Last spring I published a post that was inspired by an email I got from a reader named Kate. She wrote about how being able to pay for something isn’t the same thing as being able to afford it, and I loved her perspective. We had some back and forth emails, and then at the end of the summer I got this email from Kate:
Thank you for your advice a few months ago on helping me decide which house would work best for us. I used your approach and MMM approach of seeing how much even a $200 a month increase in housing payment can cost us over 10 years. For me, it adds up to putting one child through college at a state school. WOW! Who knew. For those of us not born frugal or raised frugal, $200 is not something I would considered a big price difference. Yet, it all adds up. So we went with a smaller place.
We are currently under contract on a townhouse that is in a small town. My girls will be switching schools so that we can be less car dependent. Our townhouse is 1800 sq feet with no basement in a less desirable neighborhood. Yet, we will be saving 40% of my husbands income (20% before taxes and 20% after taxes.) I am following the 50-30-20 budget rule.
Here is my question…. Can you ever be too frugal when purchasing a house? Can you buy a house that is too small and regret it?
We choose our house on the fact that it needed no work, walking distance to town and where the payment was $1500 or less. Sure the bathrooms are not new but they have been tastefully been maintained and I don’t feel the need to touch them for a while. In fact there is nothing I feel the need to do. I never thought that day would come.
Most single family homes that were $30,000+ more needed a lot of work. My mom was even going to give me the $30,000 to buy the place that was 200 square feet bigger but also had a basement. I declined because they needed new kitchens, hardwood floors, etc. everything in the house was 25 years old. I just felt like I would be putting a lot of money into the house from day 1. My mom was already helping us with downpayment and I didn’t want to be greedy. The house we chose is everything that we need for now. It is simple. No decisions or renovations with three kids under your feet. We will have our full weekends to spend with our kids and 30% of our budget to spend on our “wants” which hopefully will keep us out of our house doing fun things.
Thoughts? Can 1800 sq feet be too small for a family of five?
Thanks in advance for your help. I live in a very wealthy town and people Just spend spend spend. I want to have a dream life not a dream house. My family and friends think I am crazy for going so small. Yet they also are not in touch with their finances. Thanks!
This was my response:
Congratulations on the new place, and on your awesome savings numbers! I love your philosophy. My husband and I earn roughly the same income as most of our friends, but we bought a house that is half the price of the houses that nearly all of our friends bought. That means that we’re able to pay off the mortgage faster and our debt obligation is much smaller (makes it easy to sleep at night when you don’t have to worry that a month or two without income would send you into a tail spin).
And I think 1800 square feet is perfect for a family of five! We have 1300 square feet – soon to be 2300 once the basement is finished – for a family of four, but we both work from home so we need space for that (and my husband needs space that is quiet enough to be on the phone all day, even with two little boys running around the main part of the house). Even still, with a finished basement I think 2300 square feet is going to feel like a mansion – maybe even too big. Ideally, I’d have gone with a smaller house, but we bought this property because of the yard, and just took the house that came with it. Have you ever read the Tiny House Blog? I love it, and I find it really inspiring. Take a look when you get a chance.
We’re also happy with our current house and not doing any upgrades or remodeling other than finishing the basement. Our house was built in 1999 and everything is basic builder stock (doors, counters, fixtures, mirrors, etc.) Our dishwasher broke and we replaced it with a nicer one, but we still have the original stove and laminate counters and low-end carpet. Everything is in good shape and pretty neutral, so why change it? I see so many people upgrading their homes just because… Nothing is wrong with the old stuff, they just want to remodel or follow a new trend. Tile back splashes covering the walls between counters and cabinets, granite counters, fancy faucets, new flooring, stainless steel appliances… the list is endless, and it truly never does end because the home supply manufacturers keep coming up with fancy new designs and products.
The way I see it, that sort of constant upgrading is bad for the wallet and bad for the environment. What happens to our perfectly-good-but-not-fancy laminate counters if we replace them with granite? Same with the carpet. Landfills must be overflowing with stuff like that. Once our carpet or counters are old and cruddy looking or very damaged, it would make sense to replace them and we could consider replacing them with something nicer. But not when they’re in fine condition but simply not the newest trend. I like home organization blogs but I’m always struck by how often the owners rip out perfectly good things in order to replace them with the newest trend. To me it seems like a waste of money and resources and time. So I’m with you on having a “good enough” house and then spending time doing things that are more fun.
I’m glad you’ve discovered MMM – that blog is another great resource for people looking to live well under their means. I find it helpful to identify with like-minded people (online if I can’t find them nearby) and have them be my “Jonses” to keep up with, rather than comparing myself to people who live lavish lifestyles and spend most of what they earn. Enjoy the freedom that comes with having a house that is “just enough” – time to have fun, no space to fill with extra possessions (forced minimalism is a good thing!), and more money to put in savings since your house payment is lower.
I wanted to post this email exchange for the rest of you to read too – a little inspiration in case you’re looking for ideas from someone who is opting for a “dream life instead of a dream house” (Kate mentioned that concept in another email, and I love it! – Think of all that we can do with our time and money if we’re not spending it all on our house!)
By keeping our house payment to a smallish chunk of our monthly income, we’ve been able to pay off the mortgage faster and also build a decent chunk of money that we’ve earmarked for eventually paying off the loan in one chunk (of course, we could also use it as an emergency fund if need be, which is why we’re hanging onto it for now instead of making overpayments on the loan). We’ve also been able to max out our IRAs, HSA and SEP IRAs over the last few years (not all of them in every year, but most of them, most of the time), which is setting us on a good path towards retirement. Ideally we’d like to have the mortgage paid off within the next few years (we technically have 8+ years to go if we just pay the amount due each month until it’s paid off) and continue to aggressively build our retirement savings so that we can have more options as we get older. We might choose to continue working until we’re 70… I’ve learned to never say never, because life changes and we should be able to change with it. But we’re working towards the day when we don’t have to work. When we can work just because we like to, and not because next month’s bills depend on it. Moving to an inexpensive town and buying a reasonably-priced house had a big impact on our ability to save for the future and mostly avoid money stress. So did our efforts towards minimalism – striving towards having clear surfaces and rooms with lots of space in them is a great way to not spend money! And of course, the fact that we purchase nearly everything used helps a lot too. Joshua Becker published an article today about how to live on one income, and I think a lot of my readers will like it. It ties in well with everything else in this post, so I thought I’d share it with you too. Even if you don’t want to actually be a one-income family, living on one income (and saving the other if you’re really a two-income household) is a very good way to set yourself up for long-term success. Live well below your means in order to always be able to live well!