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Were We Worried When Buying Our New House? Great Question!

Some of you may know that I run monthly giveaways for my newsletter subscribers (if you want in on that, sign up in the right toolbar).  All my subscribers have to do to enter to win is to comment on a monthly giveaway post.  They can leave any comment at all, but I do ask for questions so that my “Ask Crystal” part of the newsletter doesn’t get extremely boring.

Great Question

Erika at Newlyweds on a Budget asked a fantastic question last week and my answer just was too long for a newsletter, lol:

I have been curious to ask…you guys decided to purchase a new home right around the time the whole google slaps happened. Did it not make you nervous that maybe your online income wouldn’t be as stable? or did you get nervous to make such a huge purchase with the uncertainty?

Were We Worried?

Short Answer:  Yes, we were pretty worried but we ran the numbers, could make it work, and decided to go ahead anyway.

Long Answer

Here was the whole situation.  We signed the contract to have our house built on April 14, 2012.  We had made nearly $16,500 in March after expenses, so we actually didn’t know yet that April would be the start of a lull.  But it was.  We decided to keep an eye on it.  Worst case, we would forfeit our $2750 in deposits and walk away.  This house literally had everything we wanted from a home and we plan to stay here until we physically can’t handle it anymore, so we definitely wanted to give it as much time as possible before just walking away.

Income

From April through September 2012, while our house was being built, our high income month online was about $10,000 in August and our low month was about $6000 in June.  Seems that our new average is around $8000, but we obviously don’t have a ton of data.

Expenses

Even though that meant we were making half of what I was expecting, we only lived on $3500 a month.  When I worked the numbers for the new house (mortgage, taxes, insurance, HOA, and utilities), we’d be adding a max of $2000 a month to that total.  That brought us to $5500 a month in estimated expenses.

Taking a Closer Look

Well, even in our lowest month, we brought in $6000 online, $1500 from hobby jobs (Mr. BFS refs and works part-time at a bowling alley), and $600 from renting out our spare bedroom.  That’s $8100.  After taxes, we were still covering everything without taking into account the rental income ($1200 a month) that we would be getting from our old house.

Backup

Thanks to saving the extra in big months or using it to pay down the old mortgage in 2011 and early 2012, we also knew that we already had the 20% down in the bank, knew that we would have $20,000 as padding after closing, could sell $20,000 in stocks if we ever had to, and have $60,000 more as worst-case-scenario money in retirement accounts.

Plus, we could sell the old house within a month for $100,000 (should sell for $120,000 at least but we could liquidate it for $100k super fast).

Our Final Decision

In the end, we decided that worst case, we could get “real” jobs again and bring in the $5500 a month, expecially when you take into account $1800 a month in rental income between the old house and a bedroom in the new one.  And we have 5 bedrooms in the new house, so we can always rent out one or two more for an extra $500-$1000 per month if we ever had to go balls to the walls.

We can also cut expenses down to $5000 a month easily, $4500 a month pretty easily, and $4000 a month if absolutely necessary.

So far, it hasn’t been an issue.  I am still hoping online advertising picks up again, but even if it doesn’t, we are okay.  :-)  Yes, I still worry in general, but that’s nothing new.  Until both houses are completely paid off (so until we are debt free), I will worry.  It’s in my nature.  And honestly, whenever I stop worrying about one money issue, I find something else.  :-)

What do you think?  I just assumed most of you would not have actually made the same decision we did, but I could be wrong.  The financially-motivated part of me knows that lifestyle inflation is a risk.  But that part of me and all of the rest also knows that we spend the majority of our life in our home.  I couldn’t justify passing up our actual dream home, especially when it was a pretty great price,  just because of a risk.  Especially since we had backups in place even if all else fails.  That said, instead of me just assuming, would you have made the same decision in our place?  Feel free to ask for more details in the comments below if you need them to make up your mind.  :-)

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21 comments to Were We Worried When Buying Our New House? Great Question!

  • I’m not sure we would have made the same decision, but I think that has more to do with the fact that we’re pretty sure our current location is not a “forever” location and we also spend way less time in our home than you do working from home.
    So we’re pretty satisfied with our starter home for the indefinite future.

  • I think you guys are doing great. Sounds like you weighed the pros and cons and have enough of a buffer in your income.

