Speaker 1: Let's say good morning to the host of How to
Speaker 1: Money on Sundays from twelve to two right here on KFI.
Speaker 1: It's Joel lars Guard. Joel, we have an interesting trend
Speaker 1: among millionaires. They're renting instead of buying. What's up with that?
Speaker 2: Yeah, this is a study of people named Amy King
Speaker 2: who are just you know, loaded, but they're choosing to rent.
Speaker 2: And say, no, I'm just kidding. This is this is fast.
Speaker 2: Is fascinating to see and I think most people are saying.
Speaker 2: I think that, oh, if you have millions of dollars, clearly,
Speaker 2: clearly you're going to buy a home, right because it
Speaker 2: just it just makes sense. Why would you do anything
Speaker 2: else and building home. There's this kind of mentality in
Speaker 2: the United States of America that this is what leads
Speaker 2: to significant wealth a big part and when you look
Speaker 2: at the numbers, it's actually fairly true. For the average American,
Speaker 2: a big chunk of their net worth lies in the
Speaker 2: fact that they own a home. They've built up equity
Speaker 2: over the years. But we're seeing more millionaires bucking this
Speaker 2: trend and opting to rent instead of buy. And I
Speaker 2: think that this reflects a couple of things. I think
Speaker 2: it reflects the current state of the housing market and
Speaker 2: just how expensive it's gotten. We're starting to see kind
Speaker 2: of some softening and prices. We're seeing more sellers than buyers,
Speaker 2: which is interesting because when you're thinking about like three
Speaker 2: years ago, it was the exact opposite. And we're also
Speaker 2: so when you look at like the disparity between what
Speaker 2: you'd pay for an average apartment these days versus an
Speaker 2: average house, you have to have almost twice as much
Speaker 2: income to afford a mid priced home. Then you need
Speaker 2: to afford a mid priced apartment. And then a recent
Speaker 2: bank rate study found that it's cheaper to rent than
Speaker 2: to buy in all fifty of the largest metro areas,
Speaker 2: which was not true eight years ago, was not true
Speaker 2: six years ago. So it's just really interesting to see
Speaker 2: as the market turns, people make different choices. And I
Speaker 2: think it's a good thing. You can still build wealth
Speaker 2: as a renter. And I think a lot of people
Speaker 2: have heard amy that, yeah, well people have heard that
Speaker 2: renting is throwing money away, yeah, and I just think
Speaker 2: that that's patently false. Renting is putting a roof over
Speaker 2: your head and paying for it, and so you have
Speaker 2: to think you're getting utility out of renting, and if
Speaker 2: renting is going to save you money every single month,
Speaker 2: the disparity between what you pay in rent versus what
Speaker 2: you pay in your mortgage, well, if you are taking
Speaker 2: what you would have paid to buy the house, right,
Speaker 2: and then the repairs on the house, which can be significant,
Speaker 2: don't understand those, then you can invest in your tax
Speaker 2: advantaged accounts in a much more significant way, building wealth
Speaker 2: through your future. So I think people think, oh, I
Speaker 2: got to buy the house to build the wealth. The
Speaker 2: truth is as a renter, you might actually have more
Speaker 2: capacity to build wealth.
Speaker 1: Okay, And speaking of the future, the other thing we
Speaker 1: wanted to touch on is that workers are cutting their
Speaker 1: four oh one k contributions.
Speaker 2: Yeah, so this is some new data that just came
Speaker 2: in from Morgan Stanley. And when I mean you talk
Speaker 2: about it every day, all the headlines that are coming
Speaker 2: in just are not looking econo bright. There's tariffs, right,
Speaker 2: there's cuts to government spending. So a lot of people
Speaker 2: who work have federal jobs. They're like, they're freaking out
Speaker 2: about their future. And so what happens when it feels
Speaker 2: like recession predictions are rising, will people say I'm going
Speaker 2: to invest less, And I think there's there's one good
Speaker 2: side of this and one bad side to this. The
Speaker 2: good side of this is if you're cutting back on
Speaker 2: your investing, like let's say you dial your four one
Speaker 2: K contributions back from eight percent to five percent, that's
Speaker 2: okay for a time. If what you're doing with the
Speaker 2: extra money is putting it into savings, right if you're
Speaker 2: building up a liquid cash account to allow yourself to
Speaker 2: be prepared for harder you know, financial situations that might
Speaker 2: come down the pike, that is okay with me. But
Speaker 2: sixty seven percent of people in this study said they're
Speaker 2: not prioritizing savings either. So they're dialing back on investments,
Speaker 2: they're not prioritizing savings. And to me, that's the clutch
Speaker 2: move is if you're going to dial back on investing,
Speaker 2: you have to increase your savings. If you're not, then
Speaker 2: I want you to keep investing where you are instead
Speaker 2: of just pulling money back and investing less in those
Speaker 2: retirement accounts so you can have more money to spend
Speaker 2: right now, okay?
Speaker 1: And then do you need to keep in mind too
Speaker 1: that it's not like a dollar for dollar thing, because
Speaker 1: I noticed that when I increase my four h one
Speaker 1: K contribution by like three or four percent, it was
Speaker 1: like less than a percent of my take on pay
Speaker 1: that was reduced.
Speaker 2: So what do you mean by that?
Speaker 1: Well, I'm saying that if because it's pre tax that
Speaker 1: the four to one k is taken out, it's it's
Speaker 1: not like if I put an extra two hundred dollars
Speaker 1: a month in, It's not two hundred dollars less on
Speaker 1: my paycheck.
Speaker 2: Yes, that's exactly right.
Speaker 1: Yeah.
Speaker 2: And the other thing to note too is, well, hey,
Speaker 2: what is my workplace contribution amount and what do I
Speaker 2: have to do to earn the full match? So if
Speaker 2: you're saying I'm at six percent right now and they'll
Speaker 2: match three, I'm going to dial back to four. Well,
Speaker 2: if it means your employers only putting in two percent, now,
Speaker 2: you've not just reduced your contribution amount by two percent,
Speaker 2: you've effectively reduced it by three percent, and you've taken
Speaker 2: free money off the table. So you have to be
Speaker 2: aware of that too. And again it might be wise
Speaker 2: if your liquid savings is paltry and you need to
Speaker 2: beef that up because you're worried about your job. You're
Speaker 2: worried about your industry. Then that makes total sense to me.
Speaker 2: You need to be prepared in liquid savings are a
Speaker 2: huge part of that. If you go to how to
Speaker 2: money dot com and you click start here, I've got
Speaker 2: something called the money gears. Find out where you are
Speaker 2: in the money gears, and that can help you know
Speaker 2: what to do next. I don't love seeing people invest less,
Speaker 2: but if it's a limited time only thing to boost
Speaker 2: your cash cushion, then I think it can be wise.
Speaker 1: Okay. For more great money advice, listen to how to
Speaker 1: Money on Sundays from noon to two right here on KFI.
Speaker 1: You can also follow Joel at how to Money. Joel
Speaker 1: It's Joel Larscard. Thank you so much for the great
Speaker 1: advice and information as always.
Speaker 2: Oh happy to thanks Amy.
Speaker 1: All right, talk to you next week.