Until the financial crisis that started last fall, no one questioned the  value and importance of owning a home. But when so many people  defaulted on their mortgages, people began to see that renting is a
viable and, in some cases, preferable option.

Many of us grew up with the adage: “Renting is just throwing money down the drain.” Well, the subprime crisis has ended that delusion, and besides, it’s never been true that everyone should own a home even if they can afford one.

In boom times or in bust times, who shouldn’t own a home?

Anyone who doesn’t have a firm intention to live in the house for at least seven years.

Anyone who needs flexibility. For example, if you don’t want to limit your income potential, or want to keep your income options flexible, owning a house keeps you in one area, but the more lucrative jobs may be elsewhere.

Anyone whose marriage isn’t stable. Self-explanatory!

Anyone whose life is changing. For example, if you’re about to have your first child or about to be an empty nester, your world will change dramatically. Keep your options open while you’re in transition.

Anyone who’s arriving in a new neighborhood, job or a city should rent first before buying. In six months, you may be pining for the neighborhood your friends live in, but if you’ve bought, it’s too late. If your boss is a tyrant, renting allows you to relocate and start over—quickly.

Anyone who is disciplined enough to save money on his/her own should not buy. Most people need the forced savings of home ownership. But if you don’t, save on your own and keep your investments diversified in a mutual fund portfolio.

Anyone who must put all of their assets into a house. Putting all your eggs into one basket is never a good idea. Diversifying your assets is essential to keeping your portfolio healthy and balanced.

Anyone who doesn’t want the stress of home maintenance or doesn’t have the cash reserves for unexpected home repair/maintenance costs. Yes, roofs really do need to be replaced. Termites really can destroy your house. And paying for these services can put you into debt fast.

Anyone who prefers to use their surplus cash flow for travel, five-star restaurants or other expensive items instead of costly home repairs and improvements.

Anyone who isn’t willing to look at the numbers and rationally decide whether renting or buying makes more financial sense. Lots of people are impulse home buyers. They fall in love with that cute cul-de-sac or the master bath Jacuzzi or the sunlight pouring into the kitchen. It has to make emotional and financial sense to make a purchase this big. When looking at the numbers, include and compare everything: property taxes, utilities, short- and long-term maintenance, landscaping, insurance and commuting costs.

I was in the shower this morning  thinking:  “Oh, when the markets come back and the business world revives, I’ll have more money.  I’ll feel more at ease.  I’ll be happier.”  Of course, three years ago my clients and I had more money.  And I remember that my clients and I were upset about various world events, our elected officials, our jobs, our commutes.  And we were worried about our money, too.   We were no happier back then than we are now.  The opportunity for today is to let go of the myth that more money will make us happy.

If we can let go of this thought we can have happiness and peace right now. Because happiness and peace have nothing to do with the amount of money you have.  When you know that, you’re free.  You can yell at your TV “CNN, you do not determine  my happiness!”  You can choose to be happy because of your own intelligence and creativity, your potential, your community of friends and family, the fact that the sun reliably rises in the sky every day.  We are not victims of  the markets.  We don’t need to wait for the markets to come back.  Were you really happier when the economy was strong?  Or were you just worried about other things?  Cultivate the things that make you happy and your happiness will grow.

And if you really want to add to your happiness, stop watching or reading the news for 1 week.  Feel your bliss grow.

Answer : First, keep in mind that these markets can come back completely. Impulsive moves may be too reactive.  If you’re planning to draw money during retirement over a 20+ year period, I do not recommend any changes to your plans. In my book I offera step-by-step approach for allocating your money.  It’s about buying what’s low and selling what’s high.  That’s the way to make money.  And keep contributing money.  So many people stop contributing when the market goes down.  This is irrational!  Keep contributing and contribute even more when the market is low.  Find work that you love so that even if you don’t have sufficient funds to retire, you’ll enjoy what  you do. 

More on the financial Crisis :