I've shared bits about my daughter's house hunting; in spite of the higher interest rates, she's still looking. She won't force a decision, and has looked at five in person so far. But she's in a sort of brain circular cycle. The thought of dropping so much on down payment and closing costs, then to have a mortgage that's double her rent is scary. Yet, the main reason she worked so hard to save, chose an apartment with rent as low as possible, was to buy a house.
This circular thought pattern, the when to act conundrum is so relevant in our lives, and resurfaces at different periods of life. People may save before having a child because they want to reduce outside employment by one or both parents. It might be saving for a medium to big wedding, or a trip of a lifetime. Knowing when the savings goal is met, when it feels safe to go ahead is quite a dilemma, especially when the impact is long reaching.
My daughter's in the saving for house/buying the house loop. We're in it as we figure out when to officially get off the retirement savings loop and exit to retirement. We'll do this twice, for DH, then me.
An important step we're practicing is to live for awhile before pulling the lever, as if the life change has already occurred. That'll help ensure it's doable before it's real. Paper budgets are all fine and well, but without discipline, they could create a false sense of financial security. This is why I'm so focused on living off just my income this year.
My daughter's been putting in her savings minimally the extra difference between rent and her top end mortgage/ escrow. ( With saving rent while temporarily with us, that's going in her savings too.) Not only is she saving more now, she can see when her cash flow is super tight. She might only have $25 until pay day due to needing to have a tire replaced, or even something fun like concert tickets, without dipping into savings. That provides discipline during the saving cycle to make sure she brown bags it for lunch for the week or meets up with a friend for a walk instead of going out for dinner.
We'll keep this strategy in our house for the time being. We're hoping to make subtle changes that if maintained, seeing a significant drop in discretionary income won't make the day to day post house or post retirement a challenge. This is not advice, just a little sharing of what seems to be working for us.
An excellent post, Sam. Living as if the changes are already in place is a great way to see if it will work when the time/change actually comes.ReplyDelete
Thanks, Belinda. I'm very excited for her, know she'll make the right choice for her, but glad she's also financially savy.Delete
We did the same. The year before my husband retired we lived off of only my income and banked his first retirement and his current salary. It worked well for us and I'm sure you'll find your sweet spot as well. Have a great Monday Sam.ReplyDelete
I feel like if we can learn, save, and ride out the economy we'll stay on track. I like hearing from others with experience.Delete
I have a friend who is considering a job change with minimal pay raise, because he has seen he can live with less. So living as if you're already there makes sense. I do hope your daughter finds somewhere, I am not hunting but my friend is; she is so burnt out and now planning her wedding! I worry she will miss the chance to get a hope while our market is slightly cool here.ReplyDelete
I took a 15% pay cut 7 years ago. Despite my work stress now ( still COVID impacted) I m in such a better place mentally.im sorry for your friend. That's two of the top five most stressful events.Delete
these are all common questions/dilemmas about buying a house. Good luck to her on that. We bought ours in the craze of 2005 only to watch it plummet. However by now it is 'up to wear we bought it". I think it helps not to see a house as an investment but something I want; then the value doesn't matter as much.ReplyDelete
She's looking at funding her place. She's not looking to grow the assett, but find a place to make a life. You're spot on with how she's trying to think.Delete
Those are all great ways to save and it is a credit to you as parents that she is able to do this.ReplyDelete
She's a hard worker- you know the type as you have three as well. We're her cheerleaders.Delete
To me the hardest thing about buying that first house was the shock of paying the mortgage the first few months. After that it became the norm and was easy to cope with. The same happened as we bought different houses (always a little bigger with a little larger monthly payment) but you adapt quickly. The most difficult thing is to pull the trigger and buy. I hope she can find something she likes sooner rather than later, and I hope she understands there is no such thing as the perfect house.ReplyDelete
I think she'll adapt as well. She's got a couple deal breakers, but now I think is pretty sure where she can compromise. She needed to see a few, lose out on a few, to know. It's just harder as a single person and no back up. She could potentially get a housemate, but last resort. I think she'd do side gigs. I still waited tables a few hours a week when we first got married but even though so was teaching full time. It helped put a little money back in our budget for the repairs and updates our little house needed.Delete
