The process of buying a home can profoundly affect a person’s wealth-building ability, an author of a book on wealth building said.
Chris Hogan in his latest book “Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too,” said that mistakes in mortgage-related decisions could destroy a person’s dream of becoming rich.
To come up with the book Hogan, together with the Dave Ramsey research team, studied 10,000 American millionaires for seven months. He found in his study that these wealthy people avoided these mistakes, which contributed to their wealth building along with their stable incomes and strict saving habits.
Hogan’s research showed that prolonging a mortgage longer than needed, retaining your mortgage because of tax reliefs and obtaining a home equity line of credit are some of the disastrous errors that people who want to accumulate millions should avoid.
Neighborhood Also Affects Wealth-Building
Aside from avoiding mistakes in purchasing a home, finding the right place to live is also crucial for people who want to build wealth.
Most millionaires avoid pricey homes and neighbourhood, Sarah Stanley Fallaw, Affluent Market Institute’s director of research, found in her study of more than 600 US millionaires. She said that a person’s community has a powerful influence on that individual’s spending habits.
Moreover, Stanley Fallaw said an individual’s home price relative to income also affects his or her capacity to amass wealth. She added that most of the wealthy people she surveyed had never bought a home worth more than three times the amount of their yearly income. She cited billionaire Warren Buffett, who lives in a simple home 0.001% of his total wealth.