Money Management

Some people will tell you that your home is your greatest investment. Read on to see why I feel very differently. 

Many people will tell you that owning a home is more advantageous than renting because you get to build equity in a place of your own. And eventually, you might be able to cash out that equity and walk away with a nice profit.

The idea of homeownership being a more financially sound choice than renting is certainly arguable. I’ve often made the case that renting makes more financial sense because your costs are more fixed and you’re not grappling with rising property taxes, maintenance, and repairs.

In a recent survey by TD Bank, 85% of respondents said that buying a home is a good long-term investment. I’ll never think of my home as an investment, though. Here’s why.

1. It’s subject to wear and tear

Many homes ultimately gain value over time. But the more wear and tear yours has, the more it’ll detract from its value. That alone leads me to believe that my home is not an investment.

I need to be able to live in my home without worrying about wearing out the carpet or scratching up the hardwood floors. I need the option to be comfortable and not have to think about the financial consequences.

But to me, investments are all about financial upside. And since I’m not really expecting that from my home, it falls into a different category.

2. It costs money to hang onto

The stocks I own in my brokerage account don’t cost me money on a regular basis. Sure, I spent money to buy them. But it’s not like I’m charged a fee to maintain them. And my stocks won’t suddenly stop working like my air conditioning system has several times over.

When you own a home, you’re constantly spending money just to keep it. To me, that reads like an expense more so than an investment.

3. I may not make a profit when I sell — and that’s not even my goal

The whole reason I bought a bunch of stocks for my brokerage account is that I want to make money. I don’t gain any near-term benefit or enjoyment from holding those stocks. I simply want to keep them around so their value increases and then sell them at a profit at the right time.

But making money isn’t my goal in owning a home. My goal is to put a roof over my family’s head and enjoy a comfortable living space. That’s it.

If I happen to make money when the time comes to sell my home, wonderful. But that’s not my primary objective.

Plus, given what I spend on property taxes, maintenance, and repairs, it’s questionable whether I’ll even make a profit. Right now, my home is worth several hundred thousand dollars more than what I paid for it. But I’ve also spent that equivalent amount through the years on property taxes and other expenses. So that basically wipes out any financial gain.

There are plenty of good reasons to want to own a home. But if you’re going to buy one, don’t do so for the purpose of adding another investment to your portfolio. Instead, buy a home so you don’t have to follow a landlord’s rules and so you can enjoy a space you’re able to set up to meet your needs. There may be some financial upside down the line if you’re lucky, but that should really be secondary.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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People often end up going over budget on their vacations. Discover why this happens and how you can better manage your travel costs. 

Many travelers find that trips end up costing much more than they originally planned. Sometimes, you come home and get sticker shock when you see the balances on your credit cards. Or, it can happen mid-trip. You start doing the math in your head while you’re getting lunch or booking activities. Next thing you know, you’re stressing out about how much you’re spending.

Worrying about money is no way to spend your vacation. But digging yourself out of a financial hole when you get back is no good, either. So, let’s look at why this happens and what you can do to fix it.

Why travel always costs more than you expect

The reason why people are often surprised by how much travel costs is that they don’t plan for all the expenses involved. Everyone focuses on the two big expenses — airfare and accommodations. Those tend to cost the most, and they’re what you need to book in advance.

There are plenty of other common travel expenses, though. You’re probably also going to spend money on:

Dining at restaurantsActivitiesTransportation (rideshares, taxis, metro tickets, car rentals, etc.)Souvenirs

Even if you plan for some of these, it’s common to miss things or underestimate how much they’ll cost. Maybe you end up doing more activities than you expected. A $15 boat ride here, a $20 museum visit there, $60 at a rooftop bar you heard you just have to visit. You might not factor these into your budget, either because they’re smaller expenses or because you didn’t plan every single part of your trip ahead of time, but they add up.

Now, sometimes these are less honest mistakes and more wishful thinking. If you really want to go on a trip, it’s easy to skimp on the planning and underestimate what you’ll spend on a day-to-day basis to convince yourself you can afford it. You eventually end up with the same problem, though — a trip that cost much more than you bargained for.

How to fix your travel budget

I travel fairly often, and my method for estimating my travel costs is pretty simple. First, account for the large, fixed expenses. That means flights, hotels, and any big-ticket activities or purchases you know you’ll have.

After that, come up with a quick, daily spending estimate. For that, I go with 50% to 100% of the price of the hotel (or vacation rental). If the hotel costs $200 per night, I assume I’ll be spending another $100 to $200 per day. And I’ll only go on the trip if I’m comfortable spending that much.

Here’s an example:

Flights: $400Hotel: $200 per night for seven nights, $1,400 totalDaily spending estimate: $100 to $200 for seven days, $700 to $1,400 totalTotal cost: $2,500 to $3,200

It works well because how much your accommodations cost is usually a good predictor of what your other expenses will look like. If hotels are expensive where you’re going, things like restaurants and activities probably will be, too.

There are definitely more precise methods. But the last thing I want to do is spend a bunch of time with a spreadsheet, trying to figure out everything I’ll do when I travel and exactly how much it will cost me. I don’t need to know the exact numbers. I just need to know how much it could cost so I don’t get any unwelcome surprises.

Travel doesn’t need to be expensive

If you often find yourself spending more than you’d like on vacation, or you don’t think you can afford to go on one, there are several ways to travel for less. Here are a few travel savings strategies that have worked for me:

Start using travel credit cards. These earn rewards you can use for travel expenses, including airfare and hotels. Many cards also have other benefits that can help you save while you travel.Spend more time in one place. Seeing multiple cities is more time consuming and expensive. Each time you go somewhere new, you need to spend more on airfare, train tickets, or a car rental.Don’t eat at restaurants for every meal. I love a good restaurant as much as anyone, but eating out two or three times per day adds quite a bit to your travel costs. If you have free breakfast at your hotel, take advantage. And visit grocery stores to grab snacks and cheap meal options — things like sandwiches and poke bowls are great for a quick lunch or dinner.Look for low-cost and free attractions. Not every activity needs to be expensive. Most cities have plenty of attractions that don’t cost much or anything at all.

It’s nice to have a large travel budget, but it’s not a necessity. You can travel for less, or spend more, depending on the kind of trip you want and what your budget allows. Whatever you decide, make sure to account for major expenses and also plan for the daily spending you’ll do.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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