I write to you this morning from down south in KwaZulu-Natal, from one of those hundred-and-something year old farm houses scattered across our country by early settlers. Rambling gardens and remnants of days of high society life, when the elite of the area would arrive in their wagons for a spot of tennis or bowls followed by high tea. The big old tree where they would rotate their wagons around and disembark, still stands in front of the old stone front wall. The tennis court and bowling green long gone and overtaken by orchards and plants. Something simple about those days….
Google is a very powerful tool. Most of you will know that it follows what you regularly search for and learns to bring you leads on those subjects. For me it’s motorbikes, history, 70s and 80s music, and yes, financial stuff. I have recently been reading a couple of articles around Warren Buffett and his long time business partner and friend, Charlie Munger. (Charlie passed away last year)
The topic that I’m going to specifically write about today, is that both of these men stayed in their same houses almost all their lives. Buffett bought his first house in 1958 and still lives in it. Munger said that he refused to follow his rich friends who built mega-mansions. He said that in practically every case, a fancy house does not make the person more happy. I am not going to pass a subjective opinion on that – maybe not for me to do. However, I will remind you that the house we live in is not an asset. Yes, we put it on our assets and liabilities, but that’s just so that the bank or SARS can see what they could take away from you.
Why is it not an asset? Because it costs us money while we live in it, because it does not put money into our bank account, and because you cannot access the value of it while you live in it. (Borrowing against it does not mean you’re accessing the value of it.) Yes, whoever inherits your estate could now access the value of it, but it’s not an asset while we live in it.
So, like these two incredibly wealthy men, be careful how much money you spend on your house of residence. It’s wealth you can no longer use.