Saturday, January 23, 2010

What is Security?

Once again the "experts" are telling us that homeownership is a bad investment, and maybe if I saw my house in the way that they mean, as an asset that can be bought or sold, I might agree.

But my home is not an "asset" - at least, not now.

There was a time when we used the house as our personal ATM through a HELoC (Home Equity Line of Credit), but with the exception of a very costly, major and necessary repair (replacing the out-dated and failed septic system), most of the charges on our HELoC account were made during the four months at the beginning of 2006 when Deus Ex Machina's employer looked like they might be going bankrupt and didn't pay him a full paycheck for four months straight.

It was during that financial crisis that I realized how important our home is to us and resolved to hang onto our house - at all costs.

My house isn't an investment, at least not the kind of investment that has anything to do with me reaping some monetary return ... but that's not entirely true, either.

My house, my home, my yard, my garden, the bees, the chickens, the ducks, the rabbits, the mushrooms, my home-based business, our homeschool, the heating with wood, the stocking our pantry ... all of it is an investment in our future. I will very likely never see any significant monetary gain from any of it ... including my home business which pays me just enough money that I can continue to work part-time from home, but not much else.

For me, our house is not about earning cash dividends. Our house is about giving us security.

The article states that the notion buying a home is a ticket to financial security is a "scam" perpetrated on the American people by corporations seeking to keep us in debt, less mobile and with the storage to purchase all sorts of needless consumer goods.

And I couldn't disagree more, except that *we*, as citizens and not consumers, have to change our definition of financial freedom. If our definition includes anything about being able to buy all the things that we want, then the article is completely correct. We shouldn't be investing in a house. We should be renting, and putting our earnings into more liquid assets so that we can spend it more easily on the things we want.

If our definition, however, involves anything to do with physical comfort and well-being, then buying a house is probably the best place we can put our money.

It's all about what we mean by financial freedom. For me, it means that if I am, for whatever reason, unable to continue earning the same amount of money that I am earning today, my life will not be significantly negatively impacted. That is, if I lose my job or my employer decides not to pay me for four months, I won't be evicted and end up starving on the streets.

Renting will never give me that sort of freedom, but homeownership, eventually, will. Once my mortgage is paid off, my monthly house-related expenses will be negligible compared to paying rent.

In addition, because I have a house that is on a small piece of land, I am able to use that land to feed my family. I have a septic system (no cost for sewage fees), and I can dig a well (no charge for water). I could use our gas-powered generator to keep the freezer cold, and pay only a few dollars per day for electricity, or build/install other power generation equipment and pay nothing for the electricity we'd like to use. We already heat our house with wood that was free, and so we don't pay for heat.

The more steps we take to lower our cost of living, the more financial freedom we will enjoy, and while we may not retire with millions of dollars, we won't be hungry and we won't be cold.

There are other benefits, too. The article says that our homes make us less mobile, and I submit that that is not a bad thing. Moving is expensive. There are all sorts of hidden costs associated with transitioning to a new apartment or house. Things like utility deposits and rent deposits, moving trucks, boxes, and/or moving companies, gasoline for traveling, eating out because there's no kitchen in which to cook and/or the dishes and food are all packed up. My mother, who survived eight moves in eight years when I was very young, advised that each time a person moves, it takes about six months to get back on one's feet financially speaking.

If I don't ever move, because I own my home, then I won't need to pay for those moving-related expenses, and it's more likely that my living costs will remain even.

The article also says that having a house gives one the storage to purchase all sorts of needless consumer goods, and with that, I have to completely disagree. In every apartment in which I have ever lived the amount of storage space far exceeds the amount of storage space I currently have in my home. Heck, I don't even have drawers in my kitchen, but I have never rented an apartment that lacked that feature.

That said, however, my house is an anomaly, and many homeowners do have a great deal of storage, which, despite the assertions of the article, is not a bad thing. There's a lot to be said for having a place to put things like 50lbs of flour, 25lbs of raw almonds, a seed starting shelf, tools for home improvement projects, maple sugaring equipment, canning jars and other supplies, bicycles, gardening equipment .... Buying in bulk and DIY saves hundreds, if not thousands, of dollars per year.

The point is that all of the things the article points to as being negatives are actually positives, if one's focus is on thriving rather than just on money.

Depending on whose report you're reading, we're either in a recovery or sinking deeper into economic chaos, the dollar is getting stronger or weaker, unemployment is set to stall or is continuing to creep upwards. We may find in our very near future that despite all of our wise investments, we have no money, or the money that we have is all-but worthless.

But, chances are really good, I'll still have my house, and it may not be worth much on paper, but I'll still be warm in the winter, and we'll have something to eat, and we'll have clean water to drink and bathe - even if all of our cash goes to pay the mortgage bill.

The bottom line is that if one purchases a house in the hopes that, someday, it will be worth a lot of money, then it probably is a wiser choice to give someone else those dollars in rent, but if real security is the goal, (i.e. knowing that dollars invested today will increase one's chances of survival in an uncertain future), then investing in a house is a very wise move.

True financial security is not about accumulating monetary wealth. It's about finding a lifestyle in which money is a nice benefit, but not a necessity.

5 comments:

  1. In many ways I have to agree with what you point out here, Wendy. We bought our house not as a means of investing our money, but as a place to live and grow roots. We have land to forage on, to grow food on, and with planned "improvements" become more independent. We bought a house because we want a woodstove, a garden, animals, and a certain lifestyle that is very difficult in an apartment or rental. We want to use our space for storage and DIY - this piece of the planet that we are now responsible for is our security and financial investment has little or nothing to do with that.

    ReplyDelete
  2. I agree as well. In a rental, I couldn't build my gardens, plant my trees, house my chickens, build a well etc. It is secure to me because I can make my future more secure with what I add to it. Very few people would see the improvements I've made as positives. They would be looking for the pretty cabinets and expensive flooring. I love my home and the community that I have around it. To me it is security.

    ReplyDelete
  3. I don't meant to knock anyone's mom, but I have to disagree--nowadays it takes longer than 6 months. I wish I didn't know that. ;-)

    Renting sucks. I'm stuck in a house where there are vermin living in the ceiling and there is nothing I can do about it without taking legal action if the lazy/broke/invalid landlord doesn't do anything about it.

    If he dies and/or forcloses on this place (we're hoping he'll at least live another 3 years til we finish up in NJ and can go set down roots back west; and according to his nurse, he's got two reverse mortgages on this place and strapped for $) we're SOL. FORCED to move and there's nothing we can do about it. At least when you own a home you have more control of your home and it's surroundings.

    So often I hear "Oh renting is so great--you don't have to worry about upkeep yourself!" Yeah having a hole in my living room ceiling for seven months is so great.

    ReplyDelete
  4. Wendy, could you email me, please? Thanks!

    ReplyDelete