easily down size and use the extra cash for retirement. You can’t do that if you always rent.
It's a very good and important point about spending more on things you love and not spending anything on things you don't. The longer I live the more I appreciate that principle.
I think that your advice should be directed at higher learning professionals in big cities. I'm a working Joe and I made a Smart buy on a house and sold it for four times what I paid for it. I didn't stretch my budget to buy the house, I didn't spend lavishly on upgrades, and I did most of the work on it myself.
I disagree not buying a house. I puchased my house in 1994 for $225,000. Now my house is worth over 1 million dollars. House is now paid off, zero mortgage payment. Retired now. The feeling of owning your house free and clear is good. If I rent now, I will have to pay over $4000 per month. I probably have to move to a mobile home.
So you’ve never had to maintain this now million dollar home? Water heater never failed? Roof never leaked? Windows lasted forever? A/c unit never died? Lawn care was a replacement for your gym membership? Never had a plumbing issue? How did you avoid all the hidden costs?
You're delusional if you think you can own your so called house in America. You can't own a house, you will never be able to own a house. Your state, city, govern ment is the real OWNER of your million dollar property, that's why you're stuck in paying taxes on it until you die, you are still RENTING the house you think is yours.
You could not replicate this today though
Owning a house should be a top priority.
@@RealAnthonyJones you severely overestimate the hidden costs... blackrock has brainwashed you
Here are hidden costs which I did/didn't know which really made me think of why I bought a house, some of which you can do without, but most house holds would need it.
- Pest Control
- Lawn Upkeep
- Termite Protection
- Home Insurance
- PMI, if putting below 20%
- Property Tax
- Security
- HoA
yes, all true. But if this guy thinks getting a 30 year fixed mortgage is a bad idea, but thinks his rent will be the same price 30 years from now, well he will likely be dead wrong. Also home mortgage might be the only thing a regular person can get "good" debt from. Large corporations can issue bonds as debt to build their businesses up, which can also be "good" debt. But for regular people, the only "good" debt is a home mortgage due to the tax breaks on the interest paid. Also it is an asset that can build generational wealth.
Totally agree.
Also GAS and car expenses if you have to buy further out from the city center and jobs.
Not to mention home warranties in case something breaks down
You people must have never owned a home before it cost a lot of money..
The maintenance costs alone can be a lot
I do property management. Most people take for granted how much work and money it takes to repair roof, HVAC, landscaping, security, electrical, plumbing, fire suppression, pool maintenance.
When i was 24 i bought my home for $1800 in a nice neighborhood...i bought 3 vending machines for $1800 that paid my rent monthly...then retired at 42 from investing
How can I start investing?
@@_rasec_9910 purchase shares of VTI weekly for the rest of your life, ideally in a retirement account
An investor client bought a foreclosed property at 85k cash in 2007, in Houston Tx. Over the years, maintenance/repairs about another 30k. The property has been bringing rental income average 15k to 18k annually for the past 16 years (current tenant been staying for more than 10 years) to pay for the maintenance, property tax, all the costs. If the investor sells the property now, it could be sold for more than 200k. Owing real estate is still the only way to accumulate wealth. Start early and start with something you can afford comfortably is the key.
@@justthebrttrk also that yes, they made that 85k back but factoring all the maintenance costs over the years, they probably were at a loss if anything.
Wow Erika, had not heard of this guy and I think he is so awesome. Most all (scratch that- ALL) financial gurus want to tell you how to live your life based on THEIR values. Ramit is refreshing in that he says, as long as you can afford it, you decide what is worth spending your money on. I am in the same boat (no pun intended) as far as cars, don't really car much about them as long as they're safe and reliable and start every day. But I did not always think that way, had many fancy cars in my life, and that is out of my system. And totally agree with the flying thing, expect for me it is about 2.5 hours max for coach. That will pretty much get you anywhere in the US if you're flying north/south, but if going from coast to coast I upgrade. Once you have enough, you can't take it with you. Great interview Erika, you've been killing it lately. Happy for your success.
I always tell people the only thing I can't afford in life are international business class tickets for family vacation. Having a great life is not that expensive. I have cheap cars and a cheap house for my income. No stress!
