Tuesday, April 5, 2016

Financial Literacy Month 2016: Why I Rent

The delightful Paula Pant wrote the end-all, be-all post on why renting may be financially prudent, which I can't recommend highly enough, but the overall message bears repeating as often as possible.

Of course, I can only speak about why renting is best for me, but those reasons may resonate.

About a year and a half ago, I got the dreaded notice from our landlord that my rent was increasing by $100 a month. Granted, my rent had not increased at all for years, but $100 is substantial so I started weighing my options.

First, I considered buying. It didn't take too long to discover that there was nothing in my price range in good ol' Los Angeles. But I'm still glad that I went through the process to know that for sure.

I filled out an application with my credit union, and was approved for more than I thought I could reasonably afford. It still wasn't a lot by L.A. standards, but there were a few possibilities for condos (no houses). Very few.

One by one, each of those possibilities stopped looking feasible. They were either in neighborhoods where I didn't want to live or required work or were in developments that were questionable.

It actually wasn't that much of a disappointment to discover that buying wasn't going to happen. The more I thought about it, I knew that I couldn't handle it financially or emotionally.

It would have stretched my budget so dang thin, I'm not even sure we would have been able to keep Netflix! Even though I'm still not at Warren's recommended 50%, this would have put our living expenses at well over 70% of my income.

Living that close to the financial edge would not have been good for my state of mind. Not sure how much sleep I would have lost, worrying about my job stability, trying to find extra income, never having lunch with a friend, dreading holidays and birthdays...I've been there, done that. I don't want to go back.

Things might possibly have been different if we lived somewhere else, but I don't want to live somewhere else. My job is here, my friends and family are here, our lives are here.

We did end up moving, finding a place we like even better for the rent I was paying prior to the increase. I had the funds to handle the moving costs, and even buying a washer and dryer.

Just the other day, Sylvia was telling me that she's glad we moved and she likes our current place so much better than the last. So do I.

Americans are far too wonderfully varied to have just one American dream. Some things to consider before buying into the home-ownership aspect:

  1. Down payment +: Don't just have the amount required for your loan. You will also need more set aside for closing fees, moving expenses, and the unexpected repairs/necessities you don't discover until the keys are yours. 
  2. Plus...: Do you plan on buying new furniture for the new place? Do you need appliances? Will you still have enough in your emergency savings if your car needs new brakes the same week you move? Will you still have at least a few months' worth of income if you get unexpectedly laid off the next week? 
  3. Stability: If you're married, what if your spouse gets offered a new job with ten times the income the following month? If you're divorced and the other parent is still a part of your child/ren's lives, what if your ex moves across country? Are you prepared to stay in the house for at least five years?
  4. Peace of Mind: I know, everyone wants to dream about the possibility of saying "all mine" when it comes to home ownership. But how will you feel if the roof is leaking? If your mailperson slips on your front walk? When your debt is six figures? When the property taxes are all yours? 
The farther we get from the financial crisis, the more people start to use the phrase "throwing money away on rent."

I don't think of it like that at all. Every month, I pay for the privilege of the roof over my family. Just like someone with a mortgage does. I also get to call the landlord if my HVAC stops working. I get to explore the possibilities again if I don't like my rent increase. 

Of course, this is not to say that no one should own a home, but like most things in life, it is not for everyone. And it's certainly not for me.

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