This is the fifth article in a series of 7. I don’t normally write about the finance books that I read, but George S. Clason’s “The Richest Man in Babylon” has some really sound financial principles that I want to pass along. It’s a tiny little book, only 140 pages and since it’s older you should be able to pick it up at your library or on Paperback swap if you want to read it yourself.
“The Richest Man in Babylon” is the story of Arkad, a man who started out as a simple peasant and has now become extremely wealthy. From his castle the king of Babylon sees the poor in his country continue to suffer as they mismanage their resources. He asks Arkad to teach the citizens the secrets to achieving financial security.
The lessons Arkad teaches them he calls the “Seven Cures for a Lean Purse”. While they are not revolutionary, their simplicity makes them very valuable information.
Cure #5: Make of Thy Dwelling a Profitable Investment (A Frugal Chick’s Translation: Don’t Have More House than You Can Handle)
This is one point where Arkad and I have a small difference of opinion. Arkad’s advice is to quit paying rent and start paying a mortgage. Then pay your mortgage off as quickly as possible.
For a large percentage of the population, I agree with this whole heartedly. When I was ready to move out of my parent’s house I asked my father to go apartment hunting with me. He told me he wouldn’t go look at apartments but he would go with me if I would consider buying instead of renting. I bought the first place we looked at. Years later, I still live in that little condo and it’s the best decision I ever made. And it has increased in value, giving me a nice nest egg if I ever need to move.
However, I live in a navy area where the average stay is about 3 years. Some homeowners can lose money by staying in a house only three years. Also there are many cities in this country where being a homeowner is only for the extremely wealthy. In that case, renting is ideal. Plus the additional costs of being a homeowner (insurance, maintenance, taxes etc) do not always make it the most economical situation.
I do agree with Arkad on one point though- be realistic about your housing. If your house or apartment is too big, why not consider downsizing to something more reasonable?