What Sex & The City Taught Me About Money
Earlier this week, I read a great article in Newsweek by Sallie Krawcheck, whom I’ve had the pleasure of hearing speak. In her article, she talks about the inextricable link between money and power. In order for women to achieve more power, she believes they need to be more comfortable talking about money.
My favorite example that Sallie uses in her op-ed piece is of Carrie Bradshaw in Sex and the City. For those of you who weren’t avid Sex and the City watchers like me, Carrie’s character was a smart, accomplished, successful journalist with an incredible sense of fashion and a closet full of amazing designer clothes and shoes. However, when her landlord decided to sell, she didn’t have any savings to buy her apartment – or any other apartment. Her money was all in her closet! Carrie was completely clueless about the basics of financial health.
This example resonates with me because I can remember watching this episode and vowing that even though I have a bit of a thing for shoes myself, I would never get into a similar situation. Immediately after my college graduation, I met with a financial advisor, which helped put me on the right track. Luckily, by saving responsibly and having open discussions about money and saving (like Sallie talks about in her article) with my parents and financial advisor, I was able to buy my first condo at age 24 by utilizing an FHA loan (you only need to put 3.5% of the sales price as a downpayment with this type of loan). Less than a decade later, I’m in my third home at a significantly higher price point. I was able to make each move from the equity I accumulated in each property I owned previously, combined with my dedicated saving habits (and yes, I even still splurge occasionally on expensive shoes!).
Sallie’s article also reminded me of one I wrote a few years ago about women being comfortable buying real estate when they’re single. I realized it needed an update to go beyond talking to only single women. Why? Real estate is one of the best ways to build wealth over time and I believe it should always be part of any conversation about money and power, whether you are single or in a relationship; whether you’re a man or a woman.
So, why is real estate so consistently a wealth builder? There are many reasons! I’ve run through some of the most important ones below.
- When you pay a mortgage, your money goes toward paying down your loan — and you own more of your home every month. When you pay rent, your monthly outlay disappears; it pays down your landlord’s mortgage. Paying your own mortgage (your principal payment is paying down your loan, increasing your equity), adds to your net worth. For more on what equity is and why it’s important, check out this article.
- Over time, except in the rarest of cases, real estate prices appreciate, building your equity, wealth, and net worth!
- Tax write-offs on property taxes and interest which lowers your tax liability come April 15th. Not really a wealth builder per se, but a nice perk nonetheless!
- Neighborhoods with higher owner-occupancy rates (fewer renters) generally are more expensive.
- To set your children up for success, show them the benefits of homeownership and financial responsibility (again, as Sallie notes, openly talk about money) from a young age. Help them solidify good financial habits as they grow and start lives of their own.
So, HOW, do you get into a position to buy a house and be on the road to building wealth for yourself and future generations?
- Open a new bank account NOW (or you’ll never do it), one that is NOT be linked to any other accounts. Make a commitment to put a certain amount of your paycheck into it EVERY TIME. Make it automatic and watch the account grow. Start with an amount you know is doable and you won’t miss too much. Set a reminder for every three months to see if you can increase it. Trust me, it gets fun (and a little addicting) to watch the account get bigger over time. This account can be used to save for a new house, pay off student loans, etc — whatever that goal is for you. For more ideas on preparing to buy a home, read our related article.
- Audit your current financial situation and see where you need to start. Paying off student loans or credit cards? Reducing your shoe budget? Sometimes it’s helpful to have an outside person like a parent, sibling, friend, or yes, a financial advisor, look at your debts and spending to see where you should start.
- Get your financial team in place. This team includes a financial advisor, accountant (depending on your situation), lender, and of course, a Realtor. We can recommend any of these providers for you to start a conversation.
- Understand that your first home is NOT your dream home. It’s a way to get your foot in the door to building wealth going forward.
- Read our financial guide for first-time buyers. It dives into more depth into some of these items in the HOW section, to get you on the road to homeownership. If you think you’re ready, you can download our first-time buyers’ guide. Not a first-time buyer? We have other guides you can check out here.
If you have any questions about buying, investing, selling, or even just improving your financial IQ, please don’t hesitate to reach out. We’re always happy to chat with you or recommend other financial resources to you, even if you think you won’t be ready for several years!
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