J and I are not that far along on our financial planning path. He’s 30, I’m 28, and we’re still in the early years of being self-employed. But even though the net worth numbers aren’t huge yet, we feel like we’re on the right path. We each contribute $200/month to an IRA, and we put $100/month into an ING account. We pay a little extra on our mortgage every month, and should be able to bump up the IRA contributions in 2007. But we consider our best financial move by far to be our decision to remain in our “starter house” forever. Or at least for a very long time. We bought our house 4 years ago, for $190,000. This is on the low end of the housing market in our area, but it was still a stretch for us at the time. We saved for a year, had about $10,000 for a down payment. Since that didn’t even come close to 20%, we had to get a home equity line of credit to cover the other $28,000 of our “down payment.” Our total mortgage payment is $1250 (we round up to $1300), including taxes and insurance.
Our house is just under 1400 sq ft, with three bedrooms and two bathrooms. Cute is a great word to describe it. It backs up to a great open space and park, with playgrounds and a school on the other side of the park. We’re less than a mile from three grocery stores, and a plethora of other shopping – pretty much everything we need is within a 10 minute drive/walk from home (including my favorite – a huge thrift store about 1/2 mile away). Despite all this, from the time we bought the house, we planned to move again in a few years. We work from home, so the two bedrooms serve as offices (mine does triple duty as a guestroom/office/scrapbook room). We knew that eventually we wanted to have kids, so we just figured that we’d have to buy a bigger house in order to have room for them. We knew that we’d have more money for a down payment the next time, since we’d be selling our house and getting the equity from it. But still, the bigger houses in our area pretty much start in the very high $200s and go from there. So even if we had $40,000 to put down, we’d still have to get a creative mortgage, and our payments would jump by nearly $1000/month.
We were sitting around one night, talking about how much we love our house, and how much it was going to suck to move. Then we started brainstorming. Within 20 minutes, we had a solution. We have two living rooms in a very open floor plan. And I have parents who love nothing more than remodeling houses – they’ve been doing it since before I was born. So the plan is to build a wall (with a little help from my parents) in the middle of one living room, cutting half of it off from the rest of the downstairs. We’ll insulate the wall to make it mostly soundproof, and buy a solid door. That will become the office. Since we plan to each work part-time and parent part-time, only one of us will need to be in the office at any given time. So a singe office will work fine. We’ve pretty much made the switch to a paperless office, so we don’t need a whole lot of space. Then we’ll have the upstairs bedrooms that we now use as offices, available for kids.
For about a week after we came up with this solution, we were floating on air. We called our parents right away and told them, almost as excited as we were the day we told them we had gotten married. We were – and still are – absolutely thrilled. We feel very free, knowing that as time goes on and inflation does its thing, our $1300 mortgage will become easier and easier. And we’ll be able to stay in our great location overlooking the park. And our kids will be able to walk across the park to get to school. And we’ve escaped the trend of buying bigger and bigger houses, which somehow beg to be filled up with newer and better stuff (ie, crap). By staying here, in a house we love, we’ve put ourselves much further along on the path to financial independence. We’ll own our house much sooner than we would if we had taken on a bigger place, and think of what we can do with the extra $10,000 or so that we’ll save each year on our house payments! We can invest it, spend it on other stuff, or just not earn it at all, and spend the extra time playing with our kids. Knowing we have that freedom is a much better feeling than an extra 1000 square feet would ever bring.