What about building a greater than zero balance for your loved ones or children? If you never save and always rent you will never be able to pass anything along to the next generation creating another set of folks that have to start from zero.
When I hear these arguments I always figure they already have a great enough balance to counteract these issues or have no loved ones to pass along equity too.
I see that as a red herring. The key if you are going to rent is to save the difference between what your rent is and what your mortgage + other costs of ownership would be and put that capital to work for you through other investment vehicles. In America there is this convoluted idea that 'everyone should own a home'. It's a ridiculous premise and should be nothing more than a pipe dream for many people who do currently own a mortgage on a home.
Yeah. The problem with housing is that people are told "the house is an investment". Houses are lousy places to grow capital. Their primary method of generating a meaningful return on your investment is the imputed rent. But you have to consume the imputed rent immediately.
Some spending on housing is inevitable, and some is just consumption. Investing in a house to secure the former is responsible; the latter is luxury and irresponsible if you can't afford it.
Also, people underprice issues like maintenance and risks as a matter of routine.
I'm more of the mindset that if I have children that they shouldn't expect to receive any type of inheritance. Sure they might end up receiving but just not to rely on it.
In turn I don't expect to receive anything from my parents, would much rather they enjoy what they have earned.
Expecting to receive inheritance is not something you can do when your born but planning to leave equity is absolutely something that can be done. I'd rather give my children a small boost than nothing at all. Doing something like home ownership can give you something to pass along and something to enjoy too!
Now don't get me wrong, if you can leave your kids a payed off house, that's awesome. Even better if you can leave them with something a little more liquid (some stocks, mutual funds, etc).
But for me, the most important thing I want to leave my kids with is experiences. I hope they'll have lots of great memories of time we spent together, trips we took together, things we learned together, etc.
Hmm. While this is definitely true, I think you stand to leave more to your children if you own, opposed to renting. If your rent is comparable to mortgage (assumption, I know) you will wind up paying less after the mortgage is over. If you die at 80, and start paying rent at 20, that's 60 years of rent, compared to, say, a 30-year mortgage. That's 30 more years of rent.
I know, I know, someone is going to say "well, what about upkeep and maintenance and killing rats and xyz?" The way I'm seeing this (which, by the by, is originating completely from a 3-beer-deep opinionated loudmouth) is that it's negligible compared to the fact that you are investing your money in something that is of material value.
If your children are dependent or semi dependent, aka, college, you should have term life insurance for the period of your life to make sure the expenses you planned on covering for them are covered.
The education you provide your children should start them far from 0. Actual inherited wealth of a vast sum nature is rarely a good thing for character, and often is counterproductive at making good humans.
Additionally, if it's actually inherited, they don't get it until their late 40s, 50s, 60s or 70s with modern lifespans of those rich enough to get constant good medical treatment. Additionally the pandering nature that can make relationships in the later years of a parents life who has money is not always the healthiest thing to inject into family life.
I'm not proposing leaving nothing to one's children. Instead, I'm asking readers to consider the merits of both renting and owning and choosing what fits for them.
Admittedly, I have positioned my argument strongly from a renter's perspective, as I believe the "default setting" is heavily skewed toward ownership.
Fact of the matter is that many of us believe we need to own everything, when many things can be rented more economically and fruitfully (e.g. car co-op versus car ownership).
Home ownership is less clear-cut since homes tend to preserve their value well (not as well as we've thought, though!), so it's realistic to leave something of substantial value behind.
Cars though, cars are 100% consumable. There's not a lick of persistent value behind them. Personally, I'm avoiding the car ownership pitfall for as long as humanly possible, but in this country that's not indefinitely.
It's a gigantic money sink - one that most people I grew up with don't even realize, since they bought their cars along with their first jobs. They've never done a budget without their car being in the mix, to them this $1K+ per month expenditure is perfectly normal and unavoidable. A necessity of life.
How do you spend $1K+/month on a car? I've known a few people who pay that much, but they were trying to insure a sports car below the age of 25.
Buy a simple used car in good shape, with 30K-60K miles on it. This will cost $7-12,000, and last for at least 8 years with a bit of maintenance. Figure $60-150/month for gas, $100/month for car insurance, and you're still in the area of $350/month. Add a few hundred per year for tires and repairs. When the repair bill reaches $100/month, buy another used car.
Buying a new car, a fancy car, or a car with poor gas mileage will make these numbers much worse, of course.
Rather trivially, even without insurance surcharges. I had a Lancer Evolution VIII MR for a few years...
* Insurance was $150/mo. This was without an age surcharge, no speeding tickets, no accidents. As low as it was getting.
* Payments were ~$500/mo for 60 months at 4.9%. That was after putting about 23.5% down, and taking sales tax into account.
* Gasoline? This was a car that got 4mpg when you caned it, and averaged about 14mpg. I drove 500 miles a week. When premium was $3.50-$4.00 a gallon. Gas was $500 - $700 a month, as 150HP/liter doesn't come for free.
