Your House Is Not an Asset

Is your house putting money in your pocket?

My definition of an asset may differ from your banker or financial planner. I am going to say this from the start. I am not a homeowner. I am not a financial planner. Take what I say as my opinion, and not financial advice.

I am going to make this easy. An asset is something that puts money in your pocket. A liability takes money out of your pocket. With this simple definition of an asset, I am going to show you why I think your home is a liability.

I did not have to pay for my own housing until I was 33 years old. No, I did not live in my Grandmother’s basement. I joined the Army straight out of High School. So, for the next 15 years, the Army picked up my rent. Whether it was cost-free living in the barracks or living in Germany winning the Cold War, the Army picked up the tab. Then I left the Army and had to pay my first rent for a German house.

The American dream. The new house with a two-car garage where you can not park your car because of all of the junk stored in the garage. The white picket fence and large front lawn which you mow every Saturday. The three bedrooms, one master bedroom for you and your wife, and the other two for the children. In other words, your dream house.

So you bought your $250,000 home. I am going to assume you put 20% down. That is $50,000 that you have tied into your that you can not use for anything else. This asset is already taking money out of your house.

I am also going to assume a 30-year mortgage since you are a young couple and are starting a family. Sure, you are going to pay more interest over the time of the loan, but we want more money in your pocket each month for those unexpected family expenses. Plus we want to cover the expected expenses, like new shoes, class projects, and after-class activities.

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