Ramit Sethi, self-made millionaire and star of Netflix’s “How to Get Rich,” says young Americans have been “put in an untenable position” when it comes to buying a home. Prices are too high for many to afford, and yet it’s still the epitome of the American Dream.
Homeownership is also the key to getting rich, financial experts say. So when they can’t afford to buy, they feel like failures, which can have ripple effects throughout their financial lives.
“Deep down people believe renting is for losers. They have been told that in order to be successful in America, you have to buy a house,” Sethi tells Fortune. “Every day they wake up and they just feel awful. I don’t want you to feel awful.”
It’s become one of the personal finance expert’s most controversial and argued-with claims: “Renting can be a phenomenal financial choice.” Homeownership can be a good move for some, he says, but it shouldn’t be viewed as solely an investment when it’s more a lifestyle choice for most.
Viewed purely from a financial standpoint, it is possible to make more on investments while renting, says Sethi. People often compare the mortgage to their monthly rental payment to make the case for owning, but that ignores all other homeownership costs, including closing costs, utilities, maintenance, insurance, taxes, and so on. In his eyes, that means homeownership can quickly become a “bad” investment, depending on your financial situation.
Much of Sethi’s work as a personal finance expert—in addition to writing books and hosting the Netflix show, Sethi produces a financial podcast each week helping couples manage their money—is helping people overcome the money myths they’ve been taught to get at what they actually want out of life.
For example, Sethi suggests those who want to buy a house ASAP should write down those feels and interrogate them. Why is there a need to buy a house now? Where is the message coming from?
“Americans are really good at making decisions they think will make them happy but make them deeply unhappy. ‘Let me destroy my social network and move to the suburbs and take on insurmountable amounts of debt to own a home,'” he says. “You know we don’t have to do that? You can choose what your rich life looks like.”
He also suggests reframing renting in your mind. Is it really “throwing money away,” or is it fulfilling a need you have, which is having somewhere to live.
And of course, run the numbers. Sethi says because of the emotional baggage that comes with buying a house, so many people don’t consider what they can actually afford when it comes to their biggest lifetime purchase.
“People spend more time comparing the price of soup at the grocery store than they do understanding an amortization table,” he says, referencing the tool that shows you how much you will pay in principal and interest over time.
“I refuse to accept you’re going to make a seven-figure purchase just because your mom, dad, or uncle told you that real estate only goes up,” he continues. “That is not true and you need to understand the numbers.”
Sethi encourages people to define their own “Rich Life,” or how they would ideally live, rather than simply checking off the boxes of someone else’s. Do you want to retire in your 30s? Try every new restaurant in town? Build wealth to pass down to your children? Travel for half of the year?
Get clear on the details, and consider whether homeownership fits into that. And it very well might—Sethi says owning a home doesn’t always build wealth, but it does have profound lifestyle implications. Perhaps you want to design a space to share with your spouse and children, provide a place for your parents to live, or, simply, the stability that comes with owning. That works too, as long as you know what you’re getting into and it aligns with your values.
“What do you want? Most of us have never thought about it,” he says. “Be thoughtful and intentional about it.”
