The Housing Crisis: America’s Biggest Wealth Killer

[@AriWeismanchester]

Bought my house at 225k 5.75% interest 3% down in Maine $1700 a month. Needed new heating/cooling: $10k. Repairs in the first few months: $7k. We thought we were good but over the next two years the roof leaked badly $4k, the basement flooded $1k and our taxes went up +$100/month. Utilities and internet was around $300. Wife took a paycut and we stopped being able to save. We sold in March 2024 for $285k, we got lucky and ultimately broke even. Much happier and saving money while renting for $1500 a month.

[@OscarCastillo-fl9dw]

I did the same thing I will never go back to buying now investing the difference and more. Now I can retire at 45 years old if I want to. Wife and I are 33 and 32 are rent it 850 a month and we 5,500 a month while traveling 4 times in the year. We are blessed we good job as well hard work and discipline. We are very frugal with are money as well is a teamwork for sure.

[@obama7325]

how did you have 7k miscelleneous repaies in first month

[@eddiemalvin]

Did you ever consider renting your home out instead of selling?

[@OscarCastillo-fl9dw]

@@eddiemalvin no i prefer not to property taxes went of the roof as well 500 dollars a month just on property taxes alone.

[@comment_account2343]

​@@obama7325for us it was the deck that needed to be replaced and a leaky window.

[@jessicab3594]

While I don't suffer from being house poor, I did take his advice and look elsewhere for a new job. And I got a new one! I start in a couple of weeks! :)

[@veis]

Congratulations! Rock on!

[@JhamEntertainment]

I do not see the purpose of buying a home if it adds insane amounts of stress. I will be renting until I can DEFINITELY, COMFORTABLY afford a home.

[@JD78CN]

I bought my first house for $200k and I was making $45k. That first scenario was pretty close to what I was going through. On my second house I was married, we were approved for $800k home with our combined income but we ended up buying something for $490k, best decision ever. Since then our income has doubled in the past 5 years and we are about 2 years away from paying off the house.

[@BroVin-fw6zf]

❤

[@maxkaliber174]

You’re Right! The maintenance budget should be constantly contributed, it’s crazy how any contractor work is expensive and going up. Water heater > 3k, roof > 15k, furnace > 7k, fence > 5k Also, that’s why home prices are not going down.

[@atanveer5]

I think the bigger issue than buying the home is people living outside their limits. If you are making less than 80K a year on a gig based job, maybe buying a home isn't worth the risk. The best pieces of advice you are giving are 1) run the numbers 2) BE CONSERVATIVE. Just because you got a new job/promo and are making 'x' right now, does not mean you'll make the same in five years.

[@bobbert1945]

Another great cost cutting measure: avoid the crazy wedding industry.

[@mumuzeze]

Seriously my coworkers are saving $100,000 for a DAY! $400 per person is the going rate and she’s out in Jersey. She snarked at me how much was my wedding I I said $10,000 and I guess we were just judging each other :( . I would not raise my daughter to think that’s ok, I pray she actually is like me when she grows up, not a slave to the makeup /trend world and not being insecure about my age and features. To be grateful we get to be older.

[@GeeGee-d6v]

Absolutely this. Met so many couples who are renting but instead start off saddled with 50k plus in just wedding debt. You won't hear this critique because weddings are so inherently ingrained in culture and is acceptable to be couple poor.

[@poeticprincee9750]

@@mumuzezeit seems like people like us are so rare!!!

[@smileyspoon1]

Yeah. I spent 10k for the wedding. I already had the money. Just buy what you can afford, meaning you have cash for it not credit. Avoid debt like the plague and you can live a decent life. I've seen family member go bankrupt due to debt and not able to pay due to cash flow issues. It only takes on mistake to loose it all if you have lots of debt.

[@michelero4297]

Seriously, if you can not pay cash for the event/plans/meal/ or family cover some of it, elope and email out a registry link. Why start your marriage out with debt. Crazy. I get it many girls dream of that day but those girls should have parents willing to pay for it or she should have saved for it herself. I must be a meaner.

[@ladiesman2222003]

We bought 14 years ago and struggled for 10 years because of repairs and having 2 young children. There is a silver lining in struggling. Because we were house poor. We didnt go on vacations or buy new cars. But now the home has tripled in value, And we just have 11 years left in mortgage payments. I would still recommend buying a cheaper house than you can afford and make one extra mortgage payment a year if you can somehow manage it. It makes a big difference.

[@cojut]

Was it worth it? Do you sometimes regret not doing more with your kids when they were younger?

[@herbythechef7624]

​@@cojut what makes you think they did not spend time with their kids?

[@ladiesman2222003]

@@cojut I don't regret at all. We would never have the net worth we have by renting. It forced us to "save money" by spending it all on the house. We spent lots of time with the kids with sports and at home etc. Last 3 years were able to do 2 Big trips as well. 26 hour drive to Orlando 52h drive to Vegas kind of massive trips.

[@Amonfobious]

epic, a non liquid asset has tripled in value

[@lucaspm98]

Yes, it works great if you buy at the absolute bottom of the worse housing crisis ever and then look at the value/sell at the peak of the greatest run up in real estate prices in 40 years. That anecdote doesn’t mirror the current housing whatsoever right now, it’d be a much different story if the price fell to a third instead of tripling.

[@Bynming]

We started off house poor, we did run the numbers and we knew what we were getting into. On the other hand, both of our careers were on a ballistic trajectory so we were not worried about it. We were house poor for less than 2 years and by then our incomes had more than caught up with our expenses.

[@ramitsethi]

Nice work!

[@GonzoT38]

that doesn't make house poverty prudent, that just means you took an advance on your paycheck. Hardly a genius play. If the market is so volatile that a year makes a difference between affording a stick house and not, that's a casino, not an investment.

[@Bynming]

@@GonzoT38 the alternative for us was to buy a house we couldn't grow into and we would have had to move within 3-4 years, which would've made renting more sensible, and neither of us liked renting for reasons that are our own. So we moved into a house at the top of our range at the time, and now we can stay here for decades, or forever. We love the house, great location, great neighbors. So maybe not a genius move, but an amazing outcome for us.

