choosing a poorer financial decision

[LivingAlmostLarge]

So the other thread about renting your whole life. I think the biggest flaw really is do renters save the difference and invest the amount between rent and a mortgage? Or do renters save the principal payment that homeowners "save" by paying down principal. So at the end of the mortgage you have a paid for asset for say $250k that did the renter save the $250k and invest it? I've found the answer to that to be usually no. Also renter tend to get used the super cheap rent and when and if the time comes for buying it's hard to pay 2x the rent for the same home.

That being said I think renting can be a financially advantageous decision. But then I was also thinking can leasing a car be a good financial decision or is it always poorer? I can argue it can be advantageous for business owners. It can be advantageous for rapidly depreciating cars.

but most recently I told my mom she should lease the next car she wants. When she moves she'll buy a new car. And I suggested leasing it. I said just lease it and if you dont' want it or pass away i'll turn it back in. I know it's probably not the right financial decision but I was just thinking does it matter? Like renting when you are retired and older does it really matter to make the most financially sensible decision?

[disneysteve]

Not every decision is strictly financial in nature.

Regarding leasing, there are people who insist on getting a brand new car every 2 years. For them, leasing makes a lot more sense than buying. It's colossally stupid from a financial standpoint but it isn't a financial decision to them. Their priority is always having a new car.

Cell phones are similar. Lots of people take the deal that lets them upgrade their phone annually or biannually. Me? I buy my phone and keep it as long as I possibly can. I don't want to be paying for it endlessly and I don't want to be learning about a new device every year.

There are times when renting makes sense, as in my mom's situation, though for her it was also the best decision financially.

Renting isn't always "throwing money away" if it fits your needs at that point in time. For example, you shouldn't buy a house if you don't expect to be there for 5-10 years minimum. If you think you might move in a year or two, renting makes a lot more sense.

[myrdale]

Renting may work well on both the high end and the low end.

If you want to live in New York City, renting is probably going to make far more sense than buying.

If you're living on section 8 housing, again you're renting.

If you're working a temporary job that is only going to last for a few years at most, again renting makes sense.

At the time in 2006 when I purchased my house, $101,000 loan for 30 years was $650 per month and $234,000 over the life of the loan (taxes included). Renting at the time was around $1,000.

[kork13]

I've heard before that renting is patience. You rent as cheaply as able, save up as much as possible, then once you're in a stable position, you can buy.

There are always factors that enter into decision making beyond pure dollars & cents. Some influences are logical, others emotional. Just because a decision isn't the best option financially, that doesn't mean it's the wrong choice.

[kork13]

Another thought I had on this topic ... It's 100% okay & reasonable for people to sometimes make the less-financially-sound decision based on other factors that are also important to them. However, I think it's also important that people make those decisions intentionally -- they should KNOW they're choosing a suboptimal option. However, many people will convince themselves otherwise, and will never be convinced otherwise.

[myrdale]

Another thought I had on this topic ... It's 100% okay & reasonable for people to sometimes make the less-financially-sound decision based on other factors that are also important to them. However, I think it's also important that people make those decisions intentionally -- they should KNOW they're choosing a suboptimal option. However, many people will convince themselves otherwise, and will never be convinced otherwise.

To date, I have section hiked about 200 miles of the Appalachian Trail. I would like to through hike the entire trail Georgia to Maine. That will require me to quit or take off for at a minimum of 6 months. My expenses would go way down but my income would be $0. I would also be loosing out on retirement for that period. Financially it is a HORRIBLE idea at this point in my life. But there are factors beyond money.

Alternately if I wanted a $100k car and bought it today, the end balance would probably come out being the same in both cases. But I think I'd make the argument that is a foolish choice to buy a car that expensive.

"Other factors that are also important to them" have a hidden cost / value associated with them also.

[disneysteve]

Another thought I had on this topic ... It's 100% okay & reasonable for people to sometimes make the less-financially-sound decision based on other factors that are also important to them. However, I think it's also important that people make those decisions intentionally -- they should KNOW they're choosing a suboptimal option. However, many people will convince themselves otherwise, and will never be convinced otherwise.

Very true. None of us always make the absolute best financial decision every time in every situation. Life would be incredibly boring if we did. As long as we understand the decision we are making and what the consequences are, that's okay though.

[srblanco7]

Like renting when you are retired and older does it really matter to make the most financially sensible decision?

Is the "most financially sensible decision" solely based on quantitative analysis? Or is it reasonable to factor in a qualitative element (such as, "I can "live with" this decision)?

And all too often the "most financially sensible decision" can only be determined in hindsight.

[LivingAlmostLarge]

yep the best decision is always made in hindsight