* Maintenance? I changed my own oil (synthetic) every month. Even DIY, that was $40/mo. Nevermind everything else. A set of brake pads (DIY) was still $500-600. Rotors? More like $900. I ended up doing two brake jobs in 3 years.
* The summer tires, between track days and usual commuting, lasted ~12K miles a set, at $1300/set. I also had dedicated winters at $900/set, but those never needed to be replaced. But basically, a new set of summer tires once a year meant $110/mo in just tires. "Cheaper tires" weren't an option, unless I wanted to completely neuter its handling characteristics.
Honestly, it was close to $1500/mo to run that thing, and that was simply a $36,000 car that could happen to hang with things 2 to 3 times its price on a road course. I was contracting for years, and never got anything close to where I was. If I was commuting to the same place, I would've absolutely moved, and saved $300-600/mo in fuel/maintenance quite easily.
I have a Miata (MX-5) now which costs dirt to run, mostly because mileage is all fun, and < 4000 a year. Insurance is cheaper than an economy car. Gets 24mpg driving it like an idiot. Proper tires are only $750-800/set. Maybe costs me $150-200/mo, since it's paid for.
Just a point: For that car and what you apparently used it for, a car co-op wouldn't work in any case. I doubt zipcar lets you take their cars to track days, even if they had a car you'd want to take. And at 26k miles/yr, I don't think a co-op would work either.
Rather than "trivially" making it to $1500/month, I think you pushed most parameters to the expensive side.
As a contrast, I have a 2001 Passat that I've owned for 6 years and do all the maintenance on myself. Over 6 years I'd estimate it's cost me $25k total, which ends up being $350/month. But then I've only driven 40k over those 6 years, too.
I wasn't looking at it from a co-op or car sharing perspective. I was looking at it from a "how can a car cost $1000 a month perspective". The Mitsubishi Lancer Evolution and Subaru WRX STis are probably the best known examples of post-purchase sticker shock considering a transaction cost that is only 110-115% of that of the "average new car transaction cost". Especially the Mitsubishi, which was referred to by Jeremy Clarkson as "needs to be serviced every 300 yards".
The Yokohama Advan A046s had a 140 treadwear rating. High-output turbocharged engines (140HP/liter bone stock) tend to require frequent oil changes. High-output turbocharged engines also tend to run rich, basically using unspent fuel to help cool the turbo -- 14mpg is seriously what was observed under mostly rush-hour highway traffic. Premium fuel was required since it still had a near 12:1 compression ratio.
Those cars would never be offered via co-op, and I can't think of a car sharing service that even offers genuine bona-fide sports cars. They are rare, not mass market. They're incredibly noisy. Not very comfortable. They're "compacts" (in the US). They're only offered with manual transmissions (until recently). They'd be absolutely catastrophic loss leaders, especially with hooligans beating the piss out of them. They were engineered to be the most entertaining cars for the lowest transaction cost possible... but they very quickly compensate for their low sticker price with maintenance bills from a 911.
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What about those who purchase, say, a new Toyota V6 Camry, load it up to $30K, then put the minimum they'll allow down? Right there you're looking at a $550-$600/mo payment (and dealers won't care if they're getting paid and have the car off their floor plan). Add $100-150/mo in insurance. Assuming a 25mpg average, it's not hard to get right on the cusp of $1000/mo for the first 5 years, depending on how far people commute. That's with a vehicle that's around the average transaction price for a new car in this country.
My point remains that it's not hard to hit $1000/mo. I don't consider that prudent in the slightest, but a fair number of people experience just that.
As I said, I know how to not spend money on a car as well. I bought a Mazda MX-5 cash. Moved close enough to work to take mass transit. Negotiated secure garaging in my lease. Just use it as a toy. Between insurance ($120/mo), maintenance and fuel, $200/mo would be exceptional. I think I've spent $600 total on gasoline in the past 22 months, whereas 4 years ago, I remembered spending that every month on just fuel.
I pulled that number from my cubemate, who's picking up a used Camry (relatively recent, '07-'08)... because apparently you can't get married unless you own a car.
$1K is payment + maint + insurance + gas. Hell, I've gone over my parents' finances and that's roughly in line with how much they shell out for their cars (note: Mazdas and Toyotas, nothing fancy). Around where I grew up, unless you're driving a junker, $1K a month is pretty easy to hit (last I checked, my parents with their perfect driving record are doing ~$250 on insurance alone).
There are people who have an opposition to 'dynastic wealth' and would very much prefer there to be no inheritances or for them to be massively taxed. I don't agree in the least.
I also don't buy the radical minimalism/anti-ownership ethic either. Being so independent of things makes you in turn totally dependent on merchants who provide the things you want or need.
I'm with Heinlein: 'specialization is for insects.'
I can't edit the parent any more, but I wanted to add a citation:
One of the 'people' in opposition is Warren Buffet[1]:
> "Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline," Buffett said. "A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."
When I hear these arguments I always figure they already have a great enough balance to counteract these issues or have no loved ones to pass along equity too.