Featured Artist: Adam G

Here’s what’s in today’s newsletter:

💭 My Thoughts: How renting or owning a home generates wealth
❓ Q&A: What’s the future of federal student loan debt relief?
🗞 In the News: Stay up to date on personal finance news
😎 What I’m Enjoying: A music DOCKumentary and audiobook
🎙 Recent podcasts: Dig into 895+ episodes in the Money Girl archive
🤣 Favorite GIF: Reply with your favorite GIF—it might get featured!

Hi, Friend!

If you’ve ever wondered whether renting or owning a home is right for you or if homeownership is still part of the “American Dream,” the answer can be tricky.

This week on Money Girl 894, Will Renting or Owning a Home Make You Wealthier?, I explore the rent-versus-own debate in light of rising home prices—and my new townhome purchase.

Here’s a summary of the primary pros and cons for help knowing which option could make you wealthier.

How can renting a home make you wealthier?

1. Having more flexibility.

Renters get the flexibility to relocate for work or family needs more easily than homeowners. Being able to pick up and go for your company or to take a higher-paying job in another city or state could go a long way toward improving your wealth.

2. Paying less upfront.

While a renter’s upfront expenses add up, they’re much less than what you typically need for a home down payment, at least 3% of the purchase price. Depending on your lender and financial situation, you may be required to put down 10%.

3. Being insulated from market downturns.

Renters can stay protected from potential housing downturns, such as the Great Recession of 2008 when a big real estate bubble popped. Renters may even come out ahead if rents go down when the economy struggles; however, that’s not what we’ve seen since the pandemic.

4. Paying less per month (in some areas).

Where you live is a big factor in whether renting or owning a home will be cheaper. But no matter what, renters get to skip many expenses that homeowners can’t avoid.

How can owning a home make you wealthier?

1. Building equity.

Every amortizing mortgage payment allows you to own slightly more of your home and owe slightly less to your lender. The benefit of building home equity is that you can eventually cash it out by selling your home or tapping it with various financing options.

2. Having appreciation.

Historically, real estate has been an excellent long-term investment, with values going up more than down over the long term, which is a powerful way to build wealth.

3. Cutting taxes.

To encourage homeownership, the federal government created various tax breaks to sweeten the deal.

4. Paying less per month (in some areas).

Relatively low interest rates (by historical measures) can make owning a home cheaper than renting, even with additional costs such as homeowner’s insurance and property taxes. Of course, that isn’t true in large cities, such as New York and San Francisco, where home prices are notoriously high.

Should you rent or own a home?

If renting saves you money and reduces stress, allowing you to accomplish your financial objectives, it may make you wealthier in the long run. The key is investing savings that you would have spent on a home.

But if buying a home has more advantages and you’re willing to put down some roots, owning an affordable home is a terrific goal. A good rule of thumb is never to buy a home unless you’re sure you’ll live there for at least three to five years.

Get the full details for each tip by 🎙 listening to the podcast or 📖 reading the show transcript.

❓ On Finance Friday shows, I answer your money questions! This week’s topic comes from Faith F., who says:

“… should I stay in the SAVE program or switch to another one, like PAYE (pay as you earn) or IBR (income-based repayment)? Also, does being in forbearance on student loans hurt my credit score?”

If you’re a student loan borrower or know someone who is, this post will review recent legal developments that may affect you. I’ll explain what’s happening and what actions you may need to take.

🎙 Get my tips in Money Girl 895, What’s the Future of Student Loan Debt Relief and SAVE?

📖 As always, you can listen to the show or read the transcript.

🗞 Mortgage rates drop to an average of 6.96%, the first decline of the 30-year loan in six weeks.

➡️ TAKEAWAY: While this week’s mortgage rate decline was slight (0.8 %), there were more loan applications, showing potential homebuyers are ready to take advantage of it.

🗞 Americans only paying credit card minimums increased to a 12-year high of 10.75% in the third quarter of 2024, according to the Philadelphia Fed.

➡️ TAKEAWAY: While consumer spending remains strong, if more can only pay their card’s minimum balance, they may be experiencing financial hardship and eventually become delinquent on their credit accounts.

🗞 Losses from natural disasters soared to $218 billion in 2024, an 85.3% increase from 2023 and the highest tally since 2017 due to severe storms and droughts.

➡️ TAKEAWAY: The insurance industry will see profit cuts due to the higher number and cost of claims, which means homeowners will continue to see insurance costs rise in 2025 and beyond …

💵 TIP: Make sure you get every possible discount for home or renters insurance, such as bundling policies with the same carrier, having theft or fire protection devices, being a nonsmoker, getting married, setting up automatic payments, and any others offered by your insurer.

🎬 Music Box: Yacht Rock: A DOCKumentary is a 2024 HBO documentary about the popularity of relaxing, soft rock in the late 1970s and the artists who created it, like Christopher Cross, Michel McDonald, Kenny Loggins, Steely Dan, and Toto. The genre became known as “Yacht Rock” in 2005. While beloved by many, their sound has often been mocked and dismissed. However, this fun film celebrates these incredible artists and their legitimate place in music history. I absolutely loved it!

📕 Brooke Shields Is Not Allowed to Get Old: Thoughts on Aging as a Woman is a candid and vulnerable exploration of being a “woman of a certain age.” I’m listening to the audiobook, narrated by Brooke, and enjoying her perspective and humor on aging, being more comfortable in her skin, and feeling empowered at midlife and beyond.

🎧 895: What’s the Future of Student Loan Debt Relief and SAVE?

🎧 894: Will Renting or Owning a Home Make You Wealthier?

🎧 893: How Can I Invest Confidently With Little Money?

🎧 892: 5 Tips for Living and Working in Different States

🎧 891: Does My Inheritance Count as Taxable Income?

Subscribe to Money Girl so you never miss a weekly podcast episode!

Share The Money Stack

📣 Click the button above to share this newsletter with a friend or someone you love!

Download my free gift! 🎁 Your Money Success Toolkit includes a Financial Planning Workbook and Personal Financial Statement calculator to assess your financial situation, set goals, and track your wealth!