Renting is throwing money away.
1 min read


The assertion that “Renting is throwing money away” is a financial fallacy because it oversimplifies the complexities of the choice between renting and buying a home. Here’s why:

  1. Flexibility: Renting can be beneficial for those requiring flexibility, such as those moving frequently, or living in an area for a short period of time for work or studies. Home ownership in this instance may not be practical or economically sensible.

  2. Maintenance Expenses: When you rent, your landlord is typically responsible for major repairs and upkeep, a cost not reflected in mortgage payments. These hidden costs are often overlooked when comparing a mortgage payment and rent.

  3. Property Depreciation: A home is an investment, and like all investments, there’s no guaranteed return. If the value of your home depreciates, you may end up selling for less than you’ve paid into it.

It’s easy to see why we might fall for this notion. Our culture prizes ownership, and homeownership, in particular, often seen as an indicator of financial success. There’s a sense of permanence, security, and pride in owning a home, and paying off a mortgage is seen as “building equity.” On the other hand, with rent, it may not always be directly apparent that we are purchasing a service (housing, maintenance, flexibility, etc.) because there’s no physical “equity” that we retain.

Recommended Financial Behavior: Rather than assuming owning is always better, individuals should consider their personal situation and evaluate both the financial and lifestyle aspects. This includes considering current financial state, future income prospects, job stability, commitment to staying in an area, and readiness to take on the responsibilities of home ownership.

Further Readings:

  1. “The Total Money Makeover: A Proven Plan for Financial Fitness” by Dave Ramsey. Book Link This book provides a comprehensive guide for personal finance, including a balanced view of home ownership.

  2. “The Wealthy Renter: How to Choose Housing That Will Make You Rich” by Alex Avery. Book Link An explicit debunking of the fallacy, promoting a view of rental as a path to wealth generation.

  3. “Rich Dad Poor Dad” by Robert Kiyosaki. Book Link Offers a perspective on real estate investment, which includes both owning and renting.

  4. “Renting”. Wiki Link Provides an overview of the renting process, financial implications, and rights and responsibilities of renters.