[@BikeHelmetMk2]

@@Bynming I did something very similar. It worked out great. I took the costs very seriously while it was ~55% of my gross income. But once my income went up a bunch a year or two after, it became a lot less of an issue.

[@TempleoftheDarkPartsoftheMind]

A lot of people get trapped in thinking they need to use the entire loan pre-approval amount when buying a home. When we purchased our home our pre-approved loan amount was close to three times more than we needed. Had we used that max amount we would have been in a really awesome home but completely house poor and struggling to make ends meet. Taxes, insurance, and just general upkeep will need to be factored into what a person or family can afford over the long haul.

[@mirusmundi]

I LOVE the diversity in examples you gave between Julia and Kendall. Entirely different types of properties, entirely different situations, and entirely different solutions. Thanks for showing us a wealth of options when navigating this problem!

[@ClarisNdoroRealEstate]

What he is saying is that your home is not an asset; it’s only an asset if you rent it out, like Rich Dad, Poor Dad says. Most people think your first home is an asset only when you rent it. I understand about equity, and you can only gain when you sell it, period.

[@calivalley9056]

I would completely disagree, you can pull out the equity in your home to invest, let’s say in purchasing rental property. It’s only an asset if you leverage it or sell it, period. I own seven rental properties , debt free, and all were purchased by using the equity of the home I live in.

[@el_chilango2953]

⁠@@calivalley9056depends on your risk tolerance if you can handle leveraging your home equity on stocks that may or may not perform. You’ll double your losses if things go south. Yikes I don’t know how can people sleep with this much debt 😂 is beyond me.

[@Daniel-ef7nk]

​@@calivalley9056you can use either the equity in your home or investments as collateral to buy investment properties, it does not matter to the bank. If you did not buy your house and invested the money in stocks instead you could have done all that you did.

[@tygrunge]

​@@calivalley9056do you recommend a book or KZbin channel that explains all of this? I own a condo with h a ridiculous amount of equity in it that I'm never going to use unless I sell it. Just know I don't want to refi because my rate is in the 3s.

[@edartis]

I started off house poor because I purchased directly after I graduated from college. Refinancing during the pandemic and making more money has me in a great home situation now, paying half of what rent cost in the area

[@gamesong6600]

Yes there are many variables at play in the real world. Variables went in your favour.

[@FunandBudget]

Same - my mortgage started off at $4100 a month - it is now $1536 a month and valued at over 1mil. I'm less than 2 years away from paying it off. Rent could never...

[@aiko3423]

Thanks for showing off.

[@FunandBudget]

@@aiko3423 Is it showing off - or presenting another narrative that you could easily latch onto the same way you want to latch on to the idea that you could never afford a house so rent forever.

[@ramitsethi]

This is very good for you, but it's also important to realize you got lucky with historically low rates. We don't make financial decisions hoping for good luck

[@tomselek1000]

Thank you for pointing out how vehicle ownership is forced on us and how ridiculous of a transit system we have.

[@monikadoyle-realtor9559]

If you study the history of Ford and also the building of suburbs…this all happened after WW2 as a way to boost the economy.

[@TexasMade903]

Bought my house in 2019 for $240k, refinanced it in 2021 for 2.63%. Just last year I got my 100% va disability rating, so I do not have to pay property taxes anymore. So the money I'm saving on taxes, I just put towards my principal. I'm glad I got my home when I did because homes are steadily going up in DFW.

[@BroVin-fw6zf]

❤

[@jaz-v2b]

I work in the mortgage field 98% of borrowers are house poor. Sad to see.

[@abprepboy33]

I feel like a lot of first time buyers are struggling financially for the first 5-6 yrs. But if you look at people who have owned a home in a decent area for 30-40 years. They almost always have more wealth than someone who chose to rent for 40 yrs

[@thebestthingthatneverhappe6729]

​@abprepboy33 most people's networth increases have been in their homes lately

[@chaselesser3191]

Something is off or you are saying it wrong. 230 million people own a home Ramit says 18.6 million feel house poor. So that’s 8.1% of homeowners…. But then you say it’s 98%. Math ain’t mathing.

[@nathanschroeder7799]

It's because people buy a house they can't afford or majority of homes eat all of their income with nothing left for anything else. People don't think about anything else but buying.

[@DaveDDD]

⁠​⁠@@chaselesser3191 that can probably be explained by how many mortgages have been taken out since home prices and interest rates spiked. All other factors equal, if you bought before then you likely either have enough equity or a low enough interest rate to be pretty comfortable.

[@CollinRutherford]

It’s crazy how easy it is to overlook maintenance, repairs, and upgrades when buying a home. That extra 30-50% is a game changer in planning.

[@whisper2441]

Those stats are very misleading and leading people astray. My example is I built my house and paid it off by 35. So I had more than 20 years of no mortgage or rent and saved an absolute fortune. I've only recently decided to do some renovations (as a home owner you have say when you do it, can put it off for years). I spent about 150k renovating 2 bath rooms , repair/paint roof etc and now I'm set for the rest of my life living like a king. Imagine if I was paying rent this whole time - shudder. My house would rent for 40-50k per year, so that's $1 million I haven't had to pay in rent and also no mortgage payts. I'm light years ahead of renters.

[@GonzoT38]

@@whisper2441 cool story, you know another thing that's a myth in america? Your anecdote ...as some sort of MEDIAN representation of reality. Sorry, but the median american is not in an economic position in working life to homestead for 20-40 years. So in the real world of american mobility, those gains are vaporized with the moves. The stats don't lie, most transaction profits in the US are less than 200K, 77% to be exact. now, if you want to be moralistic and finger wag at people for moving around so damn much, you can do that. But you'd be showing your privilege, which has nothing to do with the facts on the ground about housing in the US, and house poverty in particular.

[@nitroneonicman]

​@@whisper2441 I own property and hadn't rented for over a decade but decided this year to rent my main house out and check out some other lower COL states. I'm effectively renting a nicer place for free when you factor in what I'm renting my property out for and difference in taxes. I guess I'm light years ahead of people who own one home.

