Buying Vs. Renting - Followup

In our recent four-part series (Part 1, Part 2, Part 3, Part 4) we discussed calculating the total cost of buying vs. renting in order to determine which was the better financial decision.

I have had several great comments and suggestions both on the site and via e-mail.  These comments focused on 1) clarifying the tax deductibility of real estate taxes and mortgage interest, 2) including rental increases, and 3) identifying the ultimate online calculator for the buying vs. renting comparison.  We will discuss these further below:

Appreciation and the Total Cost of Buying vs. Renting - Part 4 of 4

This is Part 4 of our 4-part series in toward establishing a methodology for determining whether renting or owning is more financially advantageous.  Part 1 can be found here.  Part 2 can be found here.  Part 3 can be found here.  In Part 4, we will be discussing Appreciation and Transaction Costs and working though some specific examples of calculating the cost of renting vs. owning.  Part 4 starts below:

Equity and Financing Costs - Buying vs. Renting - Part 3 of 4

This is Part 3 of our 4-part series in toward establishing a methodology for determining whether renting or owning is more financially advantageous.  Part 1 can be found here.  Part 2 can be found here.  In Part 3, we will be discussing the Equity and Financing costs associated with owning a house.  Part 3 starts below:

Ownership Costs - Buying vs. Renting - Part 2 of 4

This is Part 2 of our 4-part series in toward establishing a methodology for determining whether renting or owning is more financially advantageous.  Part 1 can be found here.  In Part 2, we will be discussing the Ownership costs associated with owning a house.  Part 2 starts below:

The Varied Housing Market - Buying vs. Renting - Part 1 of 4

In a recent comment, an associate posed the following quandry:

I think many associates erroneously think that renting a place to live is always throwing money away, while buying a house is always good, not understanding that they're investing (or "investing") on borrowed money in an asset that may not appreciate it at all.

This is a question that I get asked a lot.  Although at first it seems like a simple question, there are actually several issues wrapped up in the comparison of renting vs. buying.  We will unpack and examine these issues and develop a formula for making a direct financial comparison in this 4-part series (it is just too big for one post).  In Part 1, I will review that the housing market varies widely geographically and that any determination of ownership vs. renting really relies on your local factors.  Part 1 starts below:

Books for Lawyers: Debt Is Slavery

Over the last 20 years, I have read easily more than 100 books on personal finance and investing.  Some of the books were eye-opening studies like that in the Millionaire Next Door that we discussed in this earlier post.  Many of the books included some tidbits of wisdom, but may not have given practical, dollars and sense advice - like Rich Dad, Poor Dad as we discussed here.  Frankly, it's been a lot of work and effort over several years to mine these books for their wisdom.

Consequently, I could not help but be a little irritated when "Debt Is Slavery" came out - Why?  It's just too darn good!  In its short 102 pages the book clearly and concisely sets forth about 80% of the basic personal finance advice that I had to learn the hard way. 

I highly recommend "Debt Is Slavery" and I have given the book to several of my younger relatives. Let's take a more detailed look at it below.

Books and Lawyers - Rich Dad, Poor Dad

In this earlier post, I discussed the bestselling book "The Millionaire Next Door" and what it might be able to teach lawyers.  "The Millionaire Next Door" was one of the first personal finance books that really helped me improve and shape my financial thinking.  Robert Kiyosaki's "Rich Dad, Poor Dad" (RDPD) was another.  As I will discuss further below, this post should in no way be construed as a blanket recommendation for all of Kiyosaki's products, but RDPD does have a few valuable lessons for lawyers.

Some Financial Suggestions To Help New Associates

In my recent post Why $145K Is Often Not Enough To Max Your 401k, I tried to outline the typical expenses (based on cost of living information from Bankrate and my experiences and interviews with associates) of an associate living an average professional lifestyle while making top dollar - and to show some general parameters of how quickly the associate's compensation was eaten up by taxes, living expenses, and loan payments.  My goal was not to suggest that it was impossible for the associate to pay off their loans and max their 401k, but to give potential associates some hard numbers that might temper their expectations about how far their salaries will actually go.  In other words, even associates making top dollar are going to have to live reasonably frugally if they want to pay off their loans and max their 401k - they are not going to be able to afford $145K of toys.

Fortunately, a few associates that are more frugal than most stepped up and gave some great suggestions about how new attorneys can economize and plan their financial reality in order to make paying off their loans a reality.  I like the idea that someone might read their suggestions and use them to their own advantage.  Below I will summarize their suggestions, as well as some of my own.  Also, if you have any great suggestions, please share them in the comments or e-mail me.

Costs To Consider When Buying A Condo

This posting is NOT going to be about 1) the decision whether or not to buy or 2) about finding the area that is most desirable.  Instead, I am going to assume that the potential buyer has already arrived at generally what they want and is now trying to decide among several potential purchases by comparing the costs associated with the ownership of the properties.  One would think that it would be simple to compare these costs, but I see people (even smart young attorneys) screw this up all the time.  I attribute this to their inexperience and the fact that the real estate deal is complicated and their eyes are on the wrong ball.  I'll explain further below.