Do You Own Your Home?


 It’s not owning property that gives you security; it just gives your creditors security.  Real security comes from having a steady income… – Niall Ferguson; The Ascent of Money, A Financial History of the World

So every time I have ever applied for credit of any type, whether a credit card, store credit or for something larger like my car I’ve been asked the same question and I’ve always lied about the answer.  I even lie on my tax return every year, that’s got to be illegal right?  But I dare say every one of you at one time or another has lied too.

The question I’m referring to is this one; do you own your home or rent?

If you have a mortgage then the truthful answer to that question is neither.  The bank owns it, but that isn’t even true since they likely bundled your mortgage with a bunch more and sold it again.  The fact is I have no idea who owns my home, I just live there.  But one of the pillars of our society is built on the illusion of owning property and there is no box that says I make payments into the ether for the right to live in my 3 bedroom condo, so instead I lie on my tax return every year.  It’s just easier that way.

One of the arguments used to support the ownership of property as the be all and end all of society is that it gives you security for obtaining credit but that isn’t really true.  With the average North American home costing the equivalent of 3 to 5 years of household income, credit is a prerequisite to owning property, not the other way around.  And how to you obtain that credit in the first place has nothing to do with owning property.

At the end of the day carrying debt is nothing more than an expense or a reduction of your income.  For every dollar that I pay servicing debt I have one less dollar that I can use to purchase other goods and services.  Yes credit allows me to make large purchases and pay for them in instalments but with interest charges ever increasing the cost of those goods wouldn’t I be better off to take that same monthly payment amount and put in an interest bearing savings account?  That way when I purchased something it would truly be mine.

Of course I wouldn’t get to take home my shiny new whatever right away but that’s the price of saving.  It’s called delayed gratification or more to the point in terms of meekonomics it’s the patience part.  We in North America are really bad at that. [see Meek-o-what-ics]

The greatest single engine in the destruction of the Protestant ethic was the invention of the instalment plan, or instant credit.  – Daniel Bell, the Cultural Contradictions of Capitalism

So here is one of the formulas that drive meekonomics.

(Net Income – Debt Payments) = Spendable Cash.

It’s the spendable cash that matters.  When a banker is looking at your credit worthiness all they really care about is whether or not your can make the payments, their goal is to reduce your spendable cash by increasing your debt payment and whether you own your home or not is irrelevant.  If you want to live like a meekonomist your goal should be the exact opposite, reduce that dept payment to increase spendable cash.

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