Most people have heard the saying ‘rent is dead ...
By Ali Hogue on March 09, 2020
blog,
MO50,

Is renting ‘dead money’ an opportunity to increase your savings ?

Most people have heard the saying ‘rent is dead money’. To some degree, it sort of is. Your cash will go in the pocket of someone else and you will not be getting any of it back.

​However, there is more to consider.
 
A fair argument will mention that money going towards paying rates, interest to the bank, insurance costs, and maintenance/refurbishment costs are other examples of ‘dead money’ costs worn by a homeowner.

Purchasing a home is fine if it suits your lifestyle choice and you can afford to do so, just don’t underestimate the costs incurred by you.

If you decide to buy a home, there is a large chance that a significant portion of your income will be tied up into that single asset.

The positive in this, is that you are forced into saving through the loan repayments to your home. Because unlike your possible savings commitments, you must make those repayments.

But it then brings forward a large opportunity cost of being unable to use the possible spare cash flow elsewhere, whether it be through investing, superannuation contributions or even to assist with unforeseen future expenses.

Utilising this money to instead build your retirement savings and having a good investment strategy can have a large and positive affect on your future retirement situation.

However, you still need to make the correct financial decisions and not blow the spare income saved from not buying a home. Otherwise you may put yourself in a worse position.

If owning a home is a part of your lifestyle goals, ensure that you are taking everything into account and not disregarding those hidden costs that are rarely mentioned. Also, be sure that you are and will continue to be in the right financial position to fund your retirement goals.

Written by Ali Hogue.
Published by Ali Hogue March 9, 2020