Growing up, a lot of us dream of graduating from college, landing the perfect job, getting married, and buying an amazing home for our future family. After all, that’s the American dream.
That’s pretty much what we did. A month before our wedding, Ryan and I bought a super nice house with a pool just like I had always wanted. It was $340,000 and we put 5% down so we were left with a $2,400 payment including escrows for homeowner’s insurance, taxes, and mortgage insurance. No big deal, we had the salary to support it, right? Additionally, we spent another $20,000 in renovations because why not? It’s our dream home and we deserve the best, don’t you think? After all, we worked so hard to be able to afford it.
All in, we ended up putting about $40,000 into this home. Our house looked amazing with a brand-new kitchen, top-notch appliances, and hurricane impact windows. It was a dream come true.
Then eventually, reality sunk in. The plan was to first buy our primary residence and then start investing in real estate. Here’s the thing, our salaries were just enough to cover the cost to maintain our house and our lifestyle.
About 6 months into our marriage we finally began to take our finances seriously. We realized that while we were making enough money to support our lifestyle, we were living paycheck to paycheck. If we wanted to invest in real estate, we needed to change the way we were handling money.
We eventually began eliminating a lot of unnecessary expenses. To give you an idea, we had a housekeeper coming every two weeks, a poop-scooping company to pick up dog poop from the backyard (I know! 🤦🏻♀️), pool maintenance, landscaping service, among others. All these little items added up. Not to mention, my nails, my hair, massages, and eating out every day.
I am shaking my head as I write this because I can’t believe that I fell into the make more, spend more trap. I’m an accountant so I should know better, right?
Here is the thing, I was working two jobs so that I could make 6 figures because that’s was the dream. I then justified my spending with “I deserve this because I work so much.”
I was not tracking my spending or financial position, so I didn’t realize how my decisions were affecting my ability to begin making my dream to become a real estate investor a reality.
When I sat down and finally looked at my numbers, I was devastated. Our home, while amazing, now cost more than what we could sell it for because we spent money on renovations that didn’t necessarily increase the value of the home. Additionally, we still had credit card debt and student loans.
That was our turning point. Ryan and I sat down and truly evaluated our goals and priorities. Since then we have taken action to put ourselves on a path that aligns with what we truly want. We still find ourselves buying unnecessary items from time to time just because we can, but we are conscious of how these decisions affect our overall goal and address it immediately.
So, yes. Buying that house was our worst money mistake.
I failed to evaluate my long-term goals before buying this home and made an emotional decision.
Had I sat down and done a truly in-depth analysis of my financial position and how this payment would set me back, I would have reconsidered.
If I were to do it all over again, I would have bought a duplex, lived in one unit, and take advantage of having a tenant take care of my mortgage while saving money to continue buying real estate. We’d probably be a lot closer to retirement, but that’s life. Lesson learned.
As of the date of this post, we have moved out of that house, rented it out temporarily until we can sell, and moved to Georgia to live a similar lifestyle, but at a much lower cost. If you read my first post, you know that our expenses are less than 50% of our income today!
The lesson here is that before you decide to buy your dream home or any home, consider everything that comes with homeownership. It is easy to become emotionally attached to a home and justify a purchase if you don’t have a clear understanding of your goals and the impact that making such a big commitment has on your long-term goals. Ask yourself, how does this purchase align with my goals and the life I want?
If it is, great! If not, reconsider your options 🙂