You hear it all the time “your home is your greatest asset” but, is it really? Look up the definition of an asset and it’s something that puts money in your pocket, not one that pulls money out of it. Ask yourself, when was the last time your home made you money versus how many times it has cost you money. Now, that simple prompt may have shattered many people’s perception of this common piece of financial wisdom but this is just the tip of the iceberg because whether you realize it or not, your home is a foe and not an ally and may be slowing down your quest to financial success. Here are three reasons why that’s the case!
Reason #1: Overextended homebuying
Have you ever felt buyer’s remorse? It’s that feeling you get when you buy something you thought you’d love only to be disappointed when you actually go to use it. When it relates to a $20 purchase, I think we can all agree that it’s no big deal. You just return the item to the store and move on with your life. However, when you get in way over your head by overbuying, the issues can be absolutely crippling to your financial progression.
For some, there would seem to be an easy solution to this issue — just don’t overspend and to that I say “Thanks Captain Obvious!”. In the current home buying climate, your chances of buying a home that meets your criteria for affordability, style and size is about as likely as catching a Mewtwo with a Pokeball. Now, there is a solution to this issue however it involves, you guessed it, spending more money. In fact, meeting any housing criterion can be accomplished if you have the money but as you guessed this is where the financial issues begin.
If you ask me, there are typically two reasons why people end up spending way more than they should on a home. The first, and the more excusable reason is that home prices are generally high across the board. This is a phenomenon that we’ve experienced in the last year. Home shortages mixed with an increasing number of people wanting to own versus rent has driven up real estate prices in the West. As such, that $350,000 home that you could have acquired two years ago is now selling for $500,000 which means that most people are being forced to take on larger mortgages if they ever want to exit the renting rut.