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How Long Do You Really Want to Commit to an Expense?

Don't rush into a big, expensive decision just because it’s the “next step” or the “adult” thing to do.

As far as financial advice goes, it’s hard to find a more well-worn sound bite than “buy a house.” Paying rent, according to popular wisdom, is tantamount to flushing money down the toilet — a toilet you don’t, in fact, even get to own.

It’s true that purchasing real estate is one way to invest your wealth and start building equity for your future. Buying a house equips you with a tangible asset you can later sell or leverage for a line of credit.

But it’s also true that buying a house is a huge commitment and not one that neatly fits everyone’s lifestyle — especially in 2019, when careers and financial goals are changing. With a new focus on experiential, rather than material, wealth and a thriving gig economy, not everybody has the kind of steady income that reliably pays a mortgage, or necessarily wants to use the income they do have for that purpose.

Which begs the question: Do you actually want to make those big financial commitments, like taking out a mortgage, buying a house or starting a family? Although they may sound like Adulting 101, these steps aren’t written in granite — and in fact, they might be downright wrong for you.

Buying a (new) car

After housing, transportation is the biggest expense in the average American household, eclipsing taxes, utilities, health care and food. For most of us, that transportation comes in the form of a privately-owned automobile — and even a passing glance at the nearby dealership lot can tell you that cars are expensive.

You might already know that buying a new car comes at a huge financial loss; experts estimate you lose 10-20% of the value of a factory-fresh vehicle within the first twelve months of ownership. Although depreciation slows down, it does keep going, and you could find your car is worth half of what you paid for it in as little as five years.

Meanwhile, many people who purchase these new vehicles have to take out a loan to do so, meaning they’re paying interest on a product that’s depreciating in value — in other words, doubling down on their losses. And don’t forget you need to register and insure it. Insurance can easily run you around $1,450, the average annual cost in New York state (and by the way, you still haven’t even purchased a drop of fuel).

Buying a used car — or keeping the beater you’ve long since paid off — are great ways to cut down on your overall transportation costs. Even with the cost of maintenance, you’ll usually save thousands on what you’d spend on a new car, and you may even get lower insurance rates since the vehicle is worth less than that brand-new, shiny whip.

If you live in a dense, urban area or a small, walkable town, you could also consider forgoing the car entirely in favor of using public transit, bicycling or walking. These alternatives are better not only for your wallet, but also for Mother Earth!

Buying a home

Homeownership as a whole is on the decline, especially among younger demographics, where approximately a third of “older millennials” (those born between 1980-1984) do own housing. But amongst those who do make the big leap, many express some amount of regret in their decision. According to a survey of homeowners by Porch.com, 14% of millennials admitted they had underestimated how much money is involved in purchasing and maintaining a home long term — and 15% said they wish they’d saved up more before signing the contract.

Buyers across generational lines also rued getting too little house for the money they’d put down, which is unsurprising given that in the fourth quarter of 2018, the median home sales price in the U.S. was a whopping $317,000.

Although that price is worthy of sticker shock on its own, it doesn’t include insurance, property taxes, maintenance or repairs, all of which can make paying rent sound a whole lot more appealing. You won’t build equity, but you’ll keep a roof over your head … and when something breaks, all you have to do is call your landlord.

Starting a family

The average cost of raising a child to the age of 18 is more than $230,000 before the cost of college tuition, so you might want to think twice before you wheel out that baby carriage. (Which itself might run you at least a hundred bucks, by the way.)

Along with the heavy financial burden of parenthood comes, of course, the most serious level of commitment there is. You can always sell your car or house, after all. Not so when it comes to Junior.

So: should you make a financial commitment?

As in all things personal finance, the decision to commit (or not) to a long-term expense is just that: personal. Only you can decide whether or not any of these investments is the right move for your financial situation.

But at the same time, don’t rush into a big, expensive decision just because it’s the “next step” or the “adult” thing to do. Instead, think in the long run about your own intentions and create personalized goals — which is just about as responsible as it gets.

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