Personal Finance Is Personal

Should you buy or rent a domicile?  You would think that this is a simple calculation that can be dispassionately made by modeling the numbers with, say, an online calculator provided by the New York Times.  Certainly it’s not a decision worthy of a frothing controversy?  Oh, how I wish that were true.  Unfortunately, we’re on the internet, a veritable fount of bickering and invective.

Case in point:  an author who posts on the Freakonomics blog, James Altucher, posted Why I Am Never Going to Own a Home Again.  This being the internet, the post could not just stand, it had to be responded to – and to do that responding, RealtyTrac Senior Vice President Rick Sharga posted Why I’m Not Giving Up on Homeownership.

“It”, to use the famous phrase, “was on.”

James Altucher escalated with another post: Why I’d Rather Shoot Myself in the Head than Ever Own a Home Again.  I believe the post title says it all, and the debate continues.

Here’s the point: I’m not going to try to make peace or reconcile these two views.  It’s like trying to reconcile cats and dogs.  It won’t work.  Each author sees owning a home or renting as a suite of risks and rewards through the lens personal experience.  Which is the best decision from a personal finance point-of-view?  The one that provides each person the most utility for the cost.*

I discusses the idea of utility in a previous post about How Financial Planning Differs From Finance, but it’s easy to get off track from maximizing utility to maximizing profit.  That’s because it’s relatively easy to quantify costs and model profit or loss.  It’s terribly difficult to perform the introspection that drives the search for utility.

What do you think?  Where do you expect to find the most utility: renting or owning?

*  I should think that utility in this case would be heavily influenced by minimizing the perceived risks of the chosen strategy.  I suggest reading the posts with special attention paid to what each author perceives as the greatest risks in their preferred strategy.  It provides a lot of insight into their motives.

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