[@cyropox8235]

​@@whisper2441but the question is: if you had built your own house, immediately sold it, put all of that money into an index fund, and rented from someone else, would you be better off today? The market has increased in value by 345% in the last 20 years. If you sold your home for 500k at that time, you'd have over 1.7 million dollars right now. And that's in completely liquid assets that you can slowly siphon out, not in a single asset that you'd need to completely sell in order to get the value back. Which one is best will be different for each person. But are strong pros and cons on both sides. our current culture sees home ownership as the gold standard, and renting as a bad idea where you throw money away. But each individual person should run the numbers for themselves to see which one is better for where they are in life.

[@moneypro85]

The first girl didn't realize she was poor. We have to make sure people understand that $45k is not enough to buy a home. A roof replacement blows either their limited savings or creates another monthly payment that drives their DTI beyond sustainability.

[@jenniferbrooks6924]

I disagree. Now it is. But I brought my house in 2016 on a $34,700 salary by myself. I was approved for $150,000 and my real estate agent tried to get me to spend the whole thing. But honey I ran the numbers and knew what I wanted my payments to be. At 3% my mortgage has only gone up by about $25. I too live in Columbia SC and my mortgage now is $759 with home insurance and property taxes included. I brought my house at $115,900 and now my house is worth $194,000. I knew I wanted an affordable mortgage to where if I lost my job a PT job would cover the mortage or a family would be able to manage it if I needed help. I make more now but the cost of everything is high but I'm able to afford my mortgage and necessaries.

[@Zadnak1]

Ramit, a critique to your advice: Add 50% phantom cost of mortgage, only if that includes property taxes, insurance, and any kind of HOA fees. Otherwise, add 100% phantom cost of the mortgage. In states, such as New Jersey and illinois, property taxes alone can be equal or higher than the monthly mortgage payment. Keep up the great work, I love your podcast.

[@rebeltheharem7028]

Proper tax in New Jersey is ~ 2.26%. That usually equates to 80% of a monthly payment on a 5% 30 year mortgage. Yeah a 100% phantom cost checks out.

[@Username_CC_]

We bought a smart house within our budget 2 years ago but quickly got large raises which put us in a very comfortable position to invest more. This was a smart choice that set us up for 30 years of success.

[@turtleanton6539]

Is house paid off😊

[@jplebihan]

Looking back, buying our home almost 18 years ago was one of the best decisions we ever made. At the time, we knew that losing a job within those first few years could have been a disaster. But with hard work, career growth, and the appreciation of our home, it's been an incredible journey. Grateful for how far we've come!

[@BikeHelmetMk2]

Sometimes you've got to take a chance while you're young, and have good health. You never know when that'll change. Cognitive skills go downhill too, so you're more likely to pick properly in your 30's than when you're near retirement.

[@mercuryelite]

It is not just individuals who are losing out on wealth. It is also the nation that loses out on wealth that could have been achieved through innovation and improved productivity in areas where the real estate capital would have otherwise flown into. Canada is a prime example.

[@michaeld2613]

Advice my dad gave me: Buy a house you can still afford if one of you lost your job. While we have a much more modest house than our friends, we have easily weathered financial bumps that came up and early retirement is a real possibility.

[@TheRailwayDrone]

This is exactly why I watch these videos. You give us the cold, hard truth. While I am not house poor, I am selling my condo because I realized homeownership is not for me. I like the flexibility of moving when I'm sick of a neighborhood, and I miss the amenities that many apartment communities offer (pool, gym, events for residents, etc.). You're absolutely right about phantom costs though. I haven't had to do any repairs because this condo is relatively new, but I don't want to get into a position where I am paying 10k to fix my air-conditioning unit.

[@Imran-Lalani]

Rent and indexing is financial freedom.

[@wfm125m]

Our housing cost is around 10% and went down from maybe 18% due to a job swap and paying mortgage earlier. (We have around 15% left to pay back still after 7 years). Having everything under control gives you an enormous piece of mind that no money can buy.

[@Jeeps4evaandeva]

42 years old, mortgage free at 40. Home is now worth $250K, $350K in retirement, $150K in cash, $38K in a small SUV I treated myself….no debt what so ever.

[@varjunind1]

Kudos !!

[@lavidamia9]

Congrats, don't mess it up!

[@andrewm7352]

As explained in your videos, it always makes sense. In real life, renting is a very different situation. Annual rent increases, slumlords that don't fix things, cost of moving frequently to avoid rent increases. Unless you have some sort of stabilization or a really good landlord, its definitely not all roses as presented...

[@andrewm7352]

And I've lived both. I chose to own (again, after selling once) because stabilized and long term residency plans just make more sense for me in a high COL area

[@peterwilder752]

Big takeaways from the situation presented: 1) Dont buy too much house (no one needs a 1.15m house i'm sorry 2) Run numbers before signing for anything (I do feel for girl #1 though) 3) Account for furniture, don't go into debt for stuff like that

[@mayam297]

Ramit, I'm almost finished with your book! It was so helpful and I plan on reading it again in two years when I'm done with med school to help me get everything in order once I have an income. Thank you! 😊

[@aas55]

Good luck - as a fellow doctor, we aren’t the most financially savvy group. I’m doing fine but many of my colleagues don’t make wise decisions in terms of saving and investing. Invest early and often once you get your attending salary. Reading Ramit’s content will put you on a good path.

[@mayam297]

@@aas55 Great advice, thanks, doctor 🙏

[@dianaherron8735]

Here's what we learned. We ate out nearly daily, then gradually cut back, as Ramit suggested. Now we spend about 2-3 meals a week on dining out and choose low-cost dining over expensive, nice meals. We still love fine dining, but limit it to about once a month. I noticed our grocery bill went up some, and so did gas and electricity. Eating at home is still lower than going to the restaurants. More importantly, we consume less sodium and sugar at home.

[@dooly-ch8xr]

also you're mindful of calories you're consuming when cooking at home. You're in control.

