When math gets pissed: Part 4

Do you remember arguing with your sister when you grew up? When the words turned to playful violence it usually went a little something like this: you would pull her hair and she would beat the ever living Bejesus out of you. Well, that's how it went for me. And in some sort of strange way our violent acts canceled each other out. It took this (painful) memory to bring me to a tidy little conclusion. Our heinous disrespect of math, that was induced by opportunistic lending practices, was just offset by the banks taking a knee to the bank crotch.

The average American and banks are both reeling from poor decisions in regards to borrowing and lending. So let's just start over. Let's just act like none of this ever happened. I even have a place for us to get started: math. The banks can do whatever they want to induce us to borrow more and more money, but if you arm yourself with math, then your financial life will be spared. If math brings you to the conclusion that you should be renting, then embrace it.

Renting is not just for young people. Renting can make sense for retirees, and growing families. Renting can make sense for divorcees and people named Dave, Carlos, or Nolan. Before I go on much further you should know that my intent is to list every possible demographic. Renting can make sense for just about anyone. Renting can especially make sense if honest math doesn't support your quest to own a home.

I admit that telling people to rent just feels awkward. But isn't that the problem? We have been socialized to believe that home ownership is the American Dream. And this cultural directive is so strong that people trade their math for their peer pressure hat. I'm not much one for blame, but I would like to throw a few groups under the bus (What? Did you want me to just sit on the fence? I have to blame somebody). Here is my list of the top three groups to blame for this powerful social influence:

1. Our parents. And by our, I mean anyone under 38 (I, myself, am 32). Many parents are under the impression that their children "should not waste money on rent." This notion just doesn't make sense. I personally believe that this parental pressure has led to a number of poor housing decisions in the last 15 years. The lure of home ownership was different in the 60's, 70's, and 80's. You can't let your parents influence this financial decision based on 20-30 year old data.

1. Home builders. If the pressure to buy a house wasn't hard enough to deal with, then homebuilders techniques to get you to commit to 360 mortgage payments can send you over the edge. Homebuilders got into the practice of subsidizing your first couple years of your mortgage via programs such as a 2-1 buydowns. These programs were meant to do one thing and one thing alone: Sell you a house now, and leave your financial future to chance. Builders didn't care if you couldn't afford the home, their job is to sell you a home. I believe that they shunned their fiduciary responsibilities, and for this, they receive partial blame. Don't worry though, the karma train has entered the station, and some of the most unscrupulous national homebuilders have already gone out of business.

1. Michael Bolton

This concludes the "When math gets pissed" series. If you are looking for a tidy conclusion, then please allow this explanation to fly: use math and don't think that you are immune to bad decision making. I would love to hear your comments on the series. Feel free to post them on the blog. Don't forget to join my Facebook fan page.

Catch up with this series here: Part 1, Part 2, and Part 3.