Of our many mistakes with money, one that is particularly ironic has to do with housing. The irony is due to the fact that our mortgages have been, by far, our largest debts in our lifetime. Yet, by having had so many of them — each with a break in between — we’ve been temporarily debt free several times.
By the time we had been married for 20 years, we had purchased our fourth house with our fourth 30 year mortgage. It’s not like we’ve ever had to move due to some compelling outside reason like a job transfer or being closer to an ailing loved one. In fact, none of our homes has ever been outside a ten-mile radius from our first. Each time, we had different reasons that prompted us to leave. They were generally the wrong reasons and, being honest with ourselves, they generally shared a common theme.
You go back, Jack, and do it again…
Our first house was purchased a few years after we got married because we didn’t want to be renters any more. Financially speaking, this was probably our best house as we were given a gift for a down payment and got a good price since we purchased from the estate of an extended relative. The house was a little over 30 years old at the time we purchased it and was, for the most part, in good repair. Our first child was born while we were there. When we left, we still had plenty of room, as we had a nursery and a spare bedroom that doubled as an office.
We decided to build our second home simply because we wanted bigger and better and wanted to grow our family. To be clear, though I write “we”, as is often the case, the financial stupid was instigated by me, Mr. Frugal Source. That aside, our second was a lovely home and, being new, had few maintenance issues once all of the matters covered under the new home warranty had been addressed. Our family grew while we were there, with our second and third child being born during this time. We left this house due to the belief that property taxes were going to skyrocket. Property taxes quickly quadrupled within a few years of our sale of that home, but went back down to about the same amount after just a couple more years due to a property tax cap in our state.
After a year in a rental to reflect, we purchased the third house with an eye toward better managing our money and, as a bonus, being a bit closer to aging family. Out of the four, this house was probably the best fit as far as finances, size, and location. The house was in a decent suburban neighborhood. It was on a court, so there was little traffic, and it had enough rooms for each of our children to have their own space. It was also much more modest than our current home. We’re pretty sure if we had still been there when we awoke financially, we’d be completely debt free by now. After seven years there, local crime was starting to rise and, out of a desire to protect my young family, I started looking for yet another new place for us to live.
When we purchased the fourth house we went big. Bigger than we ever had. Though it had more living space than any of our previous homes, it didn’t already have enough bedrooms for each child to have his/her own. To fix this, and compound the financial brilliance, we poured a bunch of cash into finishing the basement to give each child their own space again.
How can you avoid our mistakes?
For those who are too young to have “been there and done that”, there are a few main lessons from our experience that we’d like to impress upon you.
First, work to be content with your home. While it may lack certain features you’d like to have, you can likely live without them — you have up to this point. If your family is growing, a bigger house will certainly be appealing, but it’s okay to stay put for a while and let things get a bit more cramped. It’s a good way to exercise your creativity in maximizing use of storage and it will encourage you to de-clutter and reduce how much you have to store. More importantly staying in a home longer will give needed stability to your family and your finances, not to mention the massive time sink that looking for a house often becomes.
The only thing we have to fear is…
One of the recurring themes in the series of financial mistakes we’ve made is that of making decisions out of fear. When we left our second home, we were afraid of higher property taxes, we left our third house due to fear of increasing crime in the surrounding area and took quite a loss when we sold because we were so eager to leave. In a way, even leaving our first house could be attributed to fear of not having enough space for the family we envisioned. As I’ve said before, and will likely say again, fear is among the worst reasons to make a decision. When you feel yourself wanting to do that, do your best to break out of that mindset and do some objective analysis about the actions you’re considering and, especially, your true motivations.
Failing to plan…
Another issue was that we never had a long-term plan, just perceived reasons to change. Each time we moved, we were in a rental between houses (an apartment, then a duplex, then a house) for at least six months; 16 months at the longest. This pattern of nomadic behavior didn’t just wreak havoc on our ability to secure financial stability for our futures, it took a toll on our kids. When we moved into our current house our son, who had just turned 15 at the time, was on his seventh address in the same metro area.
Don’t act without a definitive plan. Not just a plan for what you’re doing now, but what you want to to ten, twenty, or thirty years from now. While life will laugh at your plans over time, you will at least have a North star to make sure you’re still moving generally forward. You will take some bad steps, and you will have unavoidable curves thrown in your path. When those things happen, having that ideal to focus on will give you not only direction, but motivation and purpose in your decision making that you’ll otherwise lack.
We’re still in our fourth house, and we plan to stay put for a while. We know that taxes will be rising due to state-mandated renovation of the common lake. We don’t like it, but we’re staying put for now, because we have a plan and are willing to pay a bit more to ensure stability for our kids through their teen years. We’ll move again once the kids have mostly left the nest, and our plan is for that to be our last move, though we realize some things may be out of our control.
We’re sharing our stories as the lead roles in a cautionary tale so others might avoid living through the heartache of similar mistakes. That said, we know we’re not the only ones who have done such things, and would love to hear from those of you who were commiserating with us, reading along and silently nodding your head in knowing recognition. Have you bought too many homes, or moved for the wrong reason(s), even if it was only once? Please take a few minutes to join the choir and share your stories for the benefit of others yet to pass this way.