[@sk45861]

Sounds like everyone in Vancouver, Canada.. people put 50-60% of their household income

[@moniku4866]

All of Canada is getting there now.

[@arh1234]

Check out Millenial Revolution. I think they're based in Vancouver.

[@konuzbenissa7929]

Where can I find a house in Vancouver that cost 250000 or 500000 CAD ?

[@rebeltheharem7028]

"At least 50-60%". I hear even a small 3 bedroom house costs over 3 million there.

[@everceen]

Housing crisis, health crisis, cost of living crisis, debt crisis, inflation crisis, EU war crisis, middle East crisis. How many crises can a koala bear? I'm approaching retirement with comfortable millions, yet scared of a banking crisis. Where do I best grow my money?

[@justlikeasoldier]

Diversify… T bills, CDs, Gold, Stocks, Municipal bonds, Bitcoin, etc assets speak when cash has no value

[@beautifulpeopleonearth]

I would advise the counsel of a seasoned financial pro. It may be expensive, but as the old saying goes "You get what you pay for." "Expert solutions require Expert providers" - my mantra.

[@justamanwithbeliefs]

Truth is, investing with the help of a financial advisor set me up for life, retired as a millionaire at 55. I worked hard everyday as a teacher for 32 years, and my salary was over 100k annually. But if it wasn't for 2020 covid lockdown, I wouldn't have supplemented my income with stocks and alternative investments.

[@orangesandlemonade]

@@justamanwithbeliefs bravo! I've worked in real estate for over 25 years and have neglected a major stock portfolio, however I need a different plan now... mind if I look up the professional guiding you please?

[@justamanwithbeliefs]

Annette Louise Connors is the licensed advisor I use. Just google the name and you’d find necessary deets. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.

[@kayabe856]

Most people are so focused on “ rent is throwing away money” but they never really take the time to calculate the cost of owning a home

[@K.mit338]

18:40 I find a lot of people don’t reduce housing costs because: 1. They want to live in big cities for “access to more stuff”. Big cities are extremely expensive because of the “access to more stuff” and most of the people who live there don’t even partake in the “more stuff” because they’re always at work. 2. They want a big house which is going to require more maintenance because it’s big. A lot of these people who purchase big homes (or homes in general) don’t even know how to do simple home repairs if they needed to.

[@yhckelly]

I'm not sure how this fits in, but in my life I've seen many situations where families were struggling immensely because they didn't own a home. It wasn't the money- it was literally everything else. When you don't own the place where you lay the heads of your children down to sleep, it creates an overwhelming sense of uncertainty.

[@paddleyang4606]

a common excuse for being house poor is the house value will double or triple in the future, but will this continue for next couple decades considering there's no major bump in average income over the years ?🤔 median household income: 1984: $56,780 2022: $74,580 median house price: 1984: $92,000 2022: $403,800

[@danieljayasiri7739]

Category 1 - eating out previously 3-4 times a week. Category 2 - credit card balances carried forward. Fixes Category 1- cut down spontaneous eating out by 75%! Now we just eat out once a week. Fixes Category 2 - automated credit card payments and used what I cut down on eating out to pay down credit card debt. Now my only debt is my car! But I found other costs I could cut down, mostly because I started automatic payments to my credit card. I'm able to invest $1000 per month and save $600 towards my emergency fund. Thanks Ramit!!! I also purchased your book, but I'm still waiting for it to arrive. These changes I did just by watching your KZbin vids!

[@epicsnowleapard]

My friend is going to buy a house and is urging me to buy a house as well, he says that prices will only go up and now is the best time. I am in absolutely no position to buy a house and don't plan to any time soon.

[@flashoflight8160]

Growing income is a lot more effective than cutting expenses. Is it a coincidence that all the people that complain about inflation the most are the ones in dead end jobs and careers? Home ownership is wonderful because of inflation due to the mortgage being a fixed cost. Can't take advantage of that if your wages are way behind inflation. All you need to do is keep up with inflation to succeed. You don't need to beat it. Just don't fall behind inflation.

[@cocoa_cake]

you are my favourite youtuber, thank you for making these videos! all are so fun and informative

[@TheFirstRealChewy]

I agree with the 30% - 50% over the mortgage for utilities, upkeep and repairs. Things break. Once the house is paid off we should be fine. We bought the house on two incomes amd was fine, now we're down to one income and house poor, so you can imagine the life adjustment. Currently trying to make more money.

[@wfm125m]

Everyone I know who bought their houses is house rich right now. They just did not made a stupid decisions like buying 500k houses.

[@Caterpillaremoj]

Hey Ramit! Found your channel about a year ago. Your Rent vs. Buy video was very helpful. My husband and I were renters in an HCOL area with aspirations to own our place. We ran the numbers with multiple buy vs. rent calculators using your method (NY Times, Steve Antonioni's, etc) as well as your 28% rule, Ben Felix's 5% rule. I'm excited to share that we bought our own 1 bedroom in a neighbourhood we LOVE! Buying heavily tipped in our favour with those calculators, only ever breaking even in worst-case scenarios. Our monthly payment on ownership (incl. HOA, maintenance, property taxes) ended up being $300~ cheaper than our rental payment -- and this was us living with roommates! Thank you for your content. Your videos have kept us logical, level-headed and focused. We did not bite off more than we could chew with our home and we entered the home buying process knowing the exact price and home we wanted. On top of all this, we are planning to keep investing at the same rate that we have been to get our downpayment together, as well as invest the difference saved by buying!

[@ClarisNdoroRealEstate]

You can buy and rent it out, still rent cheaper, and let someone pay off your mortgage.

[@Caterpillaremoj]

@@ClarisNdoroRealEstate my old rent is $300 more expensive per month than if I were to live in own my place (incl. all phantom costs). Plus I don't want to live with roommates anymore!

[@omidnightlink]

Almost became one of them ! Was looking to buy a house in San Diego and oh boy. I made good money and made the mistake of only looking at the mortgage cost to see if we could afford it. Like many I was throwing money away on rent. But with My wife and I never really felt like it was a good move in our guts, the mortgage alone was a lot already....Then I got laid off which put a stop to our search. I started watching Ramit videos and thank God I did. Thanks Ramit you have enlightened me and my wife about money and how to approach life with it. I feel much better about renting and using money for things we like. Maybe we will buy one day, if it makes sense financially.

