Review: Money Matters – and why home ownership is not an investment

Money Matters by Amanda Morrall ($30, Penguin)

review money matters book amanda morrallMoney Matters, according to the title of business journalist Amanda Morrall’s book, and does it ever. It’s subtitled Get your life and $$$ sorted and it goes about helping you figure out how to do that in 10 chapters on everything from ‘financial vampires’ to ‘love & money’.

Morrall begins the book with a chapter on her philosophy of flow – money comes in, money goes out, of course, but it’s how you control both of those that matters. Morrall argues that when you’ve found your personal flow, you’re working in a way that will attract wealth. So if you’re doing the nine-to-five grind in a job that makes you want to gnaw your arms and legs off, it’s highly likely you aren’t attracting wealth into your life. It could all sound a little bit too much like The Secret but there’s plenty of solid, smart advice in the book to keep the philosophy grounded.

Some of it is the stuff your parents probably drummed into you when you were younger; compound interest when saving = good, compound interest when in debt = bad. Morrall calls you to get out of debt and start saving and tells an anecdote about a reader of her finance column who decided to turn his life around. He called a halt on his playboy party lifestyle, stopped drinking, shopping, traveling and eating takeaways and began having weekends at home reading and watching finance videos online. In three years he managed to get debt-free and $100k in the black.

There’s solid advice on emergency funds, budgeting, Kiwisaver and retirement, but the must-read chapter is on that old conundrum: renting versus buying.

It’s ingrained into our Kiwi mindset that we simply must buy a home and that to rent instead of getting a mortgage is irresponsible to the point of frivolity. Morrall – along with many leading economists – questions this ‘truism’, and we need more people to question it alongside them, because a house is not necessarily an investment.

“If you’re like most Kiwis, conditioned to believe that housing is synonymous with investing, you’ll take issue with me saying your beloved casa is not an investment,” Morrall writes. “My view, which is consistent with a number of financial advisers, is that your primary residence (while it might appreciate in value over time) is not an investment on the grounds that it won’t return any money to you. Not, at least, for a very long time.”

For others who share Morrall’s view, see Robert Kiyosaki and Martin Hawes.

Morrall also makes the point that our housing market is overvalued and therefore in bubble territory. So you might buy a property and see the value slashed in a backward slide, but you’re still locked into the repayments.

“Is home ownership important enough that you could live with a 30% collapse and stay put, potentially for a long time?” she asks.

What are your experiences with home ownership – was it worth it? 

We have two copies of Money Matters to give away. To enter, post a comment below with your thoughts on home ownership in New Zealand. Remember to include your email address in the field (only we can see this, so you won't get spammed!) so we can contact you to get your book to you, should you be one of the lucky winners. Entries close Friday, March 1 at 5pm and this giveaway is subject to Tangible Media’s standard terms and conditions.