The strategy of renting now, and investing the difference can work in theory, but the reality is that Americans as a whole, whether they are renters or property owners, really don’t save very much, and some renters will not actually be investing and saving the difference.
I completely agree, except that I would say that it’s “most” renters that don’t save the difference and not just “some”. On this forum we’re the exception. Most people will see the extra income and just spend it! New car, big TV, and so on. A mortgage payment is a forced saving mechanism, and if you don’t “save” you lose your home, go bankrupt, and so on. There is no equivalent motivation for saving in a bank account. No, the future is not motivation enough for most. 🙂
I have to add that people in this country seem to be generally bad at managing their money. I’m from England originally and over there you get paid on a monthly basis, and a lot of bills are quarterly and not monthly like they are in the states. When explaining this to to my new American co-workers, they were amazed that you could live like this! The surprise was that you could easily just spend all your paycheck in one week and then have nothing for THREE weeks as opposed to spending all your paycheck in one week and then only having to scrimp for ONE week! It’s a sad fact that most people live paycheck to paycheck and so things are made easier when the paychecks are closer together.
Honestly, I’m waiting for the day when you get billed daily through some kind of low overhead “micro billing” system. Paychecks would have to move to this kind of system too. It might not be a bad idea actually – it would prevent people feeling rich when they got paid, when in fact they’re as poor as they were the day before.
