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<v Speaker 1>Let's say good morning to the host of How to

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<v Speaker 1>Money on Sundays from twelve to two right here on KFI.

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<v Speaker 1>It's Joel lars Guard. Joel, we have an interesting trend

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<v Speaker 1>among millionaires. They're renting instead of buying. What's up with that?

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<v Speaker 2>Yeah, this is a study of people named Amy King

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<v Speaker 2>who are just you know, loaded, but they're choosing to rent.

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<v Speaker 2>And say, no, I'm just kidding. This is this is fast.

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<v Speaker 2>Is fascinating to see and I think most people are saying.

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<v Speaker 2>I think that, oh, if you have millions of dollars, clearly,

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<v Speaker 2>clearly you're going to buy a home, right because it

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<v Speaker 2>just it just makes sense. Why would you do anything

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<v Speaker 2>else and building home. There's this kind of mentality in

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<v Speaker 2>the United States of America that this is what leads

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<v Speaker 2>to significant wealth a big part and when you look

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<v Speaker 2>at the numbers, it's actually fairly true. For the average American,

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<v Speaker 2>a big chunk of their net worth lies in the

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<v Speaker 2>fact that they own a home. They've built up equity

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<v Speaker 2>over the years. But we're seeing more millionaires bucking this

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<v Speaker 2>trend and opting to rent instead of buy. And I

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<v Speaker 2>think that this reflects a couple of things. I think

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<v Speaker 2>it reflects the current state of the housing market and

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<v Speaker 2>just how expensive it's gotten. We're starting to see kind

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<v Speaker 2>of some softening and prices. We're seeing more sellers than buyers,

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<v Speaker 2>which is interesting because when you're thinking about like three

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<v Speaker 2>years ago, it was the exact opposite. And we're also

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<v Speaker 2>so when you look at like the disparity between what

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<v Speaker 2>you'd pay for an average apartment these days versus an

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<v Speaker 2>average house, you have to have almost twice as much

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<v Speaker 2>income to afford a mid priced home. Then you need

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<v Speaker 2>to afford a mid priced apartment. And then a recent

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<v Speaker 2>bank rate study found that it's cheaper to rent than

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<v Speaker 2>to buy in all fifty of the largest metro areas,

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<v Speaker 2>which was not true eight years ago, was not true

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<v Speaker 2>six years ago. So it's just really interesting to see

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<v Speaker 2>as the market turns, people make different choices. And I

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<v Speaker 2>think it's a good thing. You can still build wealth

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<v Speaker 2>as a renter. And I think a lot of people

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<v Speaker 2>have heard amy that, yeah, well people have heard that

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<v Speaker 2>renting is throwing money away, yeah, and I just think

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<v Speaker 2>that that's patently false. Renting is putting a roof over

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<v Speaker 2>your head and paying for it, and so you have

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<v Speaker 2>to think you're getting utility out of renting, and if

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<v Speaker 2>renting is going to save you money every single month,

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<v Speaker 2>the disparity between what you pay in rent versus what

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<v Speaker 2>you pay in your mortgage, well, if you are taking

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<v Speaker 2>what you would have paid to buy the house, right,

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<v Speaker 2>and then the repairs on the house, which can be significant,

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<v Speaker 2>don't understand those, then you can invest in your tax

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<v Speaker 2>advantaged accounts in a much more significant way, building wealth

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<v Speaker 2>through your future. So I think people think, oh, I

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<v Speaker 2>got to buy the house to build the wealth. The

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<v Speaker 2>truth is as a renter, you might actually have more

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<v Speaker 2>capacity to build wealth.

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<v Speaker 1>Okay, And speaking of the future, the other thing we

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<v Speaker 1>wanted to touch on is that workers are cutting their

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<v Speaker 1>four oh one k contributions.