I showed my daughter about expense ratios on investments. Her 0.60% expense ratio in her company 401K fund will cost her 200,000 over 40 years at 500 per month. She was stunned.
Right which is half of the 401k 😂 it’s bs tell her get her own Roth RIA. Index funds, s and p.
@@au123ful I told her to get the match and do Roth IRA, and she can get .03 or .04% expense ratio. Even the company that is administering has some lower cost funds, but they’re not even an option for her.
@@au123fulwhich website do I go to invest in index funds and all that others. Thank you
@@au123fulI think your math is a little off. $500’per month with compound interest over 40 years would give her around 1.6-1.8M.
Their math is way off. If their balance is high enough to pay 500 per month. They shouldn't care about the 200k.
What I know is during the pandemic and those hard times people who had mortgage agreements had more assistance and better arrangements as far as government aid. Some even got a mortgage reduction.
The renters however were at the mercy (except in very limited cases where the owners had a heart) of the the owners of the properties and suffered pending expulsion or dramatic raises in rent.
Each has pros and cons, but ownership does have it’s privileges
When Ramit spoke about having a usb port in his 17 year old honda and that he will not buy a new car because he doesn't need one, this is exactly me, I will not buy a car until mine has been run into the ground lol
Driving a 99 Camry here
Owning a home is more than an investment. Most of us want to own if we can so we have a place that is ours. That is about everything beyond a financial portfolio it’s about being a human, making memories and sharing our lives with friends and family. Sadly many people use real estate as an investment and consequently it has become outrageously expensive to own and out of reach for too many. A mortgage (even when calculated for final costs that include everything) is still less than rents where I live. Want to pay double? Rent.
But the house isn’t yours until you pay it off. Just like any other thing you finance . And whoever inherits it will have to make payments if it’s not paid off in 30 years. The best Advantage to having a house is space and freedom from neighbors on top of you. That’s it.
Plus 50%? That's ridiculous. Replacing my oven this week. It is 50 years old. My boiler (furnace) is 53 years old and still works perfectly. My last roof lasted 36 years. No way are expenses 50%.
I don’t think people really understand what this gentleman is saying. He’s not saying to Not Buy a house but to do your due diligence. Always repairs, maintenance, monthly expenses and property taxes.
How true. Helaine Olen wrote a book "Pound Foolish" with a chapter "the Latte is a lie." It's not the little expenses, it's the big ones!
I went DIY and during the pandemic spent time looking at how poorly our investments were doing and the fees. I did feel like vomiting. Had a coworker tell me she was afraid to ask her financial advisor what she is paying in fees. Best thing I ever did.
There are other things to consider than just monetary costs. My Brother and Sister in law were forced to move out of their home in California because the rent increased considerably on their home when the lease renewed. Had they owned the home, the Rent would not have increased, and would not have forced them to ultimately relocate the family. It's a huge burdon to move the kids from school. Particurlarly since the oldest will be a senior in HS next year. Not an ideal time to start over!
yeah, I agree with much of what he is saying, but disagree on owning vs renting a home. Its usually way more beneficial to own a home.
I would say in a lot of instances it is better to buy BUT even with a fixed rate mortgage don't be fooled your mortgage can still go up an uncontrolled amount due to taxes! One of the biggest mistakes we(husband and I) made as first time home owners was not considering that fact...one yr in our taxes increased over 100 a month! This was a home that cost is just over 100,000 and was in rural Ohio so this is a low end example! Home ownership SUCKS sometimes! When I received a water bill that was over 3X normal and found out not only did I have to pay that bit I also had to fix the leaking pipe in my front yard UNDER my cement steps talk about gut wrenching cost us almost 3,000 for everything invloved...this was right after Christmas and my child's bday when we all had covid when it rains it pours and homeownership is no exception!!
Great points! While the mortgage would stay the same, the property taxes also fluctuate aka increase with inflation. I saw several pandemic buyers switch to selling just a couple years later because of often unseen costs such as this, as well as factoring in needed improvements as he said. As long as ALL the numbers are run (not just mortgage), then comparisons become clearer. I’m sorry this happened to your family and many others.