L and I were so lucky to be able to put a downpayment on our condo when we did - we ended up "only" paying $118K for it - its value has more than quadrupled in the last 20 years. Of course, the only way we could afford that was that my dad and two grandparents passed away - my mom gave us the money. We put as much down on the capital as we could afford - we lived very frugally, including being car-less for 7 years - to pay it off.ReplyDelete
We're fortunate that our first house was very inexpensive to live in, plus we cleaned it up and made a nice profit. We too are in a position where our home is over 4X the value. That's what she's competing with. It's all her own money too.Delete
I hope your daughter can find a house soon. I've heard home prices may be dropping a bit now so hopefully that will help but mortgage interest rate...yikes! I guess the main thing is that she shouldn't rush and she shouldn't squeak by with the max mortgage payment she can afford because when you own a home you are always paying to fix things like a broken water heater, furnace that goes toes up, etc.ReplyDelete
She's seeing lower prices- with higher interest. Ugh. She's sticking to the real affordability rules pretty tightly. She'll still have 6 months living expenses saved, plus a little cushion for repairs. Yes, those things come with no guarantees.Delete
I still maintain that brown-bagging both breakfast and lunch (and tea and coffee) saved me an ABSOLUTE fortune and I didn't mind because I saw what my colleagues were spending and preferred my own food anyway. But your daughter obviously has a great head on her shoulders so she'll get there! Good luck to her!ReplyDelete
I was amazed at the amount some of my coworkers spent in the delivery service. $50-$60 some weeks, in salads and wraps. Nothing that special either. Coffee has gone through the roof. My basic coffee is $3 for a small. No thank you.Delete
I am afraid to pull the complete retirement trigger because of inflation. Also, I don’t know what I wanna do when I grow up… I am well into my 60’s… lol. I am so glad I bought my “retirement/ weekend” house when things were far cheaper. It is tiny at 720 sq ft with an unfinished basement and was more than three times my “work” house.. Still like being at “work house” during work week, and I purchased it for $25,000……yeah you read that right, during the Great Recession. It is 912 sq ft. I put the figures out there to show just how much houses have skyrocketed since the Great Recession and to show how much houses were underwater with mortgages back then. It is not fair to these younger kids how much housing costs have risen. I will probably retire when forced to by sickness. Just got back from flying to see daughter and grandchild. To be real, as much as I wanna act like I want to travel, I am a homebody. Flying twice a year to see family is fine and I could do this forever. I really don’t care about going anywhere else by plane. I ramble, saying all this to say that I think it is ok for you to be cautious in your retirement planning and it is ok for your daughter to be cautious in purchasing her house. These are huge decisions, that can impact lives for years. Cindy in the SouthReplyDelete
Very cool you have the vacation home. With DHs shared own d cabin, and the family lake home, we are fortunate too. It's scary though with inflation and the stick market. Saving where we can is our mantra.Delete
Your exit plan will help immensely for retirement peace-of-mind. We lived on hubsters' take-home for 2y before I retired.....and that wasn't intentional. When I looked back in my records and realized that fact, I retired giving 28d notice. Done is done!ReplyDelete
Best wishes to your daughter making a decision that lets her sleep at night.
I'm learning from others. She'll know when it's right, and trying to stay with the "rules" of home ownership affordability. I'm just glad she felt secure enough to move here temporarily, as her rental neighbors were not good for her to sleep at night.Delete
We bought our first house, built for us for something like $82 mortgage and were so afraid but brave. I knew we could do it. Husband was terrified. I cannot believe the price of homes right now! I would hate to be starting out right now.ReplyDelete
I hope your daughter is very patient, not getting something just because she can. Or, because she wants it so. She is so young and does not appreciate how things can change. Weren't we all?
Hopefully, a house will come along soon.
$82 mortgage- WOW. I thought our first mortgage payment, escrow and all at about $370 was so low, at least compared to rent. My daughter's pretty savy- she's researched and has contingency plans. I agree though, we don't really know until we experience.Delete
1968, all brick, 1.5 baths, 1200 sq ft., 3 br, living room, den, carport, outdoor utility room.Delete
I went back and it was nicer than I remember.
When we found what we wanted, we asked my parents to give us their opinion. Friends said our parents should stay out of it. Well, we asked them. Besides, I figured they knew something about homes that we might miss. I am impressed that you are going with her and that she is listening to experience.
We avoided a house where a street ran into it. I was afraid cars might not make the stop. Also, I would have no house with steep driveway because of leaving a car to roll down into traffic. The cul de sac avoided both those dangers.