[@whisper2441]

Ramit advice is good for short term plans, reduce debt payts etc. It's terrible as a life long decision/plan. I can't imagine renting forever - nothing worse imo.

[@desiv1170]

My concern about this isn't the math that shows when you should rent vs buy... The math makes sense... My concern is that it appears the wage vs home price gap appears to continue to be increasing... If that spread continues, then we will have fewer and fewer homeowners... Are we becoming a rental society? Maybe that's just different and not bad (there are better investment options now than there used to be), but it does make me sad... I know I'm older, but I like the concept of home ownership as part of the American dream...

[@GerzhusTV]

For sure it can seem a bit nihilistic that for many, the numbers lead to not to own. But if the culture is encouraging everyone to buy no matter what because it’s the American dream, then all else being equal, it leads to housing being likely over valued.

[@allisondowns1715]

I bought a house at 24 because my parents told me it was the most important thing for my future. Was house poor until I sold at 3. Made a lot of money in the sale, which helped me pay off all of my debts and then some. I'm happily renting now, for about as much as my mortgage cost.

[@whisper2441]

Should have stuck with your mortgage, future you would thank you for not condemning them to never ending and increasing rent. I paid house off by 35 and have lived mortgage and rent free for over 20 years. Had I chosen to rent all the way through I would have paid $1 million in rent just in last 20 years. That money has gone straight into my bank account and allowed me to retire early and wealthy.

[@allisondowns1715]

@@whisper2441 Continuing to dump money into a house that I couldn't afford was absolutely not the right call for my financial situation.

[@DaveDDD]

@@whisper2441 You think your rent would have averaged over $4.1k a month since 2003?? I think your numbers are wrong or you live in a very high COL area, because that’s insane.

[@whisper2441]

@@DaveDDD I’m in Australia and it’s a 5 bedroom, 2 bathroom plus rumpus room - easily $800/week minimum. I’m allowing for cpi going back 20 yrs, so rent received in 2003 and invested would be equal to today’s rent. There’s no way to make the case I would have been better off renting all this time.

[@DaveDDD]

@@whisper2441 oh yeah, idk about the Australian situation, but I guess good on you for buying a house in 1820 or whatever? I think the rest of us are discussing whether it’s worth entering the market in today’s economy with exploding prices, or if it’s better to build wealth in other areas and wait for the bubble to pop.

[@el_chilango2953]

To me it’s the psychological effects of the fact that having debt does not sit well with my sanity. I rent and invest the difference (20% of my income is invested every month In growth and dividend paying stocks). No debt of any kind. The idea of owning a home is breaking the fundamental rules of investing called diversification. Debt plus investment without diversification will not bring me peace of mind. Koodos to those who do

[@sebastianarze1614]

Thanks for the video, I'll be on the edge for a while at 40% after hoa and phantom costs. I do have all the furnishing and equipping money on hand so it will be a game of gradually getting everything in place without depleting the fund to always have 6 months exoenses in case anything happens. The mortage being at 1.99% and starting with around 40k of equity will help me a bit with sleeping at night.

[@sia.b6184]

Hi Ramit, you should talk about the house poor in A-U-S-T-R-A-L-I-A and set people straight here. This is a nation full of house poor lol, as a matter of fact, you should do a show here and enlighten people HOW to invest here in Australia so they know the only asset class is not property. If people only knew that investing in standard market ETF's could return you the same as a house over the long term but GREATLY change (for the better) how you lived your life in that period they would be shocked. People here talk about how house prices rose by 8% (eyes wide open waiting for you to be surprised and shocked) when I know full well that my ETF's which I have invested in for YEARS are growing by 10% annually ( in some cases more ) and don't have that interest payments and mortgage hanging over my life.

[@EllieofAzeroth]

I had a friend that I no longer talk to that lives in Australia who would always whine about the housing market and have a complete "poor me" attitude, yet he's 26 and has never paid a day of rent. Why complain about the housing market when it doesn't even apply to you, dude? Had to stop talking to him because that mentality spreads like lice

[@sia.b6184]

@@EllieofAzeroth This is an epidemic. There are kids who havn't even started uni or are just starting uni, maybe first or 2nd year doing a commerce, law or engineering degree who are stressed about the mortgage they DONT EVEN HAVE YET ?! Can you imagine, these kids have their whole life ahead of them, can build businesses, go overseas to expand their experience, maybe build the next google or tesla, yet they are so depressed about the housing market that they are stressing about the mortgage that they will have in the future ? And what will all that stress get them, the house poor life, which apparently they all dream for?!. Seriously, Ramit needs to come to Australia, sell some tickets to a show and explain in simple terms there is a much better way, where you can invest easily, get the gains property would give you (and better) and most importantly, live your life and not to get sucked into the Australian property market blackhole that draws everyone into that singularity of a life which is to omit all the enjoyments of life simply to have that mortgage paid for the little shack 30 minutes from the city in 40 years time (yes Australia has 40 year mortgages now).

[@rebeltheharem7028]

*And repair costs and taxes, which they always neglect, and probably eats away at the return. So realistically, maybe its only 5 to 6% return on average, any given year. Meanwhile, stock risk doesn't have any direct costs.

[@luke6247]

Australia turned shelter into an investment and now it’s time to pay the piper. Many people there are the very definition of what Ramit is talking about, living in houses that have appreciated into the millions yet living off the pension and struggling to afford bills because they have no liquid wealth.

