Home Buying: How to Avoid Being House Poor

Ever felt tangled in the web of housing affordability? In this episode, we break down the delicate balance between your bank account and the community you yearn to call home. Our parting gift in this series is a trove of wisdom for those bracing against the headwinds of today's property markets. Whether you're a bright-eyed newbie to home ownership or someone seeking a fresh start, our chat is brimming with practical nuggets. Equipped with our insights, you'll be ready to make a smart move that won't leave you house poor but instead sets the stage for your life's most cherished memories.

We strip away the veneer of societal expectations and put pride back in its place; urging you to start with a home that might not turn heads but will surely turn the gears of your financial future. It's a heartfelt conversation that dives into the essence of what truly makes a house a home—hint: it's not the grandeur of its halls but the laughter that echoes off the walls. So, embrace the idea of a less grandiose beginning to your homeownership journey. We promise that in the sanctuary of a space that's truly yours, every milestone reached and every moment shared casts a far longer shadow than the lure of curb appeal. Subscribe and join us as we continue to peel back the layers of making savvy, soulful home choices in life's grand tapestry.

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Transcript

Speaker 1: 0:07

Welcome to Ditch the Suits podcast, where we share insights nobody in the financial services industry wants you to know about. We're here to help you get the most from your money and life, so buckle up and welcome to Ditch the Suits. Steve Campbell and Travis Moss wrapping up our last episode in this series talking about housing affordability. If you took my suggestion in the last episode and you are watching on YouTube with us, hopefully this isn't your last stop to our YouTube channel. You can head over and watch all of these episodes, as well as listen on any podcast platform. We told you in the last episode don't be in despair about all these cause and effects. We really think that there are some things that you can do to kind of navigate affordable housing. So, travis Travis, let's just get right into it. What are the things that someone needs to think about when it comes to this topic around affordable housing?

Speaker 2: 0:53

Yeah.

Speaker 2: 0:53

So if you're in a situation where you're concerned about the affordability of housing and I say if, because sometimes we do stupid things Sometimes the house is perfect and affordability means more.

Speaker 2: 1:07

Like you know, they're asking $550,000 for it and I think it's only worth $530,000. And I don't want to give that extra $20,000 up. So it's like not affordable, right, it's ridiculous. Over price. It's like if you're going to buy that house and live there for the next 30 years. Or if you live in a community where housing prices are consistently progressing forward because it's a strong community, there's an opportunity cost for that 20,000 that you're losing, you know. Or if this is your dream house for your family and this is really going to bring everybody together and make everybody happy and all that kind of stuff. Or if you've been in a housing market that has been absolutely miserable and you've had a horrible time trying to find anything and you're looking for perfect and you finally find perfect, but it's 20 grand more than you want to spend. Sometimes you got to look at it and go 20 grand divided by the next 30 years, okay, that's a good deal, you know, like you just got to get out of your own darn way sometimes. But if you're looking at it and you really do have an affordability issue, like I can't make the numbers work, I can't borrow enough to get in there you know what I mean and I'm getting priced out of the market in a way that I just can't compete with, this is more for you. And this is like don't kill the messenger type of thing, because this is also really good advice, I think, for younger people that are looking at buying their first house or maybe trying to relocate and they're trying to figure out how to make the finances work. So we got three different strategies here. Strategy number one is there are amazing, amazing communities out there that would be amazing places to live. You go through the communities. They're beautiful, they're clean, they smell good, they're rich communities, the houses are beautiful. You know there's fruit trees everywhere, there's bakeries, there's restaurants, there's diners. You know there's bars. Everything you could want is in this community and it's just an amazing, wonderful place to be.

