Why Renting Is Keeping You Broke

At Multiply My Money, I write a lot of articles about the importance of stock ownership. Long term stock investing is how I was able to build a significant net worth. I would love for everyone to buy stocks and invest in them for the long-term. But the truth is that the average person is not going to buy and hold stock for the long-term. Most of the people I know who buy stock sell their shares within a year. It’s too tough to truly build wealth trading stocks. If you sold your positions early, you missed out on the supercharged growth of Tesla, Apple, Google, and other long term multi-baggers. So, how do you build wealth if you’re not a long term investor.


 Buy a house. If you are not going to invest in the financial markets long-term, then home ownership is the best way to get rich. One of the greatest reasons for the wealth gap that exists in America today between white and black people is home ownership. Only 44 percent of African Americans own a home compared to nearly 75 percent of White Americans who own a home. The rate of African American home ownership has steadily declined throughout the 2000’s. The rate of Latino home ownership has risen to 47 percent in America. While discrimination and systematic racism do still exist in America; home ownership can help to close the wealth inequality gap. 

In 2019, homeowners in the U.S. had a median net worth of $255,000, while renters had a net worth of just $6,300”. A homeowners net worth is 40 times greater than a renter.

What’s the reason for the great disparity in net worth? Home ownership

A home is the largest financial asset that most people will have in their life time. 

Home equity is often the biggest contributor to an individual’s net worth. Home ownership is the greatest driver of generational wealth. Designer clothes, bags, luxury cars, flashy jewelry, electronics, shoes, and other material possessions are far more likely to depreciate in value rather than appreciate. A home is far more likely to continually rise in value over time. Buying a home is not just a good decision for the purpose of stability but it is a wise move for economic advancement.

Every person at some point in their life should own a home and live in it for at least five years. As you are slowly paying down the principal, the price will likely rise over a 5 year horizon. I bought my first house nearly 20 years ago for only $130,000 and the home appreciated to nearly 3 times that value. This has contributed nearly a quarter of a million to my net worth. A home is an investment that you live in. The proceeds from a home sale can be used to establish a retirement plan, invest in the market, or pass wealth to your children and grandchildren. Owning a home is forced savings. You receive your money back when you sell your home. Rent however is an expense that decreases your overall net worth. Every rent payment that you make is money vanishing from your bank account permanently. 

The key is to not consistently refinance your home to pay off bills and other debts. You lose the financial savings component when you do this. Treat your home as an investment that will pay you back when it is time to sell. Be smart and use your home as an asset to propel you to millionaire status!