I recently picked up a book with an arrogant title: “Everything You Know about Money is Wrong,” by Karen Ramsey.
Oh really? Hmm.
Turns out, not everything I know is wrong, but I did gain some perspective on a few things.
One I want to mention is about houses.
See her Myth # 6: “I should buy a home because it’s a great investment.”
You know how sometimes, people will say they’re buying a home because it’s an investment? They’re buying, rather than renting, so they can build equity.
If they pay for it in full or take out a mortgage on it, eventually they won’t have to make payments. That’s a great thing.
But ya know what?
If you’re living in the house you plan to live in for the rest of your life, you shouldn’t view it as an investment.
You could be living in a multi-million dollar house, and pay just a fraction of that, but for as long as you’re living there, it is simply a place where you, well, live.
Don’t think of it as an investment until you sell it. The property may be growing in real estate value, but it doesn’t mean anything until it’s liquidated.
The author writes, “…unless you plan on ultimately selling it [your house] and then downsizing to a smaller, less expensive house–and living off the proceeds of the gain it is not an investment. It’s just a roof over your head.”
In the chapter, Ramsey goes on to make a great case for living in a smaller, more affordable house, than a larger, more expensive one. She debunks a lot of myths and it’s really interesting.
I haven’t thought of it that way before. What do you think?