The Financially Illiterate

[Jonathan Safa]

Most of us don't bat an eyelash when it comes to setting aside x amount of dollars every month for some form of 401(k), Roth IRA, or the like. But if asked to invest in real property, - emphasis on the "real" - you are met with a myriad of excuses: The primary of which being "if I want to move away, I don't want to be stuck with a mortgage." Imagine if I told you that same Roth IRA could be paid for by somebody else, depositing into your account every month, accruing both interest and appreciation. That would be pretty fantastic, wouldn't it! To my knowledge this does not exist with financial markets, but welcome to the world of "real property." Financial illiteracy. Throwing hundreds, sometimes thousands of dollars away every month in "rent." Well, thank the Lord for the financially illiterate. They are making me rich!!

[Daniel O.]

@Jonathan Safa I don't think your characterization of people who rent is entirely fair or accurate. Many people are stuck renting because they can't get a mortgage to buy even an entry-level place where they are living. This can be as true of the middle class folks in the Bay Area as it is of people living near the poverty level in Detroit or any of our other distressed urban areas.  For people who anticipate moving regularly, buying may not make sense. Look at the folks who assumed that it always made sense to buy, even if they were going to be moving on in a few years, who were left holding the bag when the housing market collapsed in 2008. Many are still underwater. Were I in their shoes, I'd be thinking very carefully about buying again.  For others, who really don't want to have to deal with upkeep or grounds, renting may make more sense because condos can be a terrible investment. Many people who are financially literate make a conscious decision to rent.  From my perspective, it is the financially literate who are the ones making us rich. They do a good job budgeting and planning, so they are better able to pay rent on time. And they understand the financial implications of an eviction, so again, they pay rent on time.