Speaker 2: 3:02

Um, unfortunately, wanting and being able to afford are two completely different things. Yep, and this is the hard truth about finance is you have a certain amount of means. There's certain things that you can do, there's certain things that you can't, and if you're going to dwell on the stuff that you can't do, you're going to be stuck in this perpetual kind of misery with this. And if you're going to dwell on the stuff that you can't do, you're going to be stuck in this perpetual kind of misery with this. You really need to be willing to find a community where your financial means are in balance with the standard of living of the community. If you're trying to live with a bunch of billionaires or a bunch of millionaires and you're not at that level yet, you're not going to be able to keep up with the cost of the community, because money attracts money, so there's going to be more people keep up with the cost of the community. You know, because money attracts money, so there's going to be more people with more money that want to move into that community.

Speaker 2: 3:55

So you see this a lot of times with communities that are near lakes or certain like corporate headquarters or you know certain types of universities and stuff like that where you know the average person is maybe making a hundred plus thousand dollars a year and then you get a job for $70,000, $80,000. You're not going to be able to compete with those people. So the nice houses they're buying up and then, when their kids are graduating from college and everything and want to come home, they're buying the houses for their kids. That's what you're competing with. You're competing with something that's beyond your financial means and you know, as a family unit you might be able to do that if you're. If you're, you know family members are willing to help you and everything.

Speaker 2: 4:33

But there has to be a balance between your means and the standard of living of the community. You know, and you can't take it personal, it has nothing to do with you. Nobody cares, nobody's looking at you saying, steve, I don't want you in my community. What they're doing is they're saying hey, you know they're. Basically there's a line of people that want to get in and they're all willing to write a check because they want to get in and they're okay. Back to that whole thing, that whole if thing. They're okay, saying you know what, I'll spend an extra 50, 100, 200, 500,000 to get into that community, if that's what it takes. So the question is, can you match them? And if you can't match them, then you look for a different community that fits where you are in life. It fits where you are in life. Chances are. That's not that other person's first community either. That's maybe their second or third or fourth trip on the you know. Stop on this trip that they're on.

Speaker 2: 5:20

You know of life, if you don't make enough money in the chosen profession, the community you live in, you got to change the profession or you got to change the community, but you can't. Don't live your life waiting for something that's not going to be there. There's lots and lots of amazing communities out there. Find one that fits that, where you fit financially too. If, in fact, you're set on owning a certain type of house and sometimes that comes down to standards Sometimes people have these really, really high standards of what they want to buy Because that's the standard in the community. It's like but you're not at average in the community, you're below average in the community, so you're going to financially break yourself trying to fit in with the community. Just go to a community where you actually fit in and you're not being pressured all the time, don't? It's the Joneses, right? It's the like I'm looking at my neighbor when my neighbor's got, so I got to do that too.

Speaker 1: 6:15

Before you even jump into the next one, though I'm just smirking because I'm thinking about maybe you did take my advice at the beginning. You know, you and your significant other whoever you make financial decisions together you sat down. I can just picture the people slapping each other on the shoulder and being like, see, he made my point because so much can get lost in what's just been said and I think it's a sobering conversation. What you talked about at the beginning is if you're $20,000 away from your dream home, you know there's an opportunity cost, but that can be like see, the guy said we're close and all of a sudden you're like babe he said 20,000, you're a hundred thousand dollars over. We can somehow be like, see that you're a hundred thousand dollars over. We can somehow be like, see, that justifies what I was thinking. But on the flip side, I think what you also said is really important too, and maybe that's not the truth that your agent's going to tell you, whoever is giving you advice, if there's money for them to be made. They may be misleading you because it says that you can afford it. But, like we go back to our previous conversations, maybe down to the penny in the budget you can afford the mortgage, but can you afford everything else that comes with living in that community? Can you afford all the additional expenses that you're going to have to keep up with? And that's a huge part of it.