@@sarahculbertson1541 for the most part, its a no brainer, buying a home is an investment, renting is just an expense that only goes up forever and you have nothing to show for it. Yes, property taxes, home improvements, maintenance, etc, but also owning an asset that creates generational wealth and tax benefits on "good" debt and a fixed mortgage. As long as you don't over extend yourself and manage it well, owning a home is the way to go.
Owning a home that you cannot afford is not better than renting. Also property tax can go up so total coat for the house goes up. Unless, upu CAN afford the house, you should not be buying a house. Also, buy a house for assets not liability. Means buy rental properties. Buy a house and rent so you can earn money.
The only problem I have with not buying a house is I can control my mortgage amount every month but I know of people who’s rent has doubled because their landlord has raised it and the market is that expensive all around .
The conversation about car purchasing stings my soul. My husband steamrolled me when I was attempting to negotiate the purchase of our 2023 Chevy Bolt EUV. He kept saying, "See, the payment is in the range of what you want..." I'm like, whose side are you on? The dealer or ME/US!!!?!?! If I had my choice, my payment would be 100 less than what it is now. I didn't want to talk about what I wanted my payment to be, I wanted to talk about the total cost.
I sat down one day and really ran the numbers on owning a home in the city where I work and I came to a similar conclusion - owning a home here may be good for the ego, but it's probably not the best financial decision for me. It was oddly freeing.
Easy to say if you don't have children who need the stability of a permanent home. There's also RENT ANXIETY, etc. It's not just the numbers.
Erika and Ramit, thank you so much for this very informative and thought provoking podcast. I appreciate having actionable items. I am totally on board for keeping that which you love and get rid of that which doesn't actually mean something to you. Your insight on Financial Advisors was simply empowering! I've been struggling with whether to hire someone or not. Keeping things simple is awesome. :)
I have been an investor for 30 years, and now I am comfortably retired. Your advice is spot on!!
Stealth wealth. I love when rich, sensible people walk and drive around like "normal" person. You will never know if they are rich by how they dress or what they drive. He drives a Honda that doesn't even have Bluetooth!
I intuitively have managed my money exactly as Mr Sethi recommends on this Podcast. I feel like contributing to a Fidelity managed target fund is like being a ship on top of water. Sometimes the ship sails along swiftly, gaining miles rapidly, sometimes the ship is in choppy stormy waters, moving back, forth, side to side. But the ship is still the same ship
Everyone in the comments with their paid off home stories missed the point. Many people dont think about the phantom costs when buying a home and put themselves in a bad situation. For every person in the comments who paid off their home, there is someone out in the world who lost their home to foreclosure.
You have to run the numbers before making the biggest purchase of your life.
Loved , i spend time learning am 51 without a plan for retirement, what you teach is making realize is never to late to start. Thank you both.
I spent $250k to build my house last year. It’s now worth close to $400k. My mortgage is 25% of my income. I save and invest 50% of my income in mutual funds and credit unions which guarantee a return of 5%.
I have no other loans besides a mortgage. I’m concerned about intergenerational wealth.Renting creates a future class of landlords. People show refer to the story of the ant and the grasshopper. Your children should not have to rent if you are able to sacrifice for them.
He makes good points. However he doesn’t mention the insecurity of your rent doubling. But a big difference between now and 40 yrs ago is that many more men then had multiple skills. My dad could fix plumbing, electrical, hvac, replace the roof, resurface hardwood floors. Today, the many more men don’t have skills in home maintenance and repair.
A well built home will have repairs, that is physics. You have choices when you are the owner that you don’t have as a renter.
Investing even in the S&P 500 during some 15 year time periods wouldn’t leave you with a great return. Shelter is important. Bought a home new in 2000 valued at $160,000. In 2023 the home is worth $485,000. Not a bad return on investment. If I’m short on the returns compared to the S&P, I would say that the S&P didn’t provide a roof over my head, safety, security and memories.
Ramit played a big role in giving me the confidence to pursue a higher salary! Thank you for the great advice
This was so eye-opening and made investing seem so easy and simple. Great episode!!!
