Have you heard of renting?
Not just for housing
Some people think renting is throwing away money. However, you are getting something in return. In addition to usage of the item, you are receiving optionality. Sometimes in life optionality is worth a lot. Buying can certainly be throwing away money, but that isn’t often talked about.
Experiences and services
Have you ever got a massage? It’s fantastic. You definitely had to pay for their labor, but I don’t think you hired them to be your full-time employee. Instead, you paid for the delivery of a service, maybe a one hour deep tissue massage. In a way you were renting the experience rather than buying it. It wouldn’t make sense to hire a full-time masseuse, driver, or chef for most of us. Those decisions are clear because it would cost a fortune compared to the relatively small price of the service. However, when the price difference is less or you get a tangible item in return people often default to the idea that buying is better a better decision.
Products and real estate
Real estate is a controversial one that is filled with emotion. Everyone needs a place to live the argument goes, so why wouldn’t you buy a home if you could? There are plenty of reasons. If you buy a home it becomes a pretty big constraint as you are responsible for quite a bit. You have not only the financial obligations of mortgage, insurance, HOA, and maintenance, but also you can’t just get up and move without a ton of hassle. Before I bought a house I lived in more than 10 places. It was great to be able to move within a city, out of the country, and on my own schedule. Yet, even when you get a mortgage, if your rate is 7%, then the first payment is only 12% principle. So maybe you are throwing away money.
When you go on a trip you probably rent a car rather than buying because you only need it for a bit. In fact, if a product is really expensive and not used frequently then it is probably better to rent it. I would much rather rent a boat for $600 each time and have it sitting ready for me in the water than own one that I have to tow to the river, pay for storage, make monthly payments, and worry about it breaking down.
A vacation home sounds like more of a constraint than a nice to have to me. It is a lot of work and rarely gets used, sure you could rent it out, but that’s a part time job. Renting a vacation home means you are free to go to a new place every trip.
Hobbies
Perhaps you really think you’ll get into road biking if you spend $4000 on a bike, but you ride a few times and it sits in the garage until years later you sell it for $1500. You didn’t want to rent the bike for $60 a day because that would be throwing away money. Yet, you spent $2500 and rode it less than a dozen times. You would’ve come out ahead if you rented.
You can apply this to any new hobby you’d like to get into. Rent the golf clubs, the scuba equipment, the skis. All those are bulky and it’s nice not to have to travel with it.
My advice
Once you know you are going to stick with something then I think it makes sense to go ahead an buy it. It doesn’t need to be the top of the line item at first though. Occasionally I’ve made purchases which I should have rented. The first pair of kids skis I bought were too big and I had to pay for a bag on flights and they are heavy. On the other hand I’m thankful that I rented kite surfing equipment because I didn’t end up going but twice. At some point I would love to get into it, but until that time I’ll continue to rent.
Over time I think we’ll see even more rental options. In Taiwan I saw umbrellas for rent and my coworker told me that in India furniture rental is popular. So, take a look at your house/garage/storage unit and see if maybe you should get rid of something and rent it when needed. Conversely, look at your credit card. If you are getting charged for renting a scooter 3 times a week, then maybe it is time to buy one. The goal is to allow your money to work for you and not have your finances constrained.