In the summer of 2010 I finally came to my senses.
My first child was a year old. My wife, daughter and I lived in a good-sized suburban home in a nice neighborhood, about 15 minutes from downtown where my office is (even in rush hour traffic). Our house was fairly “nice” since we’d been working on fixing it up over the prior 3 years. It was built in the early ’60s, a brick ranch with “good bones” and a 1/2 acre of space around us. We liked our lifestyle very much, we liked our neighbors. If you had seen us at the time, you would have said “they’ve got it made.”
So… what’s wrong with this picture? Let’s rewind a bit and I’ll tell you a story about how my previous experiences had slowly eaten away at my resolve to be a good steward of my finances, and how our future plans drastically changed… hopefully for the better.
As kids, my parents were not well off, and neither were my wife’s parents. I grew up in an 80-year-old farmhouse with one bathroom that my dad bought for $500, and I’m the oldest of 7 kids. We were all home-schooled, so we spent a ton of time at home compared to other kids. My wife’s family of 5 lived in a trailer park until she was 13 years old.
And you know what? We loved our childhoods. Neither of us lived in dangerous areas, and we loved (and still love) our families. Sleeping in cramped quarters was not a hardship back then.
Every Saturday in the late summer and fall I helped my dad cut wood for our wood stove, which is what heated our house all winter. We were constantly fixing up that old house. My dad was (and still is) a very hard-working dude, and he put a lot of time and care into that house. Then, when I was 16, we moved into a much larger house (3,500 square feet) that had a bedroom for almost all of us. But of course it had to be old to be affordable, so there were plenty of things to fix up over the years in that house as well.
Takin’ It To The Streets
When I bought my first house I was 22 years old and looking for a way to get ahead in life. With my background I thought it would make all the sense in the world for me to buy a fixer-upper and put some sweat equity into it, right from the get-go. I bought a foreclosure (in a bad neighborhood) for $67,000 with a 15-year mortgage and got right to work. I was excited about the fact that only 15 years of $750 payments would have me mortgage-free. Over the next 8 months I spent every waking (non-job) hour at that house, and I received a lot of help from family and friends to get it fixed up. I poured about $20k of my savings (basically all of it) into that house. The property value, according to my realtor friend, shot up to about $110k!
During that time I proposed to my now-wife, and we began making plans for our wedding and future life together. Unfortunately I was coming to the sobering realization (with a little help from my father-in-law) that I did NOT want to move my wife into a bad neighborhood when I could easily “afford” something better. So even though I never actually moved into the house, I put it on the market and it quickly sold $104k minus fees, so about $95k when it was all said and done. I had worked my butt off for 8 months for net profit of around $2,000. That hurt a bit.
Financial impact: $2,000 gain
Psychological impact: Low self esteem
A Necessary Upgrade
House #2 for me was a small (1250 square feet), cookie-cutter house in a massive starter-home neighborhood. We picked it up in December 2004, for $95,000 with a 30-year mortgage (see how that worked?) and we only had a couple of things to do to make it livable, including new carpet, ceiling fixtures, and a little bit of tile. I moved in there alone for 6 months, and after our wedding my wife moved in with me. I don’t regret living in that house in the least bit. It was great having nothing major to fix up during the first year of our marriage! I likened it to living in an apartment (our neighbors were that close) but we still had a tiny flower bed that we worked in, plus a 1-car garage.
During that first year I got a sizable bump in pay at work, and my wife worked part time while finishing her last year of college. We decided to add about $75/month to our mortgage payment with hopes of increasing that one day, just to shave off a year or two at the end of the loan.
Then, two years later, we decided to try and have a baby. Looking at our surroundings we convinced ourselves that we didn’t want to be bringing up a child in this starter-home neighborhood (I’d love to have a chat with that bone-headed version of myself right now) so we put the house on the market. We’d only invested $5k or so in upgrades during our time there, but we listed the house for $110k and got it! We were thrilled. But, after realty fees and closing costs we only netted about $102k for our trouble. Worse than the lack of profit to me was the fact that we’d been paying mostly interest on our mortgage over the last 2 years, so after it was all said and done we “owned” nothing! Our furniture, cars, and ability to make money were all we had after 3 years of home ownership.
Financial impact: $2,000 gain
Psychological impact: Spinning my wheels
The House Of Our Future
We began looking for a house in the $100k – $125k range, but we soon realized that what we desired for our family’s future was going to be a little more expensive than that. We ended up buying the house I described at the beginning of this post (2,000 square feet plus a huge 2-car garage) for $142,000. Plus, we could “afford” it. We didn’t have much saved up for the down payment, so we ended up putting zero down. That meant an interest rate of 4.5% on the 80 and a rate of 6.5% on the 20 of an 80/20 mortgage. Our monthly payment was almost $1200, but we were content. Mostly.
We started working on renovations and found plenty to do. There were hardwoods underneath the house-wide carpet, so we refinished those. We painted and painted. And painted. We tiled, we de-wallpapered, we even stained our exterior brick so that it would be red instead of pink. We poured $20k into renovations and upgrades without a second thought, knowing that it would be well worth the expense one day.