  • I sort of think that it’s healthy for everyone to be nervous and a ltitle scared before buying a house. It’s a big expense that’ll last a long time. It’s good for peopel to get nervous and think it over and all that. A “good’ kind of stress, I’d say. And it sounds like you guys are getting by just fine, and you have a plan if you stop getting by, so that’s great!

  • If I were you and had all of the contingency plans well thought out I would have done the same thing. You ran the.numbers and found a way to ensure it could always work so I think you did the.right thing. I would be worried too but that is just my nature.

  • I am not sure if I would have made the same decision, but do think that IF you are going to make such a decision, now was the time to do it. House prices and interest rates are low and you are both at the start of your careers. You have lots of time to pay this off. Personally, I like being completely mortgage free and don’t see much that would make me want to change that situation at this point.

  • Mom

    I definitely would have made the same decision you did. We already kinda did when we bought our current house – it was perfect for us, and we were planning on starting a family, so we bought with enough room for 2 kids + home office space for each of us. Fast forward 4 years and we’re one and done with the kids, so really the house is too big for us, but it’s in an excellent location, we like it – and we have no intentions of moving again.

    As long as you’ve run the numbers and are comfortable with them – go for it.

  • I wouldn’t presume anyone would make the same decision. Not everyone will take risks. You assessed your risks, analyzed the numbers and made a decision. Many, if not most people never go through the steps never mind take the risks.

  • That’s a great analysis. For a while there with the growth you were seeing, I figured you’d hit six figures a month after not too long. Obviously things settled and even came back down a little bit, but sounds like you’re handling it well. Hope you’re enjoying the house!

  • Thanks for sharing your though process – I found it very interesting. I’m pretty slow-moving and cautious so I probably wouldn’t have put myself in the place to make that decision, but I think what you did was reasonable since you had thought about the contingencies.

  • Thanks for sharing the nitty gritty. It is really interesting to me, given the widely variable income you have. I would find it stressful!

  • Your thought process is really interesting — but a hypothetical follow-up. Let’s say you hadn’t put a deposit down in March, and April happened, then May happened. Would you have started this same process in June?

  • Sounds like you and Hubs went into this with eyes wide open and carefully made your decisions based off of every angle. And even with the added stress from all of the unknown variables, you guys still are making it happen. Good for you!!

  • @Mrs. Pop, I’m glad you’re happy. :-)

    @Michelle, we are stable. That’s all I need. :-D

    @TB, I think it is good to get nervous about big purchases too. It is “good stress”.

    @Lance, we sound a lot alike.

    @Denise, I am really looking forward to being debt-free. We’re still on track to pay off the rent house next year. Fingers crossed on paying off our current house within the next 10 years.

    @Mom, there is a balancing act between savings and happiness. Sometimes the two coincide and sometimes you just have to decide what decision will lead to you being the happiest overall. Only one life…

    @Krantcents, I assumed that people would NOT have made the same decision. I think you missed an important word in my summary. :-)

    @Money Beagle, 6 figure months…yummy. Oh well, we’re just happy to be making more than we used to while having more flexibility. :-)

    @Emily, cautious is good. I’m usually more cautious…

    @Anne, it is but both of our past jobs weren’t guaranteed forever either. I feel more in charge of my worry this way, lol.

    @Kathleen, I really don’t know. I’d love to say yes since we are really happy here, but June was a particularly scary month for us…I really don’t know. Maybe not.

  • @Jennifer Lynn, thanks! At some point it becomes less of a decision-made and more of a got-to-deal-with-it thing. :-) I’m betting I’ll feel a little better with each passing month that we successfully hit our targets.

  • I think you should always be a little worried with any major purchase, but you seem like super planner, so I think you are smart to take advantage of cheap rates and prices right now.

  • I probably wouldn’t have pulled the trigger as you and Len did. Doesn’t really matter what I think though. You and Len obviously have worked hard to get where you are and made the right choice in going forward with the purchase. Some things in life are just meant to be. Glad you and Len are settled and enjoying the new place! – Paul

  • @Kim, thanks!

    @Paul, thank you. :-)

  • [...] @ Budgeting in the Fun Stuff writes Were We Worried When Buying Our New House? Great Question! – A reader asked if our unstable income caused us to worry while we were having our new house [...]

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  • [...] @ Budgeting in the Fun Stuff writes Were We Worried When Buying Our New House? Great Question! – A reader asked if our unstable income caused us to worry while we were having our new house [...]

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