Okay, we didn’t get nearly as close as we did last year to financial suicide. This time it was a fleeting thought that we entertained for a few hours. I am a real estate snob. Many of you already know this. So, yesterday, when Mr. MMM and I were having our weekly coffee date, he asked what was out there. By out there, he meant, what is currently on the market in our area for sale. I should mention, we’re coming up on the final decision of whether or not to move forward with our basement renovation. We have the final plans and quote in our hands. We just need to give the green light to our builder, and we’re off. I should also mention that Mr. MMM has received payment for some side hustle work he’s been doing. I should also mention that Mr. MMM is expecting to be coming into some hefty income from contracted work, as well. Now, before he asked that question, our goal was to use my income for our monthly expenses and his income, which is variable and unpredictable, to pay off debt and invest. Now that the money has started rolling in, he was questioning whether or not buying up would be a better use of his money than finishing the basement. Hmm…
The Dangers Of Lifestyle Inflation
Last year, Mr. MMM and I nearly committed financial suicide by purchasing a huge home to validate ourselves and prove to other people that we had arrived. Silly, I know. Forgive me for continuing to bring it up, but it truly was the worst anxiety I had felt and the relief of losing the house to mold gave rise to Mad Money Monster and our commitment to frugality. We would have been fine buying the house last year if Mr. MMM’s income had not fallen through, one contract at a time. We were even considering paying cash for the home at the time of our initial offer. Thank goodness the house turned out to be riddled with mold. As a microbiologist (by day), I was never so happy to hear about the presence of mold. I jumped for joy, we canceled our contract, and we both slept like babies for the first time in weeks.
We’re Not Immune
Although we are on the frugal bandwagon, we are NOT immune to falling into the lifestyle inflation trap. We have certainly demonstrated our ability to do it in the past. So, when Mr. MMM asked me yesterday what was on the market, I quickly pulled out my phone and opened my real estate apps (shame on me for still having them) and we started scouring our area. Granted, we were looking for homes in a reasonable price range. Reasonable is, of course, relative. We found several homes that we loved in the pictures. We decided to make a day of it and go on a self-guided tour. We ended up hitting three separate counties yesterday. Each home we saw looked spectacular from the outside. We even considered calling our realtor to set up some showings.
We sat down to dinner and started talking and justifying that moving could be a better option than finishing our basement because of x, y, and z-even if it would be a bit more money. A BIT MORE MONEY?! Even looking at homes that were slightly more expensive than our house (plus the basement remodel) means our monthly payment goes UP, our taxes go UP, and our utilities go UP. And let’s not forget the cost of selling our house and buying a new one. After considering all of the numbers, we had our answer. Basement or Bust! Quite literally.
Oh, The Anxiety
And then it happened, during our discussion I started to feel that all too familiar anxiety that I felt last year when we had locked ourselves into a contract for a home that would’ve been a stretch to pay for after Mr. MMM’s contracts had been canceled. How could I possibly continue to be Mrs. MMM, spouting about frugality and minimalism, when I’m buying a bigger, better house at the same time? Impossible. The best part is, I KNOW that I can make our current house look BETTER than the houses we were driving by yesterday. I love decorating and creating art. Our main floor is decorated perfectly to our tastes. Those other homes were not. Starting over equals MORE expense. True, our house will never be bigger than it is and we will never live on a wooded lot, which we would love. But, making a few tweaks to the outside of our home and finishing our basement will give our home the space we need and get it closer to the look we love.
In the end, we decided (again) that it would be ridiculous to buy UP and that it didn’t align with our long term financial goals. It turned out to be our entertainment for the day.
What can I say? After my humble beginnings, real estate is my kryptonite. What do you have to say? Is there anything that tempts you to throw frugality out the window?
MMM – Minimal Cat
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11 Comments
You couldn’t have written this at a better time for me — I spent the weekend talking to realtors and scouring the listings, running hypothetical budgets, and really really trying to convince myself that it just makes SENSE to buy a house with all the things I want, rather than wait it out in my current home. I’ve done this before — as you say, kryptonite! But I think this time I’m stepping off the ledge and really committing to staying put and investing in my current house. It may never look like a fully rehabbed townhome (I live in the city) but that doesn’t mean I can’t save up for a new kitchen, central air, and even a finished basement. Better to pay cash though!
Thank you, thank you, for writing this just as I’m coming to my own senses!
It really is difficult at times to resist the urge to engage in lifestyle inflation. The accountability factor of being PF blogger definitely keeps me on track! Great job resisting your own real estate urges! We will be much better off in the end. Let’s face it, even if we do buy UP, there will ALWAYS be a better house out there.
As it relates to repeated financial mistakes, my struggle is with thinking I’ve found some great investment to buy. I have a specific investing strategy (low cost index funds, properly allocated and rebalanced, managed for tax efficiency, etc.) but I’m constantly tempted to commit investing suicide by going outside these rules to chase some “sure-thing” investment.
The only therapy that works for my investing suicide tendencies is to have a WRITTEN IPS (Investment Policy Statement). The deal I have with myself is to consider my IPS before I commit to any investment. This brings me back to my senses and I stick with my original plans (which means letting the “once-in-a-lifetime” (until the next one!) investment go).
Maybe you need to write out your property goals and strategy to keep you on track when the real estate bug bites again! It sure helped me…..
