Homes Are Luxury Purchases

Ramit Sethi shares a nuanced perspective on home ownership and investing, emphasizing that people often misuse the term "investment" to justify purchases. He advocates for honest acknowledgment of luxury spending and making decisions based on both numbers and personal joy.

• The Term "Investment" is Misused:

  • People often label personal purchases as investments to justify spending
  • Examples include mattresses, personal training, and face cream
  • True investments should provide financial returns

• Home Ownership Reality:

  • A primary residence is often not a great investment
  • Buying a house should be viewed as a luxury purchase
  • He personally expects to "lose a million" when buying a house and is "okay with that"

• Decision Making Framework:

  • Run the numbers first
  • Consider non-financial factors
  • Be honest about whether something brings joy versus financial return
  • Affordability is about numbers, not feelings
    • "Affordability is a number not a feeling"
    • Questions about affordability should be answered with actual numbers

• Housing Decisions:

  • Renting isn't "throwing money away" - it's paying for a service
  • It's okay to buy a house because it makes you happy
  • Housing can be a store of value, but that should be a "cherry on top"
  • Don't feel pressured to buy if it doesn't align with your values

• Key Philosophy:

  • It's acceptable to make purchases simply because they bring joy
  • Be transparent about luxury spending instead of trying to justify it as investment
  • Focus on what actually makes you happy rather than following conventional wisdom