Anybody who bought a house between 2009 - 2019 made the right decision. Unbelievable low fixed interest rates would have been a game changer for these people. However, buying a house that is affordable and within your means like max spend 28% of annual gross income would be the key.
I loved this episode from the podcast! Agreed that it can be disheartening to look at someone with something, and think, that we can never have it. Investing isn’t just for people who are already rich!
only thing I strongly disagree with that he points out is the owning vs renting ideas. Owning a home can be a money pit, but it also can create generational wealth and a mortgage is the only debt I have ever had that gave me a tax break on interest payments. So mortgage is the only debt that is "good debt" most people will ever have, if managed correctly of course.
Well-said
More people using money with care for not being brainwashed,would help to reduce the social risks and could help those innocent great foolish spenders to realise their future obligation. Thanks.
The rent vs own only makes sense when rents are reasonable. Where I live, a one bedroom rents for min $2,500 and you have no security against increases or being renovicted.
House owner here that rents it out. If you want to grow your net worth, the math can be better for the renter option. But in markets where there is housing shortages, it's nice to have the peace of mind of being the owner
Not owning a house is the Best decision I have made ❤ it allowed me to use my money ro travel all around the world 🌍 while I was young & healthy. 🏃🏻♂️ I turned 60 this year, enjoying a comfortable and simple life.
that's funny. my mortgage is $1200. local rent is $2000. I pocket at least $800 per month. house ownership builds wealth.
@@TanManFixes After all these years in this nice apartment my rent is now at $533
@@VitalBigras Time is the only thing that has value. Home owners are mostly delusional about the true cost of "owning their home"... IE renting it from the government. My friends think being $500k in debt is the definition of success. He didn't even mention inflation as well. When you account for inflation, most houses are lucky to break even over time.
@@TanManFixes Did you pay a down payment? That payment could have gone to stocks which average more than real estate. What are taxes and maintenance on your home. Again more opportunity costs. Stocks have averaged more than real estate for over the last hundred years. Home ownership is forced saving though for those that won’t invest in stocks. It’s just less wealth than those who go the stock route rather than real estate route.
@@shauna996 stocks? what are those ? LOL. Of course, I am joking.
Rent also includes interest, property taxes, HOA and maintenance fees. You don't personally pay them but your landlord does using your money. Buy a house if you can afford, period.
I bought my first house for 311k with 15k down. House is now worth 850k. I turned 15k to half a million. If you rent, you will never see that money ever again...😮😮😮
Incorrect. You're not telling the whole story. WHEN did you buy your house? 10 years ago? 20 years ago? How much did you pay on property taxes during that time? Interest? Maintenance? Utilities? How much is left on your loan? You make a bold statement which could trap people into a mortgage they can't afford.
@@JomerTBBingo
Very simple, realistic and no BS life long advices - love this guy, he is so real.
Thanks Erika! This is your best podcast for me. Packed with valuable information all through ❤
I was actually listening until he compared a tesla to a camery without factoring in that the tesla battery usually gives out around 150k miles and cost 20k.
Landlord here, he is incorrect if you buy low, rents go up as mortgage go up, it never goes down. The people who wait too long can also face inflated house prices. If you lose your job you can also get evicted. Only rent forever if you want to be mobile and wants to be able to move somewhere.
True. You are very likely to doormen more money in rent every month than to pay a mortgage. Also, they come up with the idea that people change homes every 15 years. Baloney. I keep my cars for 20 years. My mother still owns the home she bought 45 years ago. Worst case scenario you rent the house and move somewhere
I love hearing what I have always believed about not using a “financial advisor”. Who better than you would take better care of your money. It is so easy. I feel the same about taxes.
I hate his maximum/minimum comment because it doesn’t account for the yearly increases in rent that move up with inflation whereas a mortgage payment stays the same for 30 years and it is inflation protected.
As well, if you have to move from your rental your rent can increase in an unaffordable way because you are at the mercy of the rental market. My parents just experienced this and they have a rental increase of 30% with a much smaller older rental.
A mortgage payment is not "inflation protected" just because the payment stays the same. The interest that you pay on the mortgage is making money for the bank net of inflation.
