Americans are incessantly barraged with glamorous advertising of luxury and television shows where luxurious lifestyles are the norm. The majority of people simply cannot afford a lifestyle of driving late model luxury cars, constantly purchasing high end merchandise like Louis Vuitton bags and Tiffany Jewelery, and owning the latest in home entertainment equipment. Many Americans try to live this lifestyle before their income would actually allow them to through many different means. There is nothing wrong with a luxurious lifestyle, if thats what your heart desires, but the way you fund that lifestyle will determine whether your retirement will be full of relaxation or bankruptcy.

In America, you can rent, or lease, many things that you could otherwise not afford to purchase outright. Since we tend to live paycheck to paycheck, or month to month, adding a seemingly small monthly payment in exchange for having the latest greatest object seems like a great deal. In reality, a lot of these deals will prevent you from ever actually being able to afford the lifestyle you covet. Sometimes renting or leasing something makes sense, but only under certain conditions.

Car Leases

Generally, I equate car leases to throwing away money. Have you every actually read the terms for a car lease? Years ago I had my car stolen and I wasn’t sure what kind of car I wanted to purchase next (since I definitely wasn’t going to risk owning another Honda Civic Si). Since my rental was expensive, and my insurance was only paying part of the amount, I looked into leasing a car while I decided what to purchase. I actually read some of the terms and (I’ll save you some time), the more you read the worse they get.
One of the positives of car leases is that the maintenance of the car is taken care of by the dealership. Other than that, you end up paying high monthly fees, for a few years or less, and then end up giving the car back (at best). Hopefully you don’t end up using all of the miles that the lease allows you and have to leave your expensive car sitting in the garage for the last three months of the deal because you’re out of miles. For those of you not familiar with car leases, if you drive more than a certain (fairly low) number of miles during your lease you must pay an expensive per mile overage fee.
Needless to say, I didn’t lease a car. I did my homework and bought a great late model used car about a week later. Used cars, new cars, anything is better than leasing an automobile.

Other Rented Stuff

For years now, there have been companies that rent furnature and electronics and other household items, but a couple years ago I noticed a lot of stores popping up where you could rent wheels (aka rims) for your car/truck. Now I know that there are certain situations where renting furniture and household electronics might be the better choice. For example, maybe you’re working a temporary job and you know you’ll be moving soon. Why purchase furniture that you will then need to move and possibly be damaged? Renting makes sense.

But renting rims? Renting the latest flat panel television? This might hurt your feelings but, if you don’t have the money to purchase it outright and that’s your reason for renting it, you don’t need to be spending that money at all. In this case, renting stuff that you think you need will prevent you from ever becoming rich because you will begin (or maybe you already have) a pattern of having to have the latest and greatest _____ (fill in the blank).

The Big Exception

While there might be small exceptions as mentioned before with furniture, one of the big exceptions is renting/leasing your home. Even if you own your own home now, it’s very likely that at one time you rented an apartment, condo, townhouse, and/or a house. While owning a home and gaining equity is a great way to increase your net worth, I don’t consider renting to be a bad choice. There are pros and cons of both renting and owning, and but it really comes down to the person and the situation. Most people can’t purchase a home, or are not ready to settle down in one city, until they get a little older and set in their career. Houses are great investments, but until your ready to purchase a home, renting is not going to ruin your finances, because after all you have to live somewhere (but you really don’t need to rent that 58 inch flat panel TV).

If you are able to think about your own future, instead of trying to lease everything you can’t afford at the present, you will be able to own those things later in life and keep them forever because they will be yours. This is called delayed gratification, and many of us would be better off if we just thought about our future a little bit more.