When you add up all that apartment living has to offer, renting can play a key role in your personal economy.
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It seems we’re constantly bombarded with information about how we should manage our financial futures.
It can be tough to sort through all of those messages to figure out exactly how it all applies to our individual financial needs.
That’s where personal economics comes in.
According to financial planner and author Carl Richards, we should all spend less time trying to keep up with the latest financial news and investment strategies. Merely keeping up and trying to wrap your head around it is tough, says Richard.
So what’s a savvy person to do? In a New York Times article, Richards urges savers to simplify their financial lives by focusing on personal economy, which he defines as the financial strategies that are relevant to each saver’s specific goals.
Richards says that when you focus on the financial info that’s relevant to you, you won’t risk being overwhelmed by fears that you’re not doing the right thing with your money. “Global” worries about troubles in Europe or the U.S. housing market recovery, for instance, become irrelevant. “Personal” strategies like saving for a vacation to a theme park, for instance, becoming clearer to define and easier to execute.
Your personal economy
If you’ve ever felt overwhelmed by your finance options, defining your own personal economy as Richards suggests might be helpful. Take a second to consider your greatest financial goal: do you want to save for a new car? To buy a home? To go on vacation? Or to retire?
To get on the path to achieving your goal, Richards suggests asking yourself these questions:
- How much can I save each month?
- What am I investing in?
- Can I pick up extra work so I can save more?
- Could freelancing or starting a side business help me save more?
The questions are laser-focused to help determine what you could do immediately to move toward your personal goals. Thinking in simple, focused terms helps you spend less time second-guessing your decisions.
Renting as a key part of your saving strategy
As you consider your personal economy, think about how renting might help you achieve your savings goals. According to a Federal Reserve Bank official, renting may sometimes be a better financial savings strategy. For some people, renting an apartment and then investing each month leads to more wealth in the long term.
Renting can be a particularly good savings strategy for those who live in areas with a high cost of living. If housing costs are sky high, you’ll have to make a large down payment as well as pay higher taxes, homeowners insurance and monthly payments to own a home. While you are creating equity with your purchase, your money is tied up in a house instead of being available to you whenever you need it.
Renting can also be a good savings strategy if you don’t plan on staying in one location very long. In order to build wealth with a home purchase, your home must increase in value — something that happens over a long period of time. If you plan on staying put, you could potentially make a profit — but if you move around, renting and investing your savings in other financial vehicles like stocks, for instance, could help you see better return on your money in the long run.
When you add up all that apartment living has to offer – great locations, included amenities, flexibility plus the potential to save money — renting could play a key part in your personal economy.
Photo credit: Shutterstock / Nagy-Bagoly Arpad
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