But as time went on our feelings about our “dream” family house began to change. Owning a large house became less and less satisfying to us, and more like a giant chore. My wife had plenty to do, taking care of a baby, and couldn’t put much time into helping with renovations like she used to. Even keeping the house clean was a lot of work. I could never keep up with the yard work like my retired neighbors could. Renovations took months instead of weeks. The quality of materials dictated that they were priced a good bit higher than what I was used to. The old house was horribly inefficient when it came to heating and cooling, and we knew that in a few years new windows would be needed, as well as a new HVAC system. The house had mint-colored tile in one bathroom and bubble-gum tile in the other (you know what I’m talking about!), and we had plans to demolish and re-create both of those rooms… one day…
The bills were high all around, from the mortgage to the utilities to the furnishings to the landscaping. And while we enjoyed “looking the part” when we had family and friends come over, we were stretched more thin than we let on. We weren’t living extravagantly per se, but there wasn’t a whole lot of money left over at the end of each month like we thought there should be!
So, despite the fact that the economy was heading south in a big way, we felt like we should move once again. We knew that whatever we sold the house for could likely be made back up by finding another good deal, so we didn’t let that stop us. After a whirlwind 9 months of last-minute upgrades (mostly to the master bathroom) we sold our young-professional-family-dream-home for a whopping $135,000 after more negotiated repairs during the sale and all the realty fees. Luckily we had been paying this mortgage down more aggressively over the last few years (that 6.5% mortgage made me cringe every time I looked at it) so we only owed around $110k at the time of the sale.
Financial impact: $28,000 loss
Psychological impact: Enlightened
A Change In Our Approach
Two years ago we bought the house we live in today. It’s not much to look at, but we love it. It’s a smaller house than our last one at 1,350 square feet, and since we now have 2 kids instead of 1 it feels like it’s a lot smaller sometimes. It was a foreclosure and required a few weeks of re-flooring before we could even move in. But we bought the house for around $72,000 and the flooring was less than $3k, so $75,000 to move in.
Yes, it was a little depressing to only have about $20k in the bank after 7 years of home ownership, but we were committed to this new direction. We put $15k down on the house, so our mortgage was only $58k from the get-go. Over the last two years we’ve taken our extra money and paid down the mortgage aggressively, and after only 2 years we have $33k left to go. Our house is currently valued at $110,000, but we don’t have any plans of selling it soon.
Our neighborhood isn’t glamorous, but it’s nice. Our neighbors have all been living here for a while, so it’s a settled place to live. By and large folks take care of their yards and say hey to you when you’re out walking. The neighborhood doesn’t feel dangerous at all.
Our yard is small, but has plenty of room for a kids swing set, a small shed, two decks, and an open space for throwing balls or practicing golf. We don’t have a garage, but neither does anyone else in this neighborhood, so we don’t miss it much.
There are a ton of benefits to living here that I wouldn’t have been able to recognize 8 years ago. Cleaning the house takes very little time. Our hardwood floors look great but didn’t cost much. We can landscape the front yard and keep it maintained with very little money. Cutting the grass takes about 45 minutes, or an hour if I completely trim and blow off everything. The utility bills are considerably less. We have a front porch that’s nice to sit on in the rain, something we’ve never had before. Our lifestyle doesn’t have to play catch-up to anyone.
But the biggest difference is not financial, it’s psychological. We have time in our lives again! Every weekend isn’t dominated by housework, maintenance, or chores. If we want to run to the library on a Saturday morning it’s an easy decision. My work at my local church isn’t a hardship, there’s plenty of time to mix that in. I can study and read in the morning and at night, and have time to blog as well.
But since this is a financial independence story, let us not forget the impact this move has made in the financial arena. We’ll be able to pay off our remaining mortgage within the next 2 years, and at that point hope to be living on around $25,000/year. The flexibility that will provide us from a savings, career, and child-rearing standpoint will be awesome, we hope!
Financial impact: To Be Determined, but currently $35,000 gain
Psychological impact: Freedom
A Smaller House Mindset
What are some of the things that changed in my wife’s and my own thinking for us to make this “downward mobility” move? Here are a few of the things I’m aware of:
- We grew tired of spending our time trying to make our house look good for other people.
- We wearied of the constant battle with “stuff” in our home and we longed for a simpler lifestyle.
- I realized (finally) that while I am able do a lot of home improvement projects, I don’t enjoy spending the majority of my time that way. My situation is drastically different from my dad’s because I have the flexibility of saying no to “project” houses, when he was compelled to buy them just to provide some space for his rapidly growing family.
- We realized that the lifestyle decision we made by choosing our house and location ended up controlling a lot of the other decisions we made.
- My wife let me know that she would prefer to have me working more flexible hours and “living life” around our children, instead of making a large dream house a priority.
- We realized that the flexibility we have right now (with only 2 very young children) allows us to use our time and money more wisely, and hopefully reap those benefits in the future, either with more flexibility or with full-on financial independence.
I’d love to know what you all think about our housing story and the decisions my wife and I made here. Lots of folks disagree with our decision to downsize, and if that’s you I’d be very interested in understanding your reasoning. At 31 years old I’ve got a lot of decisions left to make in life, so I’d love your insight!
And if you found this story helpful, please pass it on to a friend. My hope is that it can help people think through their house-buying decisions more thoroughly than we did our first few times through the process.
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