Why Buying a Home Before 45 is Financial Suicide, My Controversial Blog Post for the Week
In the following blog post, I’ll walk you through exactly why buying a home before the age of about 40 or 45, is likely financial suicide, and of how depending on your income level and job security, it is one of the absolute worst financial decisions that you can make. While I know that many of you that are reading this may think that I’m a crack pot, there are a lot of credible entrepreneurs that say the exact same thing, for the reason that it slows you down, worsens your employment prospects by making it so that you cannot move for a job, and to top it all off it makes your portfolio over leveraged and makes it less likely that you’ll have a good rate of appreciation, as you have a negative rate of interest chasing after you (-2-3% per year really adds up over time.) For more information, be sure to subscribe to our blog for additional details and information, or to comment down below with your thoughts and opinions on the article and we’ll get back to you within one business day with a response.
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Reason one why You Should Never Buy a Home Before the Age of 40, Interest on Debt
This reason alone is enough to really hit back against the idea that “buying is better than renting because your contributions become equity in your home” Even if this is the case, I firmly believe that having to take on debt for way too long, the interest that is accumulating against the mortgage (leading to you giving up $500,000 for a $350,000 home), the time it takes to own a home due to lawn maintenance etc. the recurring fees such as insurance costs, maintaining appliances etc. and the like, as well as not being able to move for a job due to having a home in the area, far outweighs this….at least depending on your level of salary and job security 🙂
In this current job market, with the horrible Coronavirus politics and business environment that is going on in the world, even if I was making like $500,000 per year, and I wasn’t 100% sure that I was going to have job security on this, I would quite literally be in a studio apartment, renting and stocking up cash, or better yet, I would sell my home in order to stack up cash and wait for this pandemic to be over, putting the money into liquid equities and cash.
Reason two, an Over-Leveraged Portfolio
If a portfolio is over-leveraged, one of the first steps, in order to get rid of this downside risk, is to pay off THE DEBT RIGHT NOW. Personally, I would 100% stop contributing to your 401K, would max out every piece of savings or even losing stock picks (you can sell these off, put the cash on the debt, and even take a tax write off for the loss, which you can use the money from to pay down the house) in order to get rid of that. I fully agree with Dave Ramsey on his opinion here, even if some of his investing nonsense is terrible (buying growth stock mutual funds….yeah right….more like low cost index funds) he has very good advise on PAYING DOWN DEBT RIGHT NOW as quickly as possible. This goes for anything, a 0% interest mortgage, a 0% interest car loan, etc. pay it the heck off, it is so stupid to have ANY debt on your books at any time, unless you are running a $100,000,000 company and you know that you can use leverage to make more money and beat out your competition, other than this, ignore all that and pay off the debt NOW.
Reason Three, Time, it Slows You Down Due to Maintenance
I’m talking about if you want to become really really rick here, if you’re content with being comfortable, than by all means buy a house, get a family and a dog and be happy, but if you want to be a really rich entrepreneur, and I’m talking like a millionaire at age 35, then you need to WORK WORK WORK, AND SAVE, SAVE, SAVE as much as humanly possible. That means literally putting all of your time and your energy into building your business. House takes a ton of time, you have to maintain a lawn, hire maintenance people etc.
Reason Four, Risk, It halts you from Taking Risks in Business
If you have a home, you are all of a sudden risk averse now. You can’t afford to take risks in your investments, you can’t really afford to start a business in that if it fails and you lose too much money you won’t be able to pay the mortgage on your home and you’ll have to foreclose, leading to bankruptcy, more debt, and your estate going down to zero.
Reason Five, Expensive and Horrible Amount of Fees
Here is the gist of the fees that you have to pay when you buy a home:
Insurance Costs
Gardening and Lawn Maintenance Costs
the Time and Money Associated with Decorating
The Time and money associated with paying for insurance on the home
Costs and Time Associated with Replacing the AC, Hot Water Heater etc.
Annual Maintenance Costs and HOA Fees
Interest on the Mortgage
The Money spent on decorations for the home
Money and time spent on plumbing and electricity Issues
And on and on, it is a huge cash and time suck, if you want to be an entrepreneur, then avoid this lifestyle at all costs, at least until you have $1,000,000.00 in the bank, and you are consistently making $250,000 per year, and if you are at this level and you forego buying the home for a studio apartment, then you can stack cash until you hit $5,000,000.00, then you can really put your money to work and can use just a small piece of your interest on the home, THAT is how you become rich.
Final Thoughts on Why Buying a Home Before $250,000 a Year is Stupid
If you’re going to be an entrepreneur, then stay the heck away from this at all costs, it will zap you of your time, money, energy and resources, and will literally make it so that you never hit certain wealth, income, and productivity levels. Have any thoughts on this highly controversial blog post? Be sure to subscribe to our blog and comment down below with your thoughts and opinions on the article, and we’ll get back to you within one business day with a response.
Cheers!
*Hedging Finance.com
Sources:
https://money.cnn.com/data/markets/
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