Reply to What is it like to be “house poor”?

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[quote=Anonymous]A lot depends on how old you are and where you are in your career. If you are young and/or at a place in your career where you expect your incomes to increase (either with escalating bonuses or just base salaries) then this is totally doable. But get your mind right. We did this about 20 years ago. Bought a place that we could afford...but just so. We were both in careers where we expected incomes to increase. We didn't eat out. We didn't go on vacations. We kept our one car and never considered a new one. We had bare bones cable. We didn't furnish anything other than what was necessary.

It turned out to be the best decision we ever made. Our incomes increased and the value of the home skyrocketed. Bonus for us was that long after we were in super strong financial condition, we continued our good habits. We vacationed, but responsibly. And because we were living in way less house than we could then afford there was considerable excess for more 10+ years. That increased income went to savings that also was well timed. When we decided to trade-up we had a huge pile of liquid and a ton of equity. We bought, renovated and sold the other house. Our current house will be paid off before kiddos go to college. All because we were willing to stretch.

Long ago one of my work colleagues (who made BANK) and was married to a biglaw partner told me you never know what life looks like behind closed doors. In her case, she and her husband were responsible for supporting a family member with special needs whose parents had long ago departed. That was a HUGE expense. The residential facility was consuming almost $200k (pretax) income annually. It is about your controllable expenses against income.

If you assume every $100k in mortgage costs about $500/month, consider that the economics are a wash if you spend $200k more on a house or blow $1000/month on frivolous crap. Also, you have to live somewhere. I love talking to friends and family about the cost of starter homes in DC. They ask how or why anyone would buy a $700,000-800,000 starter home. I remind them that a 2 bedroom apartment or rowhouse could run them 3-4k, so it isn't $3500/month mortgage in a vacuum.       [/quote]

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