Thursday 23 May 2019

Karl Deeter: 'Choosing the right partner and home are two of the secrets to becoming wealthy'

Prices increased by 5.6pc nationally in the year to January
Prices increased by 5.6pc nationally in the year to January

Karl Deeter

There are three things you can do to ensure you have greater lifetime wealth. They are simple and old-fashioned ideas but, of the three, I can guarantee you won't find two of them being promoted as wealth-builders (although they can be very positive things outside of financial considerations).

The first and well-known route to wealth is education, everybody tends to promote it. 'Knowledge is power' is an adage, but I prefer to think about it as education being a way to obtain higher income or advantages in the marketplace. The statistics support this: lifetime earnings for those with higher education are on average higher - if your third-level education wasn't in something like acting. The other two things are widely known and statistically supported but not discussed in wealth conversations.

They are to buy a home, and, lastly, to get married and stay married.

Buying a home creates the largest financial asset many people ever own. Older adults tend to know this, younger ones don't - it's why so many parents put pressure on their kids to buy a house.

That those decisions do or don't work out is a different topic, but the wealth effect is real. If you want to talk about 'rent versus buy' you really must compare mortgage interest against rent because when you make a mortgage payment, part of that is capital which economically is the same as 'savings'.

The payment that gets you the use of the house is the interest, the other part is yours, in that respect it should be the cost of renting versus the cost of interest to see how beneficial a mortgage can be (or not).

That's a tricky idea to get your head around, but it's like a savings you can't touch. Research through housing booms and busts still supports the statistical evidence of it being a wealth-builder. Harvard University did comparisons and showed that, even with a crash factored in, homebuyers had greater wealth than renters, home ownership is also where much of the 'wealth inequality' in the world comes from. That's why when I hear people saying they want to be a renter for life a small part of my financial adviser soul dies.

Lastly is to get married and stay married. Two incomes are better than one and if you know anybody who ever got a divorce then the statistics won't surprise what you know anecdotally - the wealthiest in society are usually married. The research supports that enduring relationships bound by a strong contract (such as marriage) have this outcome. So when you tell your kids to study hard, remember to emphasise the importance of choosing the right home and loved one too.

@karldeeter is an analyst at

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