Speaker 1: 7:22

So I'd rather you be on Ditch the Suits hearing. Maybe we're reaching a little bit beyond our status at this point. Wouldn't you rather know that and be comfortable living in a place where the last thing you want to do if you're a parent or if you're married is constantly live in a place where you can't go enjoy what's around you because you've just paid too much for a mortgage and now you're strapped for the rest of your life? The whole point of Ditch the Suits is to help you get the most from your money in life and lead to a life of financial freedom where money and life are two things that power the experience you want to have. If you cripple yourself affording something you can't pay for, that could be detrimental. So I think this leads kind of into okay, great, number one we're both hitting each other, going back and forth, going shoot. What do we do? I think the second one and you deal with people so much, dealing with clients what it comes down to as a strategy number two? Why don't you walk us through and hit us between the eyes with it? Let's take a break to hear a word from our sponsor.

Speaker 1: 8:17

This episode is brought to you by the Unleashing Leadership Podcast. Join Travis Moss, seasoned entrepreneur and business leader, on a transformational journey of leadership exploration. In this thought-provoking podcast, travis shares his invaluable insights and experiences gained from two decades of managing diverse businesses, which include small family enterprises, fortune 500 companies and his own successful startups. Through candid storytelling and real-life examples, he unveils the profound truth that success or failure ultimately rests upon a leader's ability to recognize and unleash the potential in others.

Speaker 2: 8:58

Start listening to the Unleashing Leadership podcast today available on all major podcast platforms. Well, pride can make you broke. And you go around to these beautiful communities. And back to the last point too. If the community costs more because of the demand for the community, everything in the community is going to cost more. You don't realize this. But maintenance on the house is going to cost more. Having somebody come out to service your furnace is going to cost more, lawn care is going to cost more, and you might say, well, I'm not worried about lawn.

Speaker 2: 9:28

Well, you better believe, if you're in a high end community, that your neighbors are going to be concerned about your lawn and you're going to hear about it. If you don't have a nice lawn, you know and so so there's an there. There will become costs that come along. If you could comfortably afford the expenses of a $300,000 house, and then you buy an $800,000 house because you're trying to force yourself into a community, you're not going to have the expenses of a $300,000 house. And then you buy an $800,000 house because you're trying to force yourself into a community, you're not going to have the expenses of a $300,000 house, you're going to have the expenses of an $800,000 house. And even if it's the same house, just in a more expensive area.

Speaker 2: 10:02

Well, all the labor to service the house is going to be more expensive. It all. You know it's, it's, it's all in proportion. So, um, you're going to find that it will not only stretch your mortgage budget, but it's going to stretch. You know, you're going to be house poor, and the challenge is the people who live around you, though they're doing a lot of stuff that you're not going to be able to afford to do. You're not going to be able to keep up with them, and it will be a challenge. But back to pride making you broke. There seems to be a trend and this is just an observation of mine, I don't know if it's, you know, maybe I only have a limited scope on this, but it seems to be very consistent. We seem to be stopping. Young people seem to have stopped thinking about getting a starter home.

Speaker 1: 10:55

Yeah.

Speaker 2: 10:56

You know a starter home is I'm moving out, Getting out of mom and dad's house, and I need a house and I need something I can afford and a lot of times that would be something that maybe they would fix up Right, or something that was fairly small but nice and quaint and you know they could still afford to save some money while they're there and basically you know it was a place to hang their head while they were really putting in the hours, while they're young, in their career or maybe where they're having their first or second child and then, as they have more, they're going to move up to like a bigger house or something. But we seem to have started to skip that and we forget sometimes it's okay to start small and then get bigger and better. And we I've heard this shift in the terminology to forever home. I never heard this before, uh, the last couple of years. But people talking I got to buy my forever home and it's like well, first of all, that doesn't even make any sense. You, you think that when you're in your twenties or even early thirties, that you're going to find the place that you're going to live for the rest of your life? It seems like you will in that moment. But I can tell you you're not. I never, ever, thought I would move from where we moved from. Steve Never did. Then COVID hit and it changed everything. Yep, all of a sudden it was easier for me to move, so I moved. And it was the perfect timing to move, so I moved.

