I’m sure that everyone reading this has heard the common adage that, “renting is throwing money away.” Is this really true? Are you throwing money away every time that you make your rent payment? I’m not here to answer questions for you, but I will attempt to give you all of the necessary information to make a well-informed decision on the topic. Let’s look at if renting a property in your 20s is considered wasting money:
Understand what you’re paying for.
When you pay your rent, you’re paying for a place to sleep and for a roof over your head. Just because you don’t own the unit doesn’t mean that you’re throwing your money away. You must understand that you’re essentially paying for the peace of mind of knowing that you have somewhere to sleep, bathe, eat, store your belongings, and just live. Unfortunately, there’s usually a high cost to this. Life and living isn’t cheap. Get used to it.
With rent you’re much more flexible financially and strategically than with home ownership. If you want to switch homes, then you’re going to have to put your home on the market and search for a new one. This process takes a long time and it usually costs lots of money (between Lawyer and Real Estate Agent fees). As a renter you become very flexible and depending on your lease contract you won’t have to wait too long until you can switch locations.
Future work situation.
In your 20s you want to look for work opportunities all across the nation and the globe. You don’t want to limit yourself to your local town or surrounding area. It’s not always the greatest idea to choose your life destination at 22. You may want to work abroad or pursue risky job opportunities across North America. Settling down in one are too soon could really hinder your goals when it comes to exploring new job opportunities.
Your financial situation.
How much money do you earn? More importantly, how much money do you save? You need to get your finances on track before you can make the transition from renting to home ownership. How can you get your finances on track at this point;
- Pay down student loan debt. The first thing you need to work on as a college graduate is to aggressively pay down any student debt that you may have.
- Increase your income. Are you earning as much as you can? Perhaps you’re still looking for your dream job or your considering starting your own business. This could make renting the most viable option for you at the moment.
- Save more money. While renting, earning more, and paying down your debt, you can begin to learn how to save more money. When you save more money you can slowly build up for a mortgage down-payment for when that day comes where you’re ready to move on.
Who do you plan on living with?
The people that you live with will make this easier much more easier. If you want to move in with a bunch of your college buddies then renting is the more ideal option. You never know who’s going to want to leave when and who’s going to want to join in. Living with your buddies while you rent a place can also really reduce your monthly expenses. If you manage to increase your income and reduce your spending by saving money on rent, then you could save up for a home purchase or any other goal that you might have.
When you make it rain in the club you’re throwing money away. Paying $20 to get into a club can also be viewed as throwing money away. Signing up for a gym membership and never going until your membership runs out is wasting money. Is renting really throwing money away?
(photo credit: aa photography)