[@sia.b6184]

@@rebeltheharem7028 in Australia its probably a negative return if its an owner occupier, cause you don't get the tax breaks (unless you sell and buy another) and you arent going to sell (unless you decide to downsize in 40 years time when you are 70 ) and after land tax, insurance, repairs and interest payments (specially now at 7+ percent) you would be lucky to get back what SPY + a sprinkling of other higher growth stocks invested in the long term would get you. With stocks in Australia, at the end of it all you know you are out for 22.5% ( marginal tax rate with the 50% capital gains discount for assets over 1 year) with houses the costs are endless. I used to own an investment property, bought it after 5 years out of uni and into a job ( bought the place in maroubra ). Felt that it was draining all my attention and sold it, invested the modest gains in ETF's for the last 15 years. Ive seen the property I had get sold a few times and the ETF's have done better with much less stress, gave me the opportunity to start a business too since I had no debt hanging over my head. The opportunity cost I would have paid, had I kept that property to maintain the mortgage would have been many times over the gains I would have had on that house. I hope people see the error of their ways here cause its draining the productivity out of the whole country. If you can afford the house, that is awesome, you SHOULD buy, but putting your entire lifes energy into paying a house off when you can't afford it is not the way to build wealth.

[@rubberducky3486]

This is so true about a house actually costs about 50% of your income. Our family always owned a home till the last 10 years. We were never able to put any money into savings till we started renting. We make less money now and are able to put a lot of money into savings every month.

[@elenaflorintsev7555]

We did #3 years ago. We just packed our belongings, sold our home and moved from the Northeast to Texas. The new home was exactly twice as cheap as the old one. What we did not expect is that my husbands career accelerated in a new place, and he doubled his income in just a few years. We bought a new house and paid it off in 5 years. Win-win.

[@MOliveira-m5h]

People don’t understand that about real estate. Even in bigger money deals developers are super cheap people because they have to put the money into the project.

[@AmyPowers-il1ps]

I am so glad, you made this video Ramit. I am house poor and walked away from it. I feel guilt and shame.

[@AngeloneHELPLINE]

There are lot's of opportunities!

[@rudebwoy9203]

Bought my home in 1993, refinance in 2013 at at rate of 3.25% monthly payment of 2500, with rent income of 2075, retirement between hubby and me 2 mill, equity in home 1.2 mill,

[@fizzimajig]

I bought my house 17 years ago and struggled for years because I got sick and was hospitalized 6 months after closing. The hospital bills plus being out of work made me super house poor. I took on a roommate for 3 years so I wouldn’t go into foreclosure and lived super lean. Family helped me out with DIY repairs and groceries sometimes but otherwise I lived poor for at least 8 years to get ahead. I refinanced in 2013 and in the last 10 years or so I’ve paid down the mortgage and will be paying off the house by February 2025 plus I’ve been investing and saving so I’m doing much better and will soon be 100% debt free. Not having a house payment is going to feel amazing after how much I scraped by initially!

[@AngeloneHELPLINE]

Choices!

[@geradweber6847]

Ramit/I Will Teach You To Be Rich Team. First, love the content and it has helped me continue to grow confidence in my own financial journey and what I can/should be doing as I look to create financial independence. Second, and this is nitpicky, but across videos on housing costs you have utilities and related housing costs lumped in such as furnishing and moving expenses. While I agree these are real costs to consider, they aren't unique to home ownership and the lens you utilize is skewed unrealistically implying renting won't experience similar costs. It's possible that certain rentals wouldn't, but in my experience I've never had a fully furnished apartment that didn't have that cost built in or utilities or costs associated with HOA, wifi, amenities that didn't also drive the cost up. Again, love the content and I know it's hard to distill complex financial conversations down to make them applicable to all, but I think your lens of representation is not accurate.

[@romt-712]

Our house is great but there's so much to improve and so much to replace when it breaks. We're about to replace the septic which will be 25-50k. We replaced the furnace 20k, the AC is 30yo so it'll be another 15-20k soon, not talking about the roof, a fresh coat of paint before it's too late. That's just for living in there. If you add the things you want to change in the house like upgrading your 50 yo kitchen. Don't buy too much too fast, be patient. Bad planning homeownership can bring a lot of stress of a family.

[@ArtAnimeEmerly]

I did so many buy vs rent calculations when it came time to buy my house because i didnt actually believe the numbers that were telling me buying made more sense 😂 so glad i went with the numbers because the reassurance that i own a house within my means that nobody can kick me out of at a whim is unmatched

[@rebeltheharem7028]

I eat out about twice a week. Its not really for a money saving thing, but for health reasons. Eating out is just too unhealthy, no matter what I'm eating. And all the "healthy options" just aren't worth the money in my opinion, when I could make it myself for 1/10 of the cost, while waiting the exact same amount of time. I've also done all the calculations, and even with being generous to housing appreciation and assuming the worst in rent increases, the only time buying a home is better is if I'm going to stay there for over 20 years (break even point), which I'm not really sure if I want to.

[@TheNotimprezed]

I don't get peoples mindset when buying a house. I think renting is throwing money away but home prices are out of control in many areas. I think many buyers are going to be very shocked in the future when their home does not appreciate. First off they massively overpaid which will negate the future appreciation they are expecting. Secondly, we face a very real potential for negative population growth over the next 30 years. The boomers will be gone along with many gen X. Combined with fewer kids being born by current young adults. This will drastically shift the supply/demand in such a radical fashion the house bought today may end up being worth less in 30 years. That said, I am a homeowner, but the home I bought is only 15% of my net income (inclusive of the mortgage, taxes and insurance). I dont really care what happens to the value of it as its not an investment for me. My first home was purchased in 2012 and sold in 2020 for what I paid for it. Im a net worth millionaire in my early 40s and i dont count my home in that calculation. I accidentally coast fire and not being house poor allowed that.

[@derchiongster8068]

3:39 I'd say 50% aint conservative enough. Best to add 100% to buffer even more.

[@Donkeyearsa]

I can see a condition where you could be very house poor in the short term but being very house rich in the long term. You buy a fixer upper that needs massive repairs that also comes with a massive discount. You drop into the house $100k in a matter of a few short years to bring it back up to excellent condition. In the first few years you could be dropping every single spare penny that you could scrape up to get things fixed. Now if you hired competent contractors you should not have to worry about new repairs for many years as things where just fixed up. Like you dropped $20K on a new roof well that roof should last a maybe a good 20 years and will drop your home insurance premium for the next 10 years.