Here in Dallas rent is going for 2500 for a one BR. My mortgage is less than half of this and gained over 100k in equity.
I 100% agree, that buying isn’t for everyone but when you look at the costs, home buying beats renting most of the time in the long run. Yeah you pay property taxes, insurance etc but guess what, you do as a renter as well. What? You think landlords just absorb that cost? Hell no, we pass it on to the renter and on top of that we get to expense costs like a new roofs 😊. If you haven’t settled into your career or you’re not sure where you want to live, then buying may not be for you but if you are settled, raising a family and likely to stay in place for the next 10-15 years, then housing makes more sense. (Full disclosure…..I’m a Realtor….LOL).
That's why it's a wash, there is no clear cut one is better than the other....you have to run the numbers and take other factors into consideration.
You can write off mortgage interest when you do your taxes. You can't write off rent. The appreciation on my home bought in 2018 sure beat my investment in the S&P. In my experience over the years owning real estate hands down has beaten all other investments
I bought a house in LA for 1.49m in 2019. It is 2.0m now. I think i made a right investment choice.
"Buy the best. keep it for as long as possible" Lol this is my purchase mantra when i buy stuff
In order to retire comfortably you have to have housing cost taken care of meaning either paying off the mortgage or buying a duplex and have the tenant pay the mortgage eventually. I don't know any millionaires that are still renting.
Wow! It's so fun to see how fast you've grown your you tube channel because of all the value you bring to us. I remember when you posted you first few videos.
Keep it up! Great content
I love the massage conversation and tailoring what you splurge on specifically to you even if it makes no sense to anyone else.
When he said 1%, that hit me. Most people don't understand compounding, that's why most people don't understand the long term affects of inflation, they see the now.
I'm a day trader, if I make 1% of my portfolio in a day, I am ecstatic, because I know the growth of these repeated small gains can be.
For example, if you start with $150 in your account, and get 3% a day, it will take 250 trading days (about 1 year) to get to a quarter million
Edit: it is near impossible to get 3% a day, there will be losing days, always manage risk, or avoid trading in general. He is right. Investing is so much safer, and much less stressful, do that.
😂
Renting can be better than buying depending on the area. My mortgage on my 3 bedroom, 2 bath is 2/3 what it would cost to rent a 1 bedroom apt in my area, so it makes sense for me to have bought. I can also rent out a bedroom or setup and rent out a tiny home for money on my property. Plus, my house has almost doubled in value in 4 years. However, if I could rent for half my mortgage, I would be renting and investing my money.
That being said, he's also scared of owning a home - maintenance is not 50% of home cost - so a lot of this is about his fear too.
The only problem with renting is the bill never goes away. If you buy the house, it will get paid off and your cost of living becomes your taxes. The rent keeps going up. Your 90 years old and still paying making the landlord rich.
I can tell you the mortgage never goes away either. Because when you get the first home almost paid off, you upgrade and buy another, and then it repeats. 50 years later, you are still paying a mortgage. But it is all about the numbers. I've owned my own home (several times) and I have also rented for years when the numbers told me it was more sensible. Do the math, every time.
I’ve heard him say it might not be a good idea to own a home on his show. I agree if you can’t afford it but with rent being so expensive now, it seems home ownership is the best way to go. But numbers don’t lie and I think that’s his point. Doing the math makes sense.
Buying a home was the best thing I could have done for my family. The repairs have been minimal compared to the amount of rent we would have paid.
People keep thinking just because it's electric car, they automatically saved. But they don't factor in, they already over paid for EV, and now a day you still have to pay for charging. Are these people thinking they don't pay for charging their EV? If you think about it, you just switching pay for gas to pay for electric.
Plus battery replacement $$$$$
He mentioned Fighting Chance at about the 12 minute mark. I've used Fighting Chance for my last car purchase. Was able to get a factory ordered car for less than dealer cost in 2016. Highly recommend.
