Renting Gives a Freedom Mindset

Something that came to mind as my wife and I are planning a big overseas move is our housing situation. Renting makes moving so easy! A couple weeks ago we let our landlord know that we are moving. No problem, no costs. We called the utility companies and set a cancellation date. And we have been selling our belongings. We have no emotional attachment to our house because it isn't ours. It's just a comfortable roof over our heads that has served us well for the past two years.

Our stuff, after ten years of relatively minimalist accumulation, is being trimmed down to four suitcases and three boxes (two of them full of books). Aside from clothes, we are taking only those things which are most important to us. Some pictures of families and friends, some small keepsakes from experiences we've had together, a few books, our laptops, and some games. Our emotional attachments are in our photos and adventures, not 2x4 walls or the dining room wainscotting.

Some notable things. We could easily leave to go on our global adventure with little cost or hassle. There are virtually no costs to leave our house or move our financial assets to accounts that will work for us overseas.

Had we owned our house we would have been forced to sell or become absentee landlords. Selling would have costed approximately $20,000 after all fees, legal costs, and taxes are factored in. The $20,000 might be a small amount compared to our total net worth, but it would cover about one year of our expenses in Vietnam! Being landlords would have introduced management, tax, and other financial headaches.

As I've shared before, not owning a house has allowed us to maximize our net cash flow every month for the past three years. We've used that to save aggressively and invest! Our investment gains on these savings alone have been well into six figures.

But more importantly, home ownership can psychologically tie you down. The demand of large mortgage payments every two weeks, taxes every year, insurance every month, and promises of limitless equity can be financially restricting. Plus, the emotional ownership of the work put into your house, whether it is new floors or custom blinds, can give emotional attachment to your house. These things all work together to hold you back from a mindset of freedom and flexibility—the ability to take advantage of every good opportunity!

The Broader Mindset

I'm into thinking about finances, life, and risk in a different way from most. The truth is most of our peers would not be able to do what we are doing. This has little to do with incomes, and not much to do with our career choices. It has a lot to do with spending and priorities. The decisions we make every day.

Much of the poor decision making I see regularly in others can be blamed directly on housing and the immense pressure from your spouse, family, and friends to become a homeowner. Even if it is the riskiest and most restrictive decision you can make. Something to think about is if you owning a house is a good decision for you, or a preferable outcome for them.

In Canada we are in a housing obsessed culture. Last week I was seriously asked if I was buying a house in Vietnam. I laughed and replied, "No!", adding that we've been renting for the past three years in Edmonton. To their further shock of course. Really, you've got to be kidding me! What kind of warped mindset of home ownership is required to think that it would be normal or expected to buy a house, sight unseen, in a developing country with a shaky legal structure and questionable property rights? I'll continue to rent, thank you very much.

While most sane people simply view housing as a form of shelter that should be comfortable and affordable, here in Canada many believe housing is an investment, a never ending improvement project, an ever-expanding HELOC to tap into for consumer spending, and a crucial part of one's identity. This ideology is all backstopped by taxpayer-funded corporations and government policies intent on keeping the party going.

Fear of missing out has driven real estate prices to insane heights in many markets. Prices are not sustainable and have every marker of an inflated asset bubble—the days of the best gains are clearly behind us. A good time to buy was 1995 when a typical house costed three times your dad's salary.

Yet people are frantic, scraping together meager savings, borrowing from family, and binding themselves into monster mortgages just so they can boast of home ownership. This craziness when houses are priced at eight or ten times the average salary in our biggest cities. As students of markets we know insanity can continue for longer than we think, but how much higher can house prices possibly go in the long term relative to incomes?

Too many people are financially stretched thinner than a crêpe. I don't know how much weight I put into the frequent surveys that state more than half of Canadians are a couple hundred bucks away from bankruptcy, but certainly we live a tight, high stress, credit dependent culture. To me this sounds like a population that has about as much house as they can afford (or probably more for most).

Mortgage applications are thought of as a fudge-able subjective process rather than a firm legal contract that is signed and comes complete with a mile of small print. In these applications incomes are stretched, existing debt is hidden, and anticipated life events are not considered and certainly not disclosed. It doesn't matter if the missus is eight months pregnant and the family income will be cut by a third or more starting next month.

Savings and real investments are an afterthought, or nice-to-have, for most. A real investment should generate positive returns over time with some income. It should be liberating, not a source of financial and emotional bondage.

That doesn't mean we should think of investment gains as being a sure thing. They are not. Drops in our portfolios occur regularly and sometimes they are even painful. But nothing beats being able to access some cash for any reason at the click of a button. Nothing is better than the freedom of no emotional attachment to where your money is. The ability to move assets to the safest locations in the world is comforting, no matter where you physically live.

