Let's say good morning to the host of How to Money on Sundays from twelve to two right here on KFI. It's Joel lars Guard. Joel, we have an interesting trend among millionaires. They're renting instead of buying. What's up with that?
Yeah, this is a study of people named Amy King who are just you know, loaded, but they're choosing to rent. And say, no, I'm just kidding. This is this is fast. Is fascinating to see and I think most people are saying. I think that, oh, if you have millions of dollars, clearly, clearly you're going to buy a home, right because it just it just makes sense. Why would you do anything
else and building home. There's this kind of mentality in the United States of America that this is what leads to significant wealth a big part and when you look at the numbers, it's actually fairly true. For the average American, a big chunk of their net worth lies in the fact that they own a home. They've built up equity over the years. But we're seeing more millionaires bucking this trend and opting to rent instead of buy. And I
think that this reflects a couple of things. I think it reflects the current state of the housing market and just how expensive it's gotten. We're starting to see kind of some softening and prices. We're seeing more sellers than buyers, which is interesting because when you're thinking about like three
years ago, it was the exact opposite. And we're also so when you look at like the disparity between what you'd pay for an average apartment these days versus an average house, you have to have almost twice as much income to afford a mid priced home. Then you need to afford a mid priced apartment. And then a recent bank rate study found that it's cheaper to rent than to buy in all fifty of the largest metro areas, which was not true eight years ago, was not true
six years ago. So it's just really interesting to see as the market turns, people make different choices. And I think it's a good thing. You can still build wealth as a renter. And I think a lot of people have heard amy that, yeah, well people have heard that renting is throwing money away, yeah, and I just think
that that's patently false. Renting is putting a roof over your head and paying for it, and so you have to think you're getting utility out of renting, and if renting is going to save you money every single month, the disparity between what you pay in rent versus what you pay in your mortgage, well, if you are taking what you would have paid to buy the house, right, and then the repairs on the house, which can be significant, don't understand those, then you can invest in your tax
advantaged accounts in a much more significant way, building wealth through your future. So I think people think, oh, I got to buy the house to build the wealth. The truth is as a renter, you might actually have more capacity to build wealth.
Okay, And speaking of the future, the other thing we wanted to touch on is that workers are cutting their four oh one k contributions.
Yeah, so this is some new data that just came in from Morgan Stanley. And when I mean you talk about it every day, all the headlines that are coming in just are not looking econo bright. There's tariffs, right, there's cuts to government spending. So a lot of people who work have federal jobs. They're like, they're freaking out
about their future. And so what happens when it feels like recession predictions are rising, will people say I'm going to invest less, And I think there's there's one good side of this and one bad side to this. The good side of this is if you're cutting back on your investing, like let's say you dial your four one K contributions back from eight percent to five percent, that's
okay for a time. If what you're doing with the extra money is putting it into savings, right if you're building up a liquid cash account to allow yourself to be prepared for harder you know, financial situations that might come down the pike, that is okay with me. But sixty seven percent of people in this study said they're not prioritizing savings either. So they're dialing back on investments,
they're not prioritizing savings. And to me, that's the clutch move is if you're going to dial back on investing, you have to increase your savings. If you're not, then I want you to keep investing where you are instead of just pulling money back and investing less in those retirement accounts so you can have more money to spend right now, okay?
And then do you need to keep in mind too that it's not like a dollar for dollar thing, because I noticed that when I increase my four h one K contribution by like three or four percent, it was like less than a percent of my take on pay that was reduced.
So what do you mean by that?
Well, I'm saying that if because it's pre tax that the four to one k is taken out, it's it's not like if I put an extra two hundred dollars a month in, It's not two hundred dollars less on my paycheck.
Yes, that's exactly right.
Yeah.
And the other thing to note too is, well, hey, what is my workplace contribution amount and what do I have to do to earn the full match? So if you're saying I'm at six percent right now and they'll match three, I'm going to dial back to four. Well, if it means your employers only putting in two percent, now, you've not just reduced your contribution amount by two percent, you've effectively reduced it by three percent, and you've taken free money off the table. So you have to be
aware of that too. And again it might be wise if your liquid savings is paltry and you need to beef that up because you're worried about your job. You're worried about your industry. Then that makes total sense to me. You need to be prepared in liquid savings are a huge part of that. If you go to how to money dot com and you click start here, I've got something called the money gears. Find out where you are in the money gears, and that can help you know
what to do next. I don't love seeing people invest less, but if it's a limited time only thing to boost your cash cushion, then I think it can be wise.
Okay. For more great money advice, listen to how to Money on Sundays from noon to two right here on KFI. You can also follow Joel at how to Money. Joel It's Joel Larscard. Thank you so much for the great advice and information as always.
Oh happy to thanks Amy.
All right, talk to you next week.