When u pay rent u pay for taxes, insurance, property management, and keep up. If houses cost 1-2M in your area either make a lot more or move to a low cost area, we live in mid Missouri house 3b/2 b 2 car garage was 138K with insurance and tax at 2500 per year so thanks but no thanks for renting❤️
I just turned 31 and have lived in the low tax bracket ALL of my life. I want you both to know after this video, 15 years or less from now my net worth will be in the millions….. and that is thanks to both of your input and information. ❤🎉cheers to the wealthy life!
The only time his home advice is accurate is when insurance + property taxes rival rent costs. There are plenty of places where that's an issue. For areas where property taxes are low, as well as insurance, owning is 100% better than renting. Don't forget that renters SHOULD carry renter's insurance, which equals a portion of the cost of home insurance
Renters insurance is usually in the low hundreds, home owners insurance is thousands. Property tax and insurance are not the only costs of ownership. HOA, Upkeep, and maintenance are expensive as well.
He said other costs are about 50% of mortgage. $3000 mortgage means $4500!!!
Erika I'm glad you got out of the matrix, congrats, now you're helping others, thanks.
Home ownership = savings account you live in. Do you pay the bank more than your home is worth? Yes. Has home ownership created more financially security? I think 100% yes. I think Ramit generates enough free cash flow not to care if he rents or owns. Most people won't be able to do that.
High risk in paying someone else’s mortgage
Everyone’s situation is different.
I loved this interview it opened my eyes on how to think about investing even though i have been investing over 30 years...
I feel bad for anyone who took his advice and didn't buy a home a few years ago because they "ran the numbers." The numbers sure have changed since, for home prices, interest rates, and rent.
I feel the same.
S and P 500 has been hitting record highs lately!
12:09 I researched the heck out of my cars and negotiate and it might be hours later but I get what I want. I drove it 17 years 270k BMW 325is...loved it
Hey @Erika, Always a pleasure to watch your videos. Am from Belgium and still follow some of your podcasts and interview. Even though the US vs Europe systems are drastically different in terms of tax, social security and health coverage, « rules of money management » are universal. Really appreciate this video with Ramit and surprisingly I naturally do what he mentions. Even though I thought I don’t need any advise, we learn everyday and I love the principle of « automate ! » your savings, investments and debt payment ». And use that freed up time to focus on other creative things. 👏 BRAVO ! Hope we could do the same type of shows here in Europe where many people still struggle with their financials.
Dag Hus!
I’m also living in Belgium. I’m finding it hard to find RUclipsrs who talk about financial advice/ Tax optimization/ Mortgage in Belgium or Europe. By any chance do you know any?
Congratulations Janet! I feel the same way, if one is able to buy, I say go for it. Ideally buying a Duplex is a great start.
I really loved this video and enjoyed this content so much! I'm this type of mindset and I always think that paying taxes is a good thing if you're making so much money bc it goes towards infrastructure and welfare for those who need it. I am always so proud of when I get the numbers owed to the govt and state of HI. Paying taxes means I participate in the function of this country
I love how all podcasters say their show is the number one in the us
My wife and I are selling our home after two years of ownership because we want to take the money and invest it. This will be our jump start.
that is great. down size the house. pay less mortgage. dump the profit in ETFs and stock market.
Ramit, a few years ago as I really wanted a USB port in my car stereo to plug in my phone. I paid $200 for the new stereo and $100 for installation. I was thrilled. You can do that for your Honda stereo- and add bluetooth at the same time.
I love this guy… I appreciate his transparency, insight and guidance 💯🙏
Ramit Sethi great advice , this a tip for you, you can replace the original car radio for a smart radio under $ 200 or less. and the come with Bluetooth, apps and usb. and I have 1997 car and still running, I keep until i die lol.
I'm a CPA in California, I don't agree renting is better than owning a home; You can deduct property tax, and your mortgage interest on your tax return. And you mortgage payment stays the same for 30 years; for example, in San Francisco, a mortgage with property tax is 5k a month; 30 years later, the property tax will only increase a little bit while the mortgage payment stays the same. 30 years later 6k is nothing. But your rent will keep increase could be like 10k a month in 30 years.
Don't you have to itemize for the tax breaks... do most people itemize?
