Money Studies Articles and Resources

Buy Or Rent: How To Decide

By Lois Vitt

You have decided it's time to move - for one reason or another, your current housing situation no longer serves your needs. Now you face the big decisions: Do I continue to rent or take the plunge into homeownership? Is it time to give up my private home and return to renting? Which makes the best sense for me financially?

If you have never owned your own home, homeownership should definitely be your goal, either short-term or long-term. The American Dream aside, investment in real estate makes sense for everyone at some point. That involves building and following a financial road map. The question is, where are you right now on your financial road map? To answer that question, you simply must analyze your financial situation. Take stock accurately and objectively, assessing both your monthly income and your monthly expenses.

Establish your monthly income after taxes:

Monthly Income: salary or wages/tips; savings and investments; alimony and child support; social security or pensions; any other source of income.
Taxes, estimated per month: Federal, state, local.
Subtract your monthly taxes from your monthly income:


Establish your monthly expenses in three categories:

Category Current Expenses Expenses if I Rent Expenses if I Buy
Housing, utilities, etc.      
  • Build a list of expenses broken out into major areas such as: Housing, utilities, food and meals, transportation, healthcare, personal care, child care, pet care, debt payments, insurance, education costs, recreation, professional expenses, charitable donations, other
  • List these expenses in each of the three categories:

This analysis will take time and effort, but it will give you an accurate picture of your monthly expenses in your current housing status, if you choose to rent, and if you choose to buy.

Once you add up the items in each category, it is simple to compare your projected monthly expenses in each scenario with your monthly after-tax income. You will have your answer in black and white.

If you can afford to buy, and owning your own home is the best choice for your current lifestyle, you can comfortably pursue that goal.

If renting is your best or only financial option at this point, return to your financial road map and continue to move toward the goal of homeownership in the future.