Have you ever looked back on your past financial decisions and cringed when you recalled what were thinking? For me, I think my financial low point was not while I was racking up debt and spending carelessly but a "plan" I had not too long ago. The scary thing was that this plan was when my financial turnaround and debt recovery was well under way.
Back at Thanksgiving 2006, I went back home to visit my parents. I was never very happy with their house, and I thought that I could do a lot better. Also, in general, I do not care about impressing people, but my parents are the one party who I've always felt obligation to impress.
So while at my parents house, and especially as I got back, I got a grand idea. I was going to buy a house. This was, I think, still during the building boom. I went and I spent a lot of time on home builders web sites and looked at all of the housing options and using the calculators to figure out what type of house to get, and what type of mortgage I could qualify for.
My plan was to pay off as much credit card debt as possible, and save up a down payment for a house. A big house, and a brand spanking new one - I'm talking 2000+ square feet, two stories, 2 car garage, 3-4 bedrooms (all for myself!) As soon as I got the loan my plan was to turn back to the credit cards and basically charge tons of stuff (i.e. plasma TV's, luxury furniture, killer stereo computer systems, etc.) on them so I could make my house totally pimp.
My goal .. to host Thanksgiving at my house in 2007, and basically out-do my parents.
I actually put down a deposit on a house back last spring, at a Centex housing development. They told me I had three days to change my mind. The next few days were the most stressful days of my life, because I was afraid I was making a horrible mistake. This was when I was just starting to read blogs, and I was worried how buying a house would impact my budget, and also I was afraid that the housing market would crash & burn.
So I called .. who else .. my dear mother. I gave her all the numbers, and she agreed it didn't make sense for me to buy a house. I called the Centex agent and told them I decided not to buy. Fortunately I didn't lose my deposit and I learned a valuable lesson for free. Thanks, mom, for saving me from the biggest financial mistake I almost made.
Wednesday, August 13, 2008
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2 comments:
I thought buying a house would be cool too and I did it. I had fun buying stuff for it until the maintenance, mortgage payments and utilities weren't so fun anymore...and that goes on for 30 years! I tried to sell but it was too late, the market had slowed. I am lucky though, I rented it out. I hate being a landlord but it could be worse. At least I still have some equity.
There's alot of overhead with home ownership. Here is some very rough numbers I scrambled together:
Power $300/mo
Property Tax $250/mo
Insurance $150/mo
Repairs $300/mo
Realtor $333/mo
Long Commutes $225/mo
Opportunity Costs $416/mo
====
$2k/mo
The above is the home ownership premium even before a mortgage. A $225k mortgage @ 5.75% = $1313/mo.
The grand total is $3.3k month
Compare that to a $1k/mo apartment.
In the above, the opporunity costs is a big number that represents the costs having money sunk into real-estate instead of the stock market. Commuting is the costs of driving a car 15,000 miles, instead of 5,000. Most people own homes far from work, instead of renting right near work. And realtor fees is what it would costs to transact a $225k house every five years. They say the average american moves every five years.
So if housing trades sideways or declines for the next decade to catch up to the housing bubble, alot of people will be relieved of alot of money.
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