21 Mar Burning Money With Handcuffs On
The housing market is looking up in many parts of the country as more people take advantage of low property values and attractive rates. But before you go ahead and sign on the dotted line, consider whether you’re setting yourself up for a major fall.
When you buy a house – especially if it’s your first one – you’re encouraged to buy a home large enough to grow into (poor grammar, but there you have it). The logic goes that if you buy a house and start a family, you’re going to outgrow the four walls pretty quickly.
There’s some logic to this. You don’t want to buy a place and settle in only to have to pack up and move in a few years. That’s not only a hassle but you’ve got tax considerations as well.
On the flip side, buying too much house is like burning money with handcuffs on.
If you’re young and married without kids, consider how large of a family you expect to have – and what kind of space that many human beings requires.
At the same time, remember that you’re going to need to be able to pay the mortgage as well as the associated costs of home ownership – in addition to thinking about your retirement planning.
Failing to think about both aspects of your life means you’re going to end up burning money. Without the financial resources to pull yourself out of the hole, you’re wearing handcuffs.
That’s a dangerous combination.
You’re newlyweds and want to have 2 children; do you really need a 6-bedroom, 5-bathroom house?
Can you afford 4 bedrooms on your current income? How about if one of you stays home to take care of the kids while they’re young?
Do you need to scale back from 4 bathrooms to just 3? Can you cut out the home office and save some money?
There’s no shame in the kids sharing a bedroom in their younger years. Nobody died from not having that extra bathroom that nobody uses on a regular basis. And I have yet to hear of a reported case of murder based on the fact that the victim didn’t have a den that was separate from the living room.
Remember, this is your future you’re planning out. The housing market may look good, but don’t bet on a rapidly-rising income or massive property appreciation to carry you through.
We’re still mopping up the mess from the last time we did that. No sense in repeating history.
Jay S. Fleischman is a consumer protection attorney with offices in Los Angeles and New York City. He liked to hang out on Twitter, where he shares information about consumer protection issues and personal finance.
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