I firmly believe that renting a modest, but comfortable house is a key element of long term prosperity, especially given the prices we are seeing today. Even where house prices are more reasonable, think about the other restrictions you might experience by taking on home ownership. Choose to put freedom first in your decision making.

Comments & Questions

All comments are moderated before being posted for public viewing. Please don't send in multiple comments if yours doesn't appear right away. It can take up to 24 hours before comments are posted.

Comments containing links or "trolling" will not be posted. Comments with profane language or those which reveal personal information will be edited by moderator.

7 Replies to “Renting Gives a Freedom Mindset”

  1. Yanniel says:

    RE is a cult. I have explained the pitfalls of it to my friends many times. Some simply think I am an idiot. Others understand and believe my argument; yet end up succumbing to it.

    I feel bad for the sheer ignorance and blind faith of the 1st group. Yet, the second group is the most puzzling to me. I just can’t get into my head why someone would commit economic suicide knowingly and willingly.

  2. Another great article 🙂

  3. Daren (Editor) says:

    Thanks for reading Matt!

  4. Where exactly in Vietnam are you guys going? And for how long you plan to be there? Will you start a travel blog/channel to document the experience, and let others know the ins and outs of such a big change? Will you keep this blog going?

    Wish you all the best in your new chapter

  5. Daren (Editor) says:

    Thanks for the well wishes! We’re heading to Hanoi–in the north of Vietnam. We hear the weather is a bit milder than in SaiGon and the city has a more relaxed feel. I suppose we’ll find out.
    I am planning on doing a photo-based blog, or something like that, to document our time there. It’s more an idea than anything else at this point. While it may include travel tips and little things we’ve learned; I don’t anticipate I’ll want to do a second blog that is predominately written.
    I am planning to continue financial blogging. However, some ideas I have are to start a new blog that is more international in flavor. Less Canadian focused, more of a trade and idea journal, and more focused on momentum and capital efficiency. While I think it is a good option for hands-off investors who want reasonable returns without much work, I don’t think I’ll discuss or track more passive investment options. I also want to try build something that I can carefully monetize a little bit. Be that with coaching or training or subscriptions. I’m not sure how it will work out, but that’s something to tackle in a few months when we get in Hanoi and things settle a bit.

  6. Thanks Daren for your response.

    As a naturalized Canadian I went through a lot of changes, and I had to adapt to new realities of life. I still find it difficult to understand the need for ownership in Canada. Also I know that this place will not be the last place I will live, not because it is not a great place, quite the opposite, but because I am amazed at the diversity of the world, and do not want to miss on any of it. I hold a European Union passport – that gives me a lot of options when it comes to traveling/living in Europe, but the big call its from Asia: Thailand, Vietnam, Taiwan, Singapore, Malaysia, and especially Japan and Korea (the friendly one) are high on my list of places to go, live, settle, or rest my bones.

    I do have to admit that you took me by surprise when you decide to give up what you have here and start anew in a foreign and very, very different place like Vietnam. I do not personally know you (obvious fact), but you strike me as a calculated, pragmatic type of person, while the adventurer cord its usually struck by some one, how to say it, more “wild”, I see you more as an apollonian then dionysian.

    I will look forward to see what you’ll create, now that you give yourself the utmost freedom, and liberty (by quitting your daily job and certain social constrains). I know that there are a tone of vloggers/bloggers out there recording their experiences, but I want to see someone more honest and pragmatic, like you, have a go at it. A fellow Canadian I’m watching just because of his honesty, lightness, curiosity and humor (otherwise I think he is a nut job) is Kasey Stern, the host of the YouTube channel “Vegetable Police”.

    Now that I digressed quite a bit from our subject, investments in or outside Canada, I will keep reading your posts, learn a bit more, get inspired and build a way of my own.

    Good luck!

  7. Daren (Editor) says:

    I have an EU passport myself. I’m not necessarily drawn to the western European countries such as my country of heritage, but there might be some more appealing options in middle/eastern Europe.
    What I really like about Asia at this stage in our lives is that it’s a happening place with an old and unique culture. I think there is a lot I can learn from the Asian mindset, especially one coming out of insular Communism with deep scars from western wars.
    I guess you could say this was pragmatic since we have always wanted to travel and this combines a nice home base and income with easy travel opportunities to many places we want to go visit. Also I am not a person to sit and let myself get very comfortable. Change is great! It isn’t always about changing to something better on paper, but more about broadening my mindset and experiences. The safe thing to do would be to work in my field, and my wife in hers, until we are both 55 and can pull a government pension in addition to our investments. But it would also narrow our life perspectives.
    We save and invest so that we can do seemingly crazy things without them actually being crazy. Its not about order vs. choas, but rather a relationship of the two in healthy balance. Apollo would put all of his money in CDs and Term Deposits, focusing instead on work and saving. Dionysus would only buy lottery tickets, play online poker, and trade penny stocks he reads about on Reddit. Neither one is preferable.

Comments are closed