Your most expensive line item in your budget is housing. So the most expensive line item in your budget is out of your control, variable, and increasing.”
DAVE RAMSEY WARNS RENTERS: YOUR BIGGEST EXPENSE IS ONLY GOING UP
To rent or to buy — that is the question for millions of Americans. On one hand, they’re holding the reality of a difficult housing market and high interest rates. On the other hand, they’re holding the fact that by paying rent, they’re spending a lot of money on a property that will never belong to them. It’s a conundrum that financial expert Dave Ramsey understands quite well.
No stranger to a strong opinion, even Ramsey acknowledges that there’s nuance to this question. His answer is that it depends on where you are in life, and how far away you are from meeting your financial goals — chiefly, getting out of debt. However, he wants every renter to know that they’re essentially on borrowed time: Renting in perpetuity is unwise, since housing is your biggest expense — and it’s only going up.
Why It’s Not Good To Rent Forever
On his radio show, Ramsey broke down why renting can be a good short-term solution but a poor long-term one: “From 30 to 70, your rent’s going to go up. Your most expensive line item in your budget is housing. So the most expensive line item in your budget is out of your control, variable, and increasing.”
Basically, the only constant thing about renting is that your costs will rise every year. Unfortunately, being priced out of your current abode isn’t out of the realm of possibility.
Of course, there are advantages to renting in the short term. You’re not on the hook for hiring repair technicians or investing in overall property upkeep. You also enjoy the flexibility to pick up and move when needed, whether for a job opportunity or a personal change, without the burden of selling a home.
Still, if you’re a long-time renter, you’re paying more every year for a property without building any equity.
The Benefits of Buying
Ramsey recommends buying with a fixed-rate, 15-year mortgage to secure a stable housing cost. In addition to painting the walls whatever color you’d like — who’s stopping you from a hot pink accent wall? — or planting a garden in your very own backyard, you’re locked into a fixed payment. No more worrying about unexpected letters from your landlord announcing another rent hike.
Another benefit of a fixed-rate, 15-year mortgage? According to Ramsey, “When you buy, you have a fixed payment for a property. And when you get it paid off, you have a fixed rate, which is zero, other than your taxes and property insurance. Those are two things that will go up, but they won’t be the largest thing in your budget anymore.”
Unlike rent, which can increase indefinitely, a mortgage eventually ends, giving you full ownership of your home and significantly reducing your monthly expenses in retirement.
But Don’t Feel Pressured Before You’re Ready
While Ramsey wants you to eventually own your own home, he emphasizes that you shouldn’t rush into the market unless you’re financially prepared.
For Ramsey, being ready to buy means being debt-free, having a fully funded emergency fund, and saving a substantial down payment — including closing costs. Once in the home, you should be able to afford monthly house payments and maintenance costs. You should plan to stay put for a while to recoup up-front loan costs, and work with a real estate agent you trust.
Renting can be a good short-term plan, but “short-term” is the key element here. While you should work toward homeownership eventually, Ramsey doesn’t want you to feel shame or pressure from more hot-footed friends and family who may be entering the market before they’re fully ready.
“Don’t let friends or family shame you into buying something when you’re not ready. But you do need to stabilize the largest expense you have before it gets out of control,” he said.
Categories
Recent Posts
Spring officially arrives next week and the housing market is heating up!
Should I Buy a Home Right Now? Experts Say Prices Are Only Going Up
Do You Know What Your House Is Really Worth?
Your most expensive line item in your budget is housing. So the most expensive line item in your budget is out of your control, variable, and increasing.”
MAKING A MOVE? CALL CAY TODAY WWW.CHANNINGREALESTATE.COM
More Buyers Are Making Moves — Is It Time To Sell?
Do You Know How Much Your Home Is Worth?
THIS SIGN WILL STEER YOU TO SOLD
A Record Percent of Buyers Are Planning To Move in 2025 – Are You?
Home Price Growth Is Moderating – Here’s Why That’s Good for You