Never Retire - Throwing Money Away
They tell me I’m throwing money away on rent.
Even amid record high housing prices and 6%-plus interest rates on a 30-year mortgage, I’m told I’m throwing money away as a renter.
I don’t get it.
In my view of personal finance as someone who will Never Retire, there’s a time and place for home ownership. It needs to make financial sense.
As in, if it eliminates my monthly housing payment, it makes financial sense.
This is what I call throwing money away—
A 60-month loan on the average new car ($46,259) at the average interest rate (6.14%) equates to a monthly payment of $800 and $6,761 in interest paid over the life of the loan.
Why did I lead with a new car?
Because, when I look around me, it seems as if everybody’s driving a new car.
Fresh plates. Temporary registrations.
That’s throwing money away.
Heck, I feel like I’m throwing money away, dropping $350 a month on my car payment.
However, once I get rid of that debt, I’ll never have it again. Cost of living lowered again.
This is what I call really throwing money away—
Those are the numbers on a 30-year mortgage taken out on the median priced home in America today.
In Los Angeles, it looks like something closer to this—
There’s no housing price appreciation, home equity, or general personal financial logic to make sense of, let alone justify those numbers as part of your budget.
None. Zero.
At least not if you’re of modest means, making decent or better money, and aim to live the life you wanna live now and for the duration.
Before my girlfriend and I moved in together, I paid $1,342 a month in rent. Now I pay $702.
At this point, anything except bringing my car and housing numbers lower makes absolutely scant personal financial sense.
Ultimately, it comes down to your view on spending.
On what you’re trying to do with your spending as it meets living life now and into relative old age.
I want to work less now so I can work less longer. Never Retire.
I don’t want to to be stressed out over money any more than I need to be. Soft life.
I want to be able to spend a month in Europe rather than chain myself to a $6,000 mortgage and $800 car payment. Semi-retirement.
If you commit to finding the floor on your cost of living, you don’t need to make $6,800 (or whatever these excessive line items would cost in your world) just to cover your first two fixed expenses of the month.
Instead, you can breathe easy knowing you can make less—even much less—and have a better life in the process.
Throwing money away on rent? I don’t think so.
Not if it’s in the name of cash security and putting yourself in the best position possible to be semi-retired today and Never Retire tomorrow.
I got a new book in the mail today—Overtime: America’s Aging Workforce and the Future of Working Longer.
I’ll start reading it and report back anything pertinent to our discussions.
Also, because I’m in the midst of planning the aforementioned month-long trip to Spain and Italy, I’ll do an installment on how my pots of money function throughout this process.
The view from one of the Airbnbs we’re staying in.
All this and more thoughts, ideas and illustrations of the strategies you can use—or at least build to suit—along your Never Retire journey (or wherever you might be and going in life!).
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We bought a house in 2003 when housing prices were affordable on a single income. We wouldn't be able to afford a house in our city today even though we have two incomes now. We have young adult kids who might never be able to afford buying house, even on good salaries once they get to that point. We will likely become a multigenerational household down the road to make living expenses more realistic for all of us.
Anytime I see these LA prices, I genuinely wonder who buys a home there, and how do they swing the payments?! My wife and I both have what I'd consider well paying jobs, but a ~6k mortgage payment? That'd mow us under.