Financial Awareness & How It's Beneficial to Rent Rather Than Buy a Home
Homeowners need to be financially aware of the pros and cons of renting vs. owning a home. Renting allows you to spend more money on entertainment, travel, hobbies, etc., but it can also lead to being stuck in a lease with an expensive rent if your situation changes. Purchasing a home is often less expensive than renting one but may leave you unable to afford other life necessities such as higher education or medical expenses because of all the income that is going towards mortgage payments or taxes each month. The decision between whether homeowners should rent or buy will depend on their individual circumstances and how long they plan on staying in place for.
What is Financial Awareness?
Financial awareness is defined as the knowledge of how money enters and exits your life. It's important to understand where each dollar comes from and where it goes. The easiest way people can become financially aware is by keeping a budget. A budget will force you to notice how much money you spend on things that are not essential, such as eating out, going to the movies, and buying new clothing. The last step in becoming financially aware is using your money wisely by saving a portion of it for future needs.
Your Monthly Expenses
When creating a budget, it's important to touch base with all of your recurring monthly expenses such as rent/mortgage, utilities (water, electricity, garbage, and internet), transportation (car payments, car insurance, public transportation fees), food (groceries or dining out), medical/dental expenses (insurance premiums and co-pays as well as prescriptions or over the counter drugs), and entertainment such as movies or sports tickets. Bringing all of your monthly expenses into one document will allow you to notice where your money is going. If you stick to a budget, then over time, you will see an increase in your savings account and/or retirement accounts.
Many people rent apartments instead of purchasing homes because it frees up more of their income than if they were paying the mortgage payment for a home. This can cause people to get into the habit of spending more than they are making, however. By living in an apartment, you may be able to afford a nicer or larger television as well as a new car but this will cause you to spend money on entertainment that could have gone towards investments like paying off debt or saving for retirement.
Why It's Beneficial to Rent Rather Than Buy a Home
For homeowners, the debate on whether they should rent an apartment or buy a home has been going on for years. Though the decision is ultimately up to them, there are some benefits to renting a home instead of purchasing a home.
One of the main reasons people choose to purchase a home is because they want to build their equity over time. This translates into a larger down payment. However, the costs of maintenance plus taxes can be minimized by renting an apartment rather than purchasing a home. Renting is usually more affordable and will give you flexibility for when you want to move out in the future.
Also, people who rent apartments are able to move around without being tied down to one location. For example, if an employer offers you a promotion to another city, it is far easier to relocate if you have an apartment rather than buying a home. A potential renter can take advantage of this since they are not tied down and will be able to get excellent benefits from their new job in the new location. It is much better than dealing with the hassles of selling a home and moving all your valuable belongings to another city.
Another reason why people rent apartments instead of purchasing a home is because there is greater financial security through renting. If you purchase a house, you are basically stuck with it for quite some time since if you decide to move out, the real estate market is not favorable for you to sell your home anytime soon. On the other hand, when you rent an apartment, there is no need to worry about this since it's very easy to relocate as mentioned earlier.
The benefits of renting a home are twofold. Not only is it more affordable, but with renters insurance, you have protection for your possessions and liability coverage in case someone gets injured on the property or if something breaks while they're there. Renting also gives you the flexibility to move within a community as well without having to worry about maintenance costs like landscaping, heating/cooling, repairs, etc., saving you money each month that can be put towards other investments such as retirement savings or paying off debt faster. Renting instead of purchasing a home can be an easier decision to make once you are better informed.