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<v Speaker 2>Yeah, so this is some new data that just came

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<v Speaker 2>in from Morgan Stanley. And when I mean you talk

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<v Speaker 2>about it every day, all the headlines that are coming

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<v Speaker 2>in just are not looking econo bright. There's tariffs, right,

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<v Speaker 2>there's cuts to government spending. So a lot of people

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<v Speaker 2>who work have federal jobs. They're like, they're freaking out

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<v Speaker 2>about their future. And so what happens when it feels

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<v Speaker 2>like recession predictions are rising, will people say I'm going

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<v Speaker 2>to invest less, And I think there's there's one good

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<v Speaker 2>side of this and one bad side to this. The

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<v Speaker 2>good side of this is if you're cutting back on

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<v Speaker 2>your investing, like let's say you dial your four one

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<v Speaker 2>K contributions back from eight percent to five percent, that's

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<v Speaker 2>okay for a time. If what you're doing with the

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<v Speaker 2>extra money is putting it into savings, right if you're

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<v Speaker 2>building up a liquid cash account to allow yourself to

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<v Speaker 2>be prepared for harder you know, financial situations that might

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<v Speaker 2>come down the pike, that is okay with me. But

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<v Speaker 2>sixty seven percent of people in this study said they're

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<v Speaker 2>not prioritizing savings either. So they're dialing back on investments,

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<v Speaker 2>they're not prioritizing savings. And to me, that's the clutch

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<v Speaker 2>move is if you're going to dial back on investing,

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<v Speaker 2>you have to increase your savings. If you're not, then

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<v Speaker 2>I want you to keep investing where you are instead

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<v Speaker 2>of just pulling money back and investing less in those

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<v Speaker 2>retirement accounts so you can have more money to spend

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<v Speaker 2>right now, okay?

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<v Speaker 1>And then do you need to keep in mind too

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<v Speaker 1>that it's not like a dollar for dollar thing, because

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<v Speaker 1>I noticed that when I increase my four h one

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<v Speaker 1>K contribution by like three or four percent, it was

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<v Speaker 1>like less than a percent of my take on pay

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<v Speaker 1>that was reduced.

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<v Speaker 2>So what do you mean by that?

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<v Speaker 1>Well, I'm saying that if because it's pre tax that

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<v Speaker 1>the four to one k is taken out, it's it's

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<v Speaker 1>not like if I put an extra two hundred dollars

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<v Speaker 1>a month in, It's not two hundred dollars less on

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<v Speaker 1>my paycheck.

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<v Speaker 2>Yes, that's exactly right.

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<v Speaker 1>Yeah.

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<v Speaker 2>And the other thing to note too is, well, hey,

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<v Speaker 2>what is my workplace contribution amount and what do I

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<v Speaker 2>have to do to earn the full match? So if

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<v Speaker 2>you're saying I'm at six percent right now and they'll

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<v Speaker 2>match three, I'm going to dial back to four. Well,

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<v Speaker 2>if it means your employers only putting in two percent, now,

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<v Speaker 2>you've not just reduced your contribution amount by two percent,

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<v Speaker 2>you've effectively reduced it by three percent, and you've taken

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<v Speaker 2>free money off the table. So you have to be

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<v Speaker 2>aware of that too. And again it might be wise

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<v Speaker 2>if your liquid savings is paltry and you need to

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<v Speaker 2>beef that up because you're worried about your job. You're

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<v Speaker 2>worried about your industry. Then that makes total sense to me.

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<v Speaker 2>You need to be prepared in liquid savings are a

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<v Speaker 2>huge part of that. If you go to how to

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<v Speaker 2>money dot com and you click start here, I've got

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<v Speaker 2>something called the money gears. Find out where you are

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<v Speaker 2>in the money gears, and that can help you know

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<v Speaker 2>what to do next. I don't love seeing people invest less,

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<v Speaker 2>but if it's a limited time only thing to boost

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<v Speaker 2>your cash cushion, then I think it can be wise.

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<v Speaker 1>Okay. For more great money advice, listen to how to

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<v Speaker 1>Money on Sundays from noon to two right here on KFI.

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<v Speaker 1>You can also follow Joel at how to Money. Joel

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<v Speaker 1>It's Joel Larscard. Thank you so much for the great

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<v Speaker 1>advice and information as always.

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<v Speaker 2>Oh happy to thanks Amy.

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<v Speaker 1>All right, talk to you next week.