[@GeeGee-d6v]

Budget and spending advice solid. Can we get a talk on the wedding culture wealth killer next. Your show had a couple that got bailed out by family contributing to their wedding. What about opportunity cost of that 10k plus into the stock market?

[@jocelynpouget6133]

why everybody needs a big house right away. if you are single or without kids a small apartment (be sure HOA monthly is low, even better if you can find a foreclosure) will work for few years then you can save + sell when ready to buy a house. the loan interests are the wealth killer.

[@NESADDICT]

11 years ago we bought our 1900 square foot home for 180k. Now my neighbor is selling her house for 350 k. It’s crazy how much houses cost now.

[@adolfo935]

I wouldn’t add it as a percentage. Because an hvac for a house that’s 200k in Texas is the same 7-10k as it if for a house in California that’s 1mil.

[@winter8869]

Isn't PITI typically rolled into a mortgage? Principle, Interest, Tax, Insurance. Seems erroneous to count Tax and Insurance as phantom costs when that's already in the mortgage payment.

[@julioarmas1273]

My biggest expense is medical insurance + car insurance. We pay around 1300 monthly 😮 Second biggest expense is groceries, working on lowering that. I did buy my townhouse in 2013 and now my mortgage payment is stupid low. I struggle for 5 years, renting rooms to roommates and avoiding spending. So the struggle was worth it.

[@StarDustMoonRocket]

As my business started to do better, my wife and I talked about moving to a waterfront property, which would be 2-3 times the value of our nice but simple country suburb home. We decided to kill our current mortgage first since we were 70% paid off already. So we saved every penny and paid off the mortgage in 2 years. Then, we instantly realized that being debt free was better than owning a fancy house beyond our needs. Our neighbors are our friends. Our taxes are cheap. We can live like royalty if we don't care to impress people. My wife retired at 40. I'll be done by 50. Life is easy when you choose not to make it complicated.

[@EdithEsquivel]

Great video, Ramit. I have a friend who bought a beautiful house but tooo big. It's paid for now but they are living with the consequences still, no savings and a reduced income due to raising children. Sooooo....

[@edwind8440]

Live below your means sure, but sometimes you need a bigger shovel. ( ei: make more damn money ) Some luxuries can be passed up on, but in some instances there is only so much you can cut out. What are you going to do? Eat only once a day in light of saving more? Makes no sense.

[@tracyaf6084]

We were a little tight when we bought our home, especially cause we had our first kid the following year. Now with our increases in income over the years and being out of daycare costs, our home payment and maintenance is very low as a percentage of our income. It’s worked out very well for us, but it wasn’t easy and it could have gone worse. I still believe in the long run, it’s better off to buy if you can afford it. People don’t usually invest the difference between rent and a mortgage. We’re at the point where rent is much more than our mortgage.

[@chriszavos]

My biggest expenses are tax and insurance, and there is no way to cut them down. And if I increase my income, guess what will happen to tax... it will also increase exponentially.

[@largol33t1]

I'll be house poor if I buy a house because the prices are just DESPICABLE. Everywhere I look, they have the same pattern: not even 800 sq ft NO garage Obsolete kitchen Ceiling and carpet that will have to be replaced A/C that will have to be replaced And the owner wants an obscene $290,000 for it?? I can't afford a house. $400K is NOT a lot of money any more.

[@kat-oe7gb]

I love watching your videos, but a person who lives paycheck to paycheck (bcuz of lifestyle creep) is not going to invest the difference between rent and a mortgage. I am talking from experience as someone living in the NYC Metro area. The best thing i could have ever done was purchase almost 20 yrs ago. My mortgage for a tri level townhouse is the same as a studio apartment in the Bronx. My ex-husband is a spender, and if we kept on renting all the extra money at the time, it would go to even more luxury items. I was able to buy him out, and yes, i have to maintain everything on the inside, but for me to get something comparable, i would have to spend $3-5k per month depending how far from the city i am willing to live. I opted for a condo, so my taxes are good for the area (~$4.5k a year 😮).

[@rebeltheharem7028]

While I would usually say that it sounds like a "you problem", I also agree that most people would never invest the difference. But if they are running the calculations anyways, then they are people who are already capable of saving the difference, so I guess its a moot point. Most people don't have financial discipline, so for many of them, even if its a lower return, buying a house is probably their best option for an investment, because it forces them to "invest" in the equity of their home by paying the mortgage.

[@morganamiller6603]

Remit love your shows, but in states where rent control does not exist (only 6 states have it) people are struggling to keep up with rental increase. Despite the raising cost of maintenance and insurance (and the burden to the budget) it is still far less than what I would pay for rental in my area these days. Rent has skyrocketed in our area… and many families had to downsize on their rental properties because honestly they were forced out by price increases

[@rheo591]

Behavioral patterns are real and habits are formed over time and repetition. It’s not about the money that’s saved from not buying $5 coffee. It’s about cultivating financial discipline across the board, which prompts one to refrain from things like $5 coffee and other little luxuries that people can learn to live without.

[@tylersanders2388]

I bought a house in my 20s because it was always a dream of mine to have a home and I worked my ass off to do it. The house I bought is way below the average house in my area because I ran the numbers first. I absolutely could not imagine how an average earner buys anything at all right now. I’m on the edge with 28% of my income going to my mortgage and I make significantly above the average American.

[@XiaoXiaoChuxubao]

Thanks Ramit for another great video 👍🏻 Does Ramit have any advice on how to tackle healthcare costs in the US? Healthcare costs are absurdly high in the US, and getting sick during one’s 30s to 50s (eg cancer, heart attack etc) can seriously derail one’s financial plans. How should ordinary middle class Americans prepare for such eventuality? 🙏🏻

[@AngeloneHELPLINE]

Discuss!

[@littleleafy]

I’m not surprised people are finding themselves house poor when the prices of houses are so over inflated. My neighbor is selling their 680sq ft home for half a million dollars! They’ve only owned it 2 years.

[@sargamartdoors]

I was house poor for many years. Now my house is free and clear- it was worth it! Living in someone else house was never an option for me!

