As we go through life, we do a lot of things semi-automatically, without thinking about them all that much. Most people go to school, head off to college, find a partner, get married, settle down, buy a house, have kids – you know the story.
But is doing all of that worth it? Or should we forge a different path for ourselves? The jury is still out on some of the items on that list, but buying a house is a sure bet because of its effect on your psychology. But why is this exactly?
How Owning a House Changes How You Act Around Finances
Let’s say that you currently rent a flat. You know that all you need to do is set aside enough money for the monthly rental, and that’s about it. Anything else above that is spare cash you can spend on whatever you like.
Take a look at most people’s monthly expenses, and that’s precisely what happens. They set aside enough for the rent, and then the remainder is their “treat money” they’re free to spend on whatever they want.
Owning a house, however, changes this dynamic. You still have the same living expenses. Except, this time, you’re not just handing money over to a landlord. Instead, the money you spend on your mortgage is actually building your equity.
Mortgages, therefore, are a kind of backdoor to saving. They force you to become financially prudent, even if you’re one of those people who spent their entire paycheck while renting.
What’s more, it doesn’t feel like a significant change. Instead of paying a landlord, you’re paying a bank – but that’s it. Everything in your life remains virtually the same. You don’t even have to be more frugal.
And That’s Why People Do It
Why are firms like Carolina One Real Estate seeing so much business these days? What is it about homeownership that is so appealing to people?
The usual arguments are that people don’t want to throw away their money paying rent, or they want to start a family. But it could be more psychological than that. Perhaps people know if they chain themselves to a mortgage, they’re much better able to build their wealth and stay disciplined. They’re not just paying a landlord and living from one month to the next. They’re putting their money away long-term in property. And that’s helping them increase their wealth dramatically.
What Does All This Mean for You?
So what does all this mean for the average person trying to manage their finances? It means that if you want to build wealth, your best option is to buy a property.
That might sound like a strange thing to say, but it is something that has played out countless times for people in the past.
A lot of folks worry about the interest on the mortgage. But most homes actually appreciate faster than debt interest accrues. So usually, you find that you’re much better off once you’ve owned property, even if you’ve spent a lot of money on fees to your lender.