Financial security is important to all of us. You may think about it from the perspective of being able to take care of your family or the freedom to retire at a younger age or even just the comfort of knowing you have the security to care for yourself. Whatever your reason for wanting financial security, there are several ways to increase your net worth and bring you the financial peace you are looking for.
- Make more money. This may mean getting a second job, furthering your education to get a better job or asking for a raise if you have been in your current position for a while and have a good performance record.
- Spend less money. When you cut your expenses, you will be able to pay off debt faster and increase your savings. This will work two-fold to increase your net worth.
- Buy a house. Almost annually, a study is done to show the comparison between the net worth of homeowners and renters. A recent study revealed homeowners are worth more than 46 times more than renters. Why is this so? There are a couple reasons to consider. Homes are likely to appreciate while your mortgage stays the same. Over time, your home is very likely to appreciate in value. Even during an economic downturn, decreased values are most often temporary and will begin to rise again before too long. When your home value rises, your mortgage still stays the same. When the value of your rental rises, your landlord is likely to raise the amount of your rent to compensate for the change in value.
Another thing to think about is that when you pay your mortgage, you are able to recover most of that money (and sometimes even more due to appreciation) when you sell your home. When you rent a home, the money you spend can’t be recovered when you move out of your rental. You have just helped the landlord increase their net worth. Owning a home acts as a forced savings plan since you must pay your mortgage to keep the bank from foreclosing on you. With each month and year, you pay your mortgage, you are growing your equity in your home. Over time, your equity increases, and you are able to take advantage of that equity when you choose to sell your home. Assuming the value of your home has increased while you owned it coupled with your equity, you can see a nice return on homeownership with a little time.
Statistically, this makes a great case for homeownership but only you can decide what is right for you. If you don’t plan to stay in one area for a long time, this may not be the best time for you to buy a home. If you do plan to stay in one place for a while, it might be a good time to consider buying a home while increasing your net worth at the same time. If you have any additional questions or concerns about buying a home, I will be happy to answer any questions you may have, help you to find your dream home and/or determine the value of your existing property.
Nancy Davidson is your ultimate real estate resource for Mammoth Lakes, CA and The Eastern Sierra. Visit my website for detailed information regarding today’s real estate markets.