I am thinking of doing just the opposite of you, possibly selling for less house. We have a home that cost was 5 times what we spent on our first paid off house. To think we paid off our first mortgage; oh the days. The sale of our first home doubled in value which helped pay down half our current mortgage. We upgraded to this new home on a wooded lot or conservation land in the back that is just a dream. We love it here but that love comes at a cost and a sacrifice. We started with a 30 year mortgage and have been able to fiddle that down to a 15 year mortgage as the interest rates dropped, dropping off years off the mortgage. This of course did increase the payment slightly a few hundred dollars per month. Not bad, hmmm, that few hundred dollars really tightens the belt when you are each contributing 100% to 401k and HSA accounts.
Normal maintenance on this new house starts to add up. The smaller house was much easier to maintain. Should we do the work ourselves or should we out source and pay someone that can do the job better, safer and quicker but at a much bigger cost. Then home improvements so we can enjoy things a bit more are always questionable. We can afford the house and it brings much joy into our lives but is it preventing us from reaching our ultimate destination being financially independent and being able to help and pay for college for our son? I believe it is worth it if when we retire we sell the house and use a large part of the sale toward funding our retirement.
But this thinking is all based on assumptions. Will we continue to have our high salary jobs? I assume that we will have the house paid off at retirement, I sure hope we do not suffer another 2008 at sale time and we are able to keep up with the proper house maintenance so it retains its value. We also assume that the school system will continue to prosper and property values will continue to be stable so people will want to move and live in our community. I think you made the right decision. Have the end goal in mind. I believe how you spend your money or time reflects what you value most at that time in your life.
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And then it happened, during our discussion I started to feel that all too familiar anxiety that I felt last year when we had locked ourselves into a contract for a home that would’ve been a stretch to pay for after Mr. MMM’s contracts had been canceled. How could I possibly continue to be Mrs. MMM, spouting about frugality and minimalism, when I’m buying a bigger, better house at the same time? Impossible. The best part is, I KNOW that I can make our current house look BETTER than the houses we were driving by yesterday. I love decorating and creating art. Our main floor is decorated perfectly to our tastes. Those other homes were not. Starting over equals MORE expense. True, our house will never be bigger than it is and we will never live on a wooded lot, which we would love. But, making a few tweaks to the outside of our home and finishing our basement will give our home the space we need and get it closer to the look we love.
11 Comments
You couldn’t have written this at a better time for me — I spent the weekend talking to realtors and scouring the listings, running hypothetical budgets, and really really trying to convince myself that it just makes SENSE to buy a house with all the things I want, rather than wait it out in my current home. I’ve done this before — as you say, kryptonite! But I think this time I’m stepping off the ledge and really committing to staying put and investing in my current house. It may never look like a fully rehabbed townhome (I live in the city) but that doesn’t mean I can’t save up for a new kitchen, central air, and even a finished basement. Better to pay cash though!
Thank you, thank you, for writing this just as I’m coming to my own senses!
It really is difficult at times to resist the urge to engage in lifestyle inflation. The accountability factor of being PF blogger definitely keeps me on track! Great job resisting your own real estate urges! We will be much better off in the end. Let’s face it, even if we do buy UP, there will ALWAYS be a better house out there.
Amen to that! (deleting realtor.com app from my phone … )
There will always be something out there that ALMOST makes sense! But great job holding strong… again! 🙂
Thanks! I couldn’t agree with you more. Even if we trade UP, there is always going to be something “better” out there.
As it relates to repeated financial mistakes, my struggle is with thinking I’ve found some great investment to buy. I have a specific investing strategy (low cost index funds, properly allocated and rebalanced, managed for tax efficiency, etc.) but I’m constantly tempted to commit investing suicide by going outside these rules to chase some “sure-thing” investment.
The only therapy that works for my investing suicide tendencies is to have a WRITTEN IPS (Investment Policy Statement). The deal I have with myself is to consider my IPS before I commit to any investment. This brings me back to my senses and I stick with my original plans (which means letting the “once-in-a-lifetime” (until the next one!) investment go).
Maybe you need to write out your property goals and strategy to keep you on track when the real estate bug bites again! It sure helped me…..
John
This is an excellent suggestion. I just might incorporate it into my routine. Because, inevitably, this situation will likely rise again. Thanks!
I am thinking of doing just the opposite of you, possibly selling for less house. We have a home that cost was 5 times what we spent on our first paid off house. To think we paid off our first mortgage; oh the days. The sale of our first home doubled in value which helped pay down half our current mortgage. We upgraded to this new home on a wooded lot or conservation land in the back that is just a dream. We love it here but that love comes at a cost and a sacrifice. We started with a 30 year mortgage and have been able to fiddle that down to a 15 year mortgage as the interest rates dropped, dropping off years off the mortgage. This of course did increase the payment slightly a few hundred dollars per month. Not bad, hmmm, that few hundred dollars really tightens the belt when you are each contributing 100% to 401k and HSA accounts.
Normal maintenance on this new house starts to add up. The smaller house was much easier to maintain. Should we do the work ourselves or should we out source and pay someone that can do the job better, safer and quicker but at a much bigger cost. Then home improvements so we can enjoy things a bit more are always questionable. We can afford the house and it brings much joy into our lives but is it preventing us from reaching our ultimate destination being financially independent and being able to help and pay for college for our son? I believe it is worth it if when we retire we sell the house and use a large part of the sale toward funding our retirement.
But this thinking is all based on assumptions. Will we continue to have our high salary jobs? I assume that we will have the house paid off at retirement, I sure hope we do not suffer another 2008 at sale time and we are able to keep up with the proper house maintenance so it retains its value. We also assume that the school system will continue to prosper and property values will continue to be stable so people will want to move and live in our community. I think you made the right decision. Have the end goal in mind. I believe how you spend your money or time reflects what you value most at that time in your life.