@@dec1slh property tax and mortgage interests together will be higher than standard deduction, so the answer is yes, you will qualify itemized deductions
@Someone on Earth not for most people (outside of a HCOL). I live in the Midwest, my property tax and interest were no where near the standard deduction when I had a mortgage.
Great talk. However, $3 decisions are sometimes necessary when you are trying to find extra cash to pay off credit card debt. $3 x 30 days = $90 per month. Once you’re out of high interest debt, I agree, it is less relevant.
You guys! Don’t hate on facials! There’s estheticians out here just trying to make money and get rich by following your advice! ☺️☺️☺️
What happens when the rent in the area you want to live goes up by 50% to 100%. What happens when the landlord decides they are going to move into the house, and not renew your lease, and that house you wanted to buy 8 years ago is now 4 times as much. And there are no other rwntals in town that you can afford, and you have to then pull your kids out of school and move them to school district that is half as nice as the one they were in.
This is so helpful! Great confirmation about my personal finance knowledge! Helps to know I’m on the right track! Thanks for sharing from a wealthy persons perspective!
Thank you, Erika. This is a very different perspective on money and the different ways to use it, invest it and how to TAKE care of it. My grand-daughter will sure get much useful information with this podast...
I would rather rent an apartment that is in a really nice location rather than owning a house that isn’t producing anything and equity is like whole life insurance: it takes a long time to get there
nah, owning a home can create generational wealth and is fixed mortgage, where rent will rise at a much higher rate with inflation and there is an end game with paying off a mortgage, tax breaks on the interest paid, and owning an expensive asset. Yes, property taxes go up, maintenance and improvements are expensive, but overall, owning superior to renting.
A nice location is also probably closer to jobs and/or transit therefore eliminating less need for a car. Car expenses are huge! And suburbs require a car to get anywhere.
Depends. Hosing is similar to the market. You have to exploit people being irresponsible. Renting is not a bad option but you can make a lot of money if you get in at decent times.
I’m not saying to time the market by any means.
@@Justb-ru7jl Your comment relates only to people who live in a city.
@@IL_Bgentyl you are right because you do not know when the owner of that building or house is going to lose the right to ownership through divorce or death or ill health.. and you have to be moving out with a short notice.. I always always always keep important papers in a climate-controlled storage facility and live like a minimalist if I'm a renter
I love this! I been renting for years and using the money I save to grow a small business on the side…
GREAT show. I love the tips and how you both broke down things in very simple terms.
This was a great show. Just found your channel and subscribed. I look forward to more of your content and following Ramit, as well. Thank you for the great information!
I used to think every investor lose out during recession, meanwhile some make millions. I also thought everybody went out of business during the great depression, but some went into business. Bottom line, there's always depression for some, and profits for others. it all starts with having the right mindset. That said, I've set aside $265k for future, unfortunately I'm a complete noob.
A better way to put it would be don’t overspend on home purchase…make it sensible rather than relying on rent
With around £120k invested in Tsla stocks, any suggestions for additional stocks to diversify across various markets? Looking for a well-rounded portfolio that balances risk aversion with returns meeting yearly inflation concerns.
Consider hiring financial advisors, estate planners or tax experts. They can provide specialized knowledge and help you navigate complex financial decisions.
Certainly, I've been consulting with a Certified Financial Planner (CFP) since the outbreak. Beginning with an initial fund of $80k, my advisor makes decisions on when to enter and exit positions in my portfolio, which has now expanded to around $350k.
Hmmm this is quite interesting, Please can you leave the info of your investment advisor here? I’m in dire need for one.
Her name is Amber Dawn Brummit can't divulge much. Most likely, the internet should have her basic info, you can research if you like
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
The Tesla vs Camry argument for cost of ownership is completely wrong. Don't forget the additional cost of the additional infrastructure you need to continue to charge your EV, then parts are exponentially more expensive, labor and then you'll dump thousands when you need to replace the battery or dead cells. Limited range is the ultimate caveat. Maintenance on a camry or any other affordable and economical japanese car is extremely low.
Ev's are a great luxury to compliment an ICE vehicle as your main vehicle, but you'll be dead in the water if it's your sole mode of transportation and japanese engineered vehicle's trump the majority of all other vehicle competitors.