F.I.R.E. Philosophy: Is Owning a Home a Financial Trap?

The F.I.R.E. philosophy talks about thinking about everything regarding good debt versus bad debt and good expenses versus bad expenses. F.I.R.E. philosophy makes owning a house a bad liability because it generates no income. Not everyone entirely agrees that owning a house is a bad idea. One of the most common reasons is that it helps in building equity. Another common reason is that you have to pay the rent; otherwise, it is a pure expense at a high level. These arguments sound reasonable in favor of owning a house. However, in practice, there are a lot of hidden costs that are ignored when deciding to own a house. Owning a home becomes a poor financial decision, even during the process of buying it. When you purchase a home as a rental property, the focus is on financial viability to make it a cash flow-positive venture. However, while buying a primary home, the focus is on fulfilling desires such as a good neighborhood, upscale amenities, good school ratings, and an easier commute to work. All these considerations inflate the house prices.

Compared to renting, owning a house attaches significant emotional value to it. As a result, maintenance costs are significantly high. People can live minimalistic, ignore minor defects and damages in a rental unit, and always ask the landlord for significant issues. However, even minor problems become nonnegotiable to ignore when you own a house. Emotional attachment is so high that you want to make it yours by going above and beyond and putting a lot of money into furniture, decor, and even repainting walls to match your style.

Other factors, such as property taxes and HOA, also become homeowners’ responsibility. Another argument that owning a house builds equity is valid; however, for most people, this increased equity stays inaccessible. The emotional attachment makes it hard to sell and leverage the gains in the equity.

In conclusion, owning a house is not a good idea for most people, as we human beings are either emotional or rational. However, it is not so black and white, and as long as you can overcome or minimize the downsides of owning a house, it may be as good as renting.