Wednesday, November 3, 2010

Our Wisest Money Decision


We bought a house below our means.

That one decision will have the most influence on our financial goals than anything else we will ever do.

Back in 2001, at a time when McMansions were starting to populate the landscape with their 2500+ square footage and three car garages, we bought a 3 bedroom, 1850 square foot home with one full bath and a one car garage. As we were moving into this home, a family member asked us how long we were planning to stay in it. “This is a good starter home”, he said. We had not even slept in the house yet and someone was concerned about when we were leaving.

At the time, I was working full time while my husband was building his new business. We were approved for a loan, but after looking at many homes and running countless numbers we chose a home that was 20% lower than what we were approved for.

Over the years, we have refinanced our home several times from the original rate of 7.25% and reduced the terms from 30 years to 15 years. For us, refinancing was not to try to reduce the size of our monthly payment but to save ourselves thousands of dollars over the course of the loan. Buying a home below what we could afford will allow us to pay the loan off faster and then give us the flexibility to work towards other financial goals, like financial freedom.

Back in 2001, we knew that we would eventually start a family and our hope was that I would be able to stay home with the baby. If we bought a bigger home at that time with a much higher mortgage that dream might not have become a reality. Our mortgage payments are well within what we can afford on a monthly basis and as I stated above we are able to work towards paying off the mortgage early. And the primary reason is because we bought a home below our means.

Now that we are a family of four, we have made a firm decision that we will stay in the house…pray for me when I have 2 teenage girls and only one full bath. I’m sure we’ll get through it.

We have made plenty of financial mistakes, and in 2001, we didn't realize that buying a home below our means would become our wisest financial decision.

What has been your wisest money decision? Let us know in the comments.


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8 comments:

  1. We also bought a house below our means. As a matter of fact, I got a mortgage with my income alone ignoring my wife's income. When we refinanced, we got a mortgage with my wife's income alone ignoring my income. This tells me that we can really afford our house.

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  2. You were smart. My first thought to your comment on the bathroom is that you could (should) add another one to your house. But then I remembered that virtually all homes only had 1 bathroom when I was growing up and families seemed to have more kids.

    Someone we made it so people don't NEED multiple bathrooms, it's a want.

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  3. That was a very wise decision. We ahve been married for 42 years!!!! and our wisest financial decision has probably been to not buy anything we don't have the money for...except our home of course, we DO ahve a mortgage:):). But we don't use credit cards. We ahve a MC and a debit card and lately ahve been using the MC and paying it off as we go just becaue we get more "points" from our bank that way and then get FREE things, like a $200.00 gift catd to a store!!!!!!! We have never regretted being "frugal":):) XO, Pinky

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  4. Very nice! Probably the wisest financial decision I've made was deciding to get educated about money -- and then to start implementing what I learn.

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  5. Let me tell you--people around the world live in MUCH SMALLER homes than EVERYONE in America, so you absolutely did the right thing! We also bought well below our means, we have one bathroom, one car (gasp!), and we like the fact that we are weird. It's crazy how everyone is buying houses WAY more than they can afford! We are looking to purchase a second car soon (mostly for work reasons), but we prefer to buy an older used car that we won't have to make payments on. Our friends think we're nuts. Doesn't everyone have car payments? Not the smart ones. Doesn't everyone have a second bath? Not always. Great post.

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  6. Buying a car 10 years ago and just finally had to get a new one this year. It was great to not have monthly payments on that car. So we made double payments on our current car, which will be paid off in 3 months and we've only had it for 2 years. Now once that one is paid off we can make double payments on the new one we just got 3 weeks ago!

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  7. I grew up in the suburbs of NY as the oldest of six kids in the 60s and early 70s and we had a ranch house of less of 1700 square feet. We had two full baths and I cannot recall a time when anyone felt that we needed more space or more bathrooms. Today, I live in the suburbs of Boston and my husband and I have seven kids. We, too, purchased much less house than we were approved for and it has been a blessing over and over. Both of us work at jobs we like, but if one of us stopped working for any reason we could still easily afford our mortgage payment. We have also refinanced several times to bring the total cost of home ownership down. The press is full of stories about people who made very poor choices and are suffering as a result. It is nice to read about others who were careful--it shows that being financially conservative pays off in so many ways.

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  8. I grew up in the suburbs of NY as the oldest of six kids in the 60s and early 70s and we had a ranch house of less of 1700 square feet. We had two full baths and I cannot recall a time when anyone felt that we needed more space or more bathrooms. Today, I live in the suburbs of Boston and my husband and I have seven kids. We, too, purchased much less house than we were approved for and it has been a blessing over and over. Both of us work at jobs we like, but if one of us stopped working for any reason we could still easily afford our mortgage payment. We have also refinanced several times to bring the total cost of home ownership down. The press is full of stories about people who made very poor choices and are suffering as a result. It is nice to read about others who were careful--it shows that being financially conservative pays off in so many ways.

    ReplyDelete

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