[@rachelodonnell2721]

I have been thinking about this a lot lately. I was curious about your thoughts on Rent to Own. It would be a new property build and a portion of the rent would go towards the down payment at the end of the rental term.

[@juanmartinez1337]

I am a voluntary house poor. My goal is to pay off my home in 6 years. My mortgage is 780 a month and sending 3100 a month currently. I am also putting away 15 percent of my paycheck towards retirement. Should fully retire by age 55 without any debt and looking forward to it.

[@Lapearls]

Besides saving for your retirement, look into loving to a different country. You’ll be amazed how your money will double.

[@mirzabaig2004]

property taxes. Here in Illinois you will pay 15-20K per year on an average 500-600K house. Even if its paid off... almost 2K a month.

[@kylem1078]

Please include utilities when mentioning total housing cost. It can be $500+ for many people. Its a guaranteed bill that must be paid every month and should always be included when budgeting for a house.

[@ramitsethi]

I will! Thank you

[@kylem1078]

For anyone looking to estimate utilities for a new place, before I moved, I called the utility company and asked what the average monthly cost was for the new neighborhood. The gave me the annual cost of the previous year for a house that size in that neighborhood. No need to guess.

[@ramitsethi]

OUTSTANDING comment! Great research

[@username00009]

@@kylem1078I’ve done this before but they would only share the highest and lowest monthly rates. My highest rates ended up being well above the number I was given and I am very conservative with the thermostat - I’m not sure if there was a nuance to the info (eg was it only for the current account holder and not for a full year) or what because the utility company wouldn’t share any other details.

[@PS-bh3zp]

The main reasons to buy are non-financial (size given number of family members, establishing a permanent home for kids etc) but more often than not, the numbers don’t make any financial sense if you’re being honest with the inputs. If it was as much of a no brainer as avg people think, institutions would scoop up every single home that comes to market, and yet there are very few funds dedicated to it…why do you think that is?

[@theprerichlife]

Glad I discovered this video and channel before starting the process of purchasing a home.

[@theRetainer]

I've been watching your videos for the past 3 months now and almost never saw you advertising your own products/services. I understand you have video sponsors, and you probably make more money from those. I'm going to check out your earnable program. Thank you.

[@ryans7097]

I think one of the things that is tough with these financial advice talks I consume is that I work in health care and the salaries for many positions (especially mine, I work as a PT) they cap out after awhile. I spoke with a financial planner about a year ago and he seemed confused when I told him my salary likely wouldn't be substantially higher in the next 5-10 years haha.

[@dnah02]

Budget and make more money now before getting into a home and dont buy the biggest house in the area.

[@stevenporter863]

There are rare exceptions but a house should be bought WITH wealth, NOT to build wealth (unless you are a professional commercial landlord).

[@dnah02]

@@stevenporter863 yes I am of the mindset that someone should have a good financial basis in place before getting into a home( fully funded emergency fund, investments, good career, ect no car debt or credit card debt)

[@Vnm-sh1jv]

Dont know if this is a house poor situation, but i honestly dont know what to do. I have a mortgage on a condo, paying off that, along with HOA fees and utilities. About $2,850 a month and I made between $3-4,000 monthly. Now, my building was condemned a month ago, but I cant afford to find a new place since everything is on this condo. What makes matters worst: I am now unemployed and cant afford a mortgage, HOA fees and utilities. It is even right to continue paying a mortgage and HOA for a place that will soon be demolished due to negligence of the city and the HOA? I'm currently suing and it's an ongoing battle, but what should I do?? I was thinking of not paying since this wasn't on me, but rent and just let the bank foreclosure on a condo that will soon be rubble...

[@MrFranksam]

I bought a house about 9 years ago for about 150k and then sold my house last year for 380k and then 6 months after I bought a condo for 180k cash! Now im mortgage free and no rent! So guess what I’m putting my extra money on mutual funds. Short cut your way by buying a house now so you have more money to invest in the future.

[@kemi1486]

OMG let’s not even talk about the “Escrow” account for homeowners insurance, property taxes etc. If you don’t make extra monthly payments into escrow your mortgage payment will almost always increase every year. I learned to do this after my mortgage went up 3 times in less than 2 years.

[@cheriecheng3414]

Where do you live?

[@villeband430]

Tons of people i know over 100k yearly salary are renting and can’t afford to eat out

[@discorabbit]

Hundreds of thousands of todays dollars aint shiiit in 30 years. Are we playing here? Be real. Inflation happens.

[@maiknitta]

My car payment is $350 and I thought it was ungodly b/c I previously just had a little used accord my colleague's family sold me for $1,000 that lasted five years. The dealership was trying to get me to trade in and told me the regular average rates and had the nerve to try and convince me I needed something new, pfft I walked out so fast.

[@Azel247]

Mortgage will end some day. When that happens, housing costs, one of the biggest cost items in people's budget, will decrease dramatically. Personally, I aim to pay off the mortgage in 10 years and I'm ok with housing costing me 40% of my net income for 10 years in exchange for it costing me 5% of my income for the rest of my life afterwards.

[@GerzhusTV]

One could potentially achieve the same outcome by renting, investing the difference, then buying the place all cash at the end of the 30 years or whatever the mortgage term is. In a situation where “running the Numbers” leads to renting being financially better than buying, let’s suppose the difference is 50k. Is owning your place for 30 years better than having 50k but not owning your place? Likely yes for most people. But what if the difference is 500k? So on year 30, both people would own their home entirely with 0 mortgage to pay (long term buyer owned for 30 years, long term renter bought with cash), but their net worths would be impacted substantially if the difference was 500k.

[@dannwhitehead6193]

I am 4 mins in and have not heard about the tax breaks you get for ownership. I also rather have my own space and be house poor vs renting. Next, your rents can rise unless you are in a rent control area. You can leverage the home equity for other repairs at a lower rate than credit cards.

[@ramitsethi]

That's because tax breaks are highly overstated, especially since recent law changes. You should finish the video and run a buy vs rent calculation for the biggest purchase of your life