Sept 9,2003

Real estate can be an emotional, exciting or really dull topic. It all depends on how you look at it, and what you are expecting from it. Most people have an emotional way of looking at housing, after all its usually your home. It's hard not to be attached to your home! Many people view their home as their best and major investment, which in many cases it may be.

But considering real estate as a "home" combines the two factors that usually don't do well together, emotions and money. Finding that dream home, falling in love with your potential home will blind you to the investment value, or liabilities, whether positive or not regarding that place you call your home.

Buying a home is emotional, buying a house shouldn't be. Buying, maintaining a home is a cash liability, and, potentially an equity building vehicle. The potential for building equity is secondary. Buying a “house” should be less emotional, especially if the reason is purely for investment.

Car buying, another major purchase, is usually an overwhelmingly emotional process. We buy cars because we want to look good, cars are clothes on wheels, and the car manufacturers know it: cars change looks and colours just like fashion, new styles, new colours and features every year. They talk about how you will feel, so we end up making choices that are emotional, not logical and end up with expensive payments or leases in order to “feel good”.

Emotions get in the way of analysis, and trap us into financial situations that are harmful. The best way to deal with this factor is to be able to identify “emotion versus money” situations and decide which way you are going to go. When you buy the family home, emotion is going to affect your decision making, so be aware of it and accept that this will happen. When you buy an investment property realize that it is NOT your home and don't get emotional about it, you won't be living there!

If you want to buy a good looking, exciting car that will turn heads as you drive by, that decision is hugely different than buying a car that will get you to work and back. If you are going to be emotionally attached to a car - realize that when you are looking. Define your purpose, and by defining your purpose you will avoid the situation where after driving the exciting sports vehicle to work and back for 20 blocks you are driven nuts worrying about or dealing with car theft or damage in underground parking. Might you have been better off both emotionally and financially with the used commuter car in the end?

Emotions vs Money = Trouble