Finance Roll

Meet the Logans. They have 2 young boys and their financial profile is very similar to that of our couple in the best personal finance book (Joe and Jill Smith)... husband is a salesman, wife is a nurse, been together about 7 years. When the Logans first got together, they rented a lovely 2-bdrm apartment in an older building at the city limits on the water for.... wait for it... Drum roll please....$400/month. $4,800 per year! Isn't that just crazy? I know people that spend more money on haircuts. But they don't take this into consideration. No one has set up a personal budget, nor do either of them know how to budget or keep personal finance books for Logan-CO.

Anyway, upon getting married, they didn't want to rent anymore. They wanted to be "home owners". So they scraped together $15K (with the help of their parents), took the best personal financial advice they got from the bank and put it towards a 3-bdrm townhome just west of the city which they purchased for $245K. Now they're home owners, right?

Let's talk about this statement. Really, what do the Logan's own? What is $15K of $245K - something like 6%? So the Logan's own 6% of their townhouse... what is that, a toilet? A closet? Maybe a sink? They're not home owners, they hold a mortgage contract... that's it. The bank is really the landlord and not a very good one. When you take the best personal finance advice from your landlord, you are in for it. You can call up a good landlord when your toilet is clogged and he'll co-ordinate and pay for a plumber, but not the bank, they're not in the plumbing business. You can call up a good landlord when raccoons have moved into your attic and he'll call the vermin hunters to chase them out, but not the bank, they're not into pest removal. If your basement's been flooded a good landlord will help you bale it out, help you deal with insurance, replace the carpeting. But not the bank, they don't do flooring.

Even though the bank owns 94% of your dwelling, they will only be there to collect their rent... I mean mortgage. But wait, the Logan's aren't "renters" they're homeowners. The Logans are "building equity", right? Oh brother. Stay tuned, Ill talk about all the equity they managed to build during the 2 years they lived in their townhome. Are you renting your home from the bank in the hopes of building equity?