This is great, Sofia! Thank you for this valuable resource.
Regarding home buying, I might note that stock market index funds have historically appreciated faster than real estate, making renting a potentially better financial and logistical choice for some advocates.
The Dave Ramsey video linked on this topic doesn’t account for the opportunity cost of putting your money towards a mortgage rather than (diversified) stocks. It’s true that one doesn’t need to pay rent after their house is paid off. But it could also be true that the gains one has made from index funds can offset the cost of rental payments. Historically, US stocks have increased 7-11% per year, while home values have increased 3-6%. This is why some experts advise renting over buying (Investopedia).
That means advocates may have more financial resources in both the short and long-term by taking the money that they would have used for down payments and mortgages and instead putting it towards stock index funds—even after deducting for rent.
Some big caveats here are the tax and homeownership incentives different governments provide. In America, thanks to subsidies, a home loan is often the biggest and cheapest loan someone can get—so that may make homeownership financially advantageous (and therefore maximize advocacy resources) for many.
I am a 27-year-old advocate in the SF Bay Area who is comfortable in shared living, which significantly brings down my rental costs compared to home ownership. I also don’t desire to own a home anytime soon, and I may be very mobile jumping between advocacy campaigns in different places for a while. So this all works out well for my particular situation (and can be very different for others!).
You are right, Dean! Thanks a lot for your comment and for reading. I think this is a very valuable perspective that folks should consider. In hindsight, I would have had more money if I invested it into the stock market rather than just saving it. That’s probably one more mistake I’ve made as an early professional, haha! I’m quite risk averse when it comes to money and investing, so this played into it, but also I was told that if there is a chance I may need this money in the next 5-10 years, the gains from investing are less likely to outperform the highest interest instant accounts (but they still can, just less likely due to the possibility of a crash when you may need to withdraw the money). Since I was unsure how long I could live with my parents, I concluded investing wasn’t for me yet. Say, if I wanted to buy a house in 2022, I would have found it gutting to have lost some money. But had I invested say, back in 2018, and kept investing until 2024, I would have had more money (which we know now but I didn’t before). I still feel like with what I knew then I was a good decision, because I slept a lot better than I think I would have if my money was in stocks. On balance, you’re right that stock market wins over, especially if you are more likely not to need this money in the next 5-10 years and can emotionally withstands the ups and downs which I couldn’t when I was younger. Related to this topic, I found this like for like video of buying a home vs renting quite helpful (it also includes investing as part of the comparison).
I think the renting vs. buying discussion (among many other things) also comes down to the degree of tenant protection in your country. In the UK, being a renter is notoriously miserable. In countries with more robust tenants’ rights like Germany/France, it is a lot easier to build a stable life as a renter.
This is great, Sofia! Thank you for this valuable resource.
Regarding home buying, I might note that stock market index funds have historically appreciated faster than real estate, making renting a potentially better financial and logistical choice for some advocates.
The Dave Ramsey video linked on this topic doesn’t account for the opportunity cost of putting your money towards a mortgage rather than (diversified) stocks. It’s true that one doesn’t need to pay rent after their house is paid off. But it could also be true that the gains one has made from index funds can offset the cost of rental payments. Historically, US stocks have increased 7-11% per year, while home values have increased 3-6%. This is why some experts advise renting over buying (Investopedia).
That means advocates may have more financial resources in both the short and long-term by taking the money that they would have used for down payments and mortgages and instead putting it towards stock index funds—even after deducting for rent.
Some big caveats here are the tax and homeownership incentives different governments provide. In America, thanks to subsidies, a home loan is often the biggest and cheapest loan someone can get—so that may make homeownership financially advantageous (and therefore maximize advocacy resources) for many.
I am a 27-year-old advocate in the SF Bay Area who is comfortable in shared living, which significantly brings down my rental costs compared to home ownership. I also don’t desire to own a home anytime soon, and I may be very mobile jumping between advocacy campaigns in different places for a while. So this all works out well for my particular situation (and can be very different for others!).
You are right, Dean! Thanks a lot for your comment and for reading. I think this is a very valuable perspective that folks should consider.
In hindsight, I would have had more money if I invested it into the stock market rather than just saving it. That’s probably one more mistake I’ve made as an early professional, haha!
I’m quite risk averse when it comes to money and investing, so this played into it, but also I was told that if there is a chance I may need this money in the next 5-10 years, the gains from investing are less likely to outperform the highest interest instant accounts (but they still can, just less likely due to the possibility of a crash when you may need to withdraw the money). Since I was unsure how long I could live with my parents, I concluded investing wasn’t for me yet.
Say, if I wanted to buy a house in 2022, I would have found it gutting to have lost some money. But had I invested say, back in 2018, and kept investing until 2024, I would have had more money (which we know now but I didn’t before). I still feel like with what I knew then I was a good decision, because I slept a lot better than I think I would have if my money was in stocks.
On balance, you’re right that stock market wins over, especially if you are more likely not to need this money in the next 5-10 years and can emotionally withstands the ups and downs which I couldn’t when I was younger.
Related to this topic, I found this like for like video of buying a home vs renting quite helpful (it also includes investing as part of the comparison).
Thanks for sharing! Also, I started using the Waking Up meditation app again after reading your post. Great resource.
I think the renting vs. buying discussion (among many other things) also comes down to the degree of tenant protection in your country. In the UK, being a renter is notoriously miserable. In countries with more robust tenants’ rights like Germany/France, it is a lot easier to build a stable life as a renter.