alan1
Gold Member
The worst investment advice I ever received was "Your house is your biggest investment". I heard that some 20 years ago when I was buying my first house. I still live in that house by the way.
I heard it from my family. I heard it from my friends. I heard it from my real estate agent. I heard it from my banker. I heard it from my co-workers. I still hear it from all kinds of people.
I didn't follow their advice. Instead, I bought the cheapest house that I and my family could comfortably live in. The way I saw it, home ownership was my avoidance of housing cost inflation. And here it is, about 20 years later and my mortgage payment is $500 a month. The house next door to me is smaller than mine and currently rents for $1100 a month. I'd say I did a good job of avoiding housing cost inflation. Instead of having an $850 a month mortgage 20 years ago (which the bank said I could afford), I opted for $600 a month (re-fi a few years back reduced the monthly payment without extending the length of the mortgage) and I put the extra money aside towards my retirement. Over the past 20 years I've spent a heck of lot more on my house than I have invested for retirement.
Guess which is worth more, my house or my retirement portfolio? If you said my retirement portfolio, move to the head of the class. In fact, my combined 401(k) and IRA accounts are worth about 6 times the equity in my house. By the time I finish paying for my house, including interest I will have paid about about 2.4X the original house price and the house will be worth (my estimate) about 3X the original price. And my costs don't include maintenance and repairs. I'd hardly call that an investment. Like I said, a hedge against housing inflation.
If your home is your largest investment, chances are you will retire without enough money to live the rest of your life in a comfortable lifestyle. My advice to young people is to skip the conventional advice that a home is good investment and focus more on your retirement portfolio.
I heard it from my family. I heard it from my friends. I heard it from my real estate agent. I heard it from my banker. I heard it from my co-workers. I still hear it from all kinds of people.
I didn't follow their advice. Instead, I bought the cheapest house that I and my family could comfortably live in. The way I saw it, home ownership was my avoidance of housing cost inflation. And here it is, about 20 years later and my mortgage payment is $500 a month. The house next door to me is smaller than mine and currently rents for $1100 a month. I'd say I did a good job of avoiding housing cost inflation. Instead of having an $850 a month mortgage 20 years ago (which the bank said I could afford), I opted for $600 a month (re-fi a few years back reduced the monthly payment without extending the length of the mortgage) and I put the extra money aside towards my retirement. Over the past 20 years I've spent a heck of lot more on my house than I have invested for retirement.
Guess which is worth more, my house or my retirement portfolio? If you said my retirement portfolio, move to the head of the class. In fact, my combined 401(k) and IRA accounts are worth about 6 times the equity in my house. By the time I finish paying for my house, including interest I will have paid about about 2.4X the original house price and the house will be worth (my estimate) about 3X the original price. And my costs don't include maintenance and repairs. I'd hardly call that an investment. Like I said, a hedge against housing inflation.
If your home is your largest investment, chances are you will retire without enough money to live the rest of your life in a comfortable lifestyle. My advice to young people is to skip the conventional advice that a home is good investment and focus more on your retirement portfolio.