Speaker 2: 12:16

Um, you don't you're buying a forever home for a book that you're only on chapter one on, or chapter two. I mean, like you're in the very beginning of the novel and you're deciding what's already going to happen at the end, right, so like we don't need to be buying the forever home in the beginning. Number one, but there one but the other issue with that is when you think about a forever home, when you think about your parents who made it and they bought a nice house or other people that you see and they have this beautiful house. Well, if you are looking at a house that somebody bought, mid-career, with mid-career financial means, so that means like you start your career, maybe you're making 50 grand, and then you progress, you're making 80. Then you progress, you're making 100. And then you get into kind of middle management in your early 40s you're making 120, 140, 150,000.

Speaker 2: 13:05

Right, whatever you're making, that's mid-career income. The type of house you're going to buy when you're making three times what you started at is different than the type of house that you would buy at the very beginning, right? Yep? So you're saying I want mid-house income, me on ramen noodle budget, yeah, and you're not going to wait for it, you're not willing to wait for it. The other thing that happens when you start small and you move to big, right, when you say you know what, I'm just going to get something that's maybe more humble and more realistic. It gives you room to make mistakes.

Speaker 1: 13:45

Yeah.

Speaker 2: 13:46

Because every homeowner knows this. You make stupid mistakes, right. You don't fix something on time. You don't. You know when you do the inspection you don't see. You know there was a little crack in the foundation and you didn't think it was anything and then it turns out to be a big water problem. You learn so much with that first house or two that you own.

Speaker 2: 14:09

Don't be in such a hurry to buy the house that impresses everybody. Buy something that is functional for you, that helps you get started. It's going to appreciate you can make some equity on it, maybe that type of thing. But it also gives you a chance to learn and figure out what the whole process is. Because you might say, well, why shouldn't I just skip to the forever home?

Speaker 2: 14:34

Well, you're in chapter two of your novel and there's 30 chapters. By chapter five, your work decides that they're going to move their headquarters or they're going to ship you someplace else, or they're going to lay you off. Guess what? Everything just changed. You're not far enough ahead to where you can say like I'm indispensable with some company I work for, you know. So your chapter can change, your book can change in a heartbeat, and so just, not that you have to be. But just be careful of pride and be careful of wanting to skip the process of life. Start, be willing to start small, or be willing to start humble and get your feet wet. Figure out what it's all about and then upscale. You might find out that, geez, I don't really. Actually, I'm really happy where I'm at in this particular lower cost neighborhood because I have enough money to travel everywhere now.

Speaker 1: 15:30

Hey guys, steve Campbell with Ditch the Suits, I want to take one quick moment to make a big ask. If you haven't already, travis and I would love for you to subscribe to this podcast, but if you haven't, also we would love for you to leave a five-star rating and review.

Speaker 1: 15:42

Your rating and review will let other podcasters know that this show is worth their time. So let's get right back to the episode, and thanks for listening to Ditch the Suits podcast. For listening to Ditch the Suits podcast. Well, and you also haven't taken on right. The opposite of pride is humility, and so if you haven't understood that, life will continue to change.

Speaker 1: 16:04

Maybe you wanted to afford more, but now your house broke. Well, what about your kids that have aspirations? To play, travel, sports, to go to college someday, the extra expenses that you're going to have to take on and bake into it? Would you rather be in a place that you love, your community, it was affordable for you, which allows you to take 10 years worth of vacations from that point, or be stuck in a house that you can't afford, that you can tell yourself vacations don't matter until you really want to take one. You can create a lot of conflict in your marriage or in your life by reaching for things that may not be the best time for you to take it on.

Speaker 1: 16:38

So I think what we want to do is just drive through, giving you again what you do with this information, whether you've listened to us through cryptocurrency, whether you've been a part of this for a long time. Travis and I are here to give you what we think are some talking points or things that you should consider. Whatever you do with this information is up to you. So, trav, I know we got one more strategy here that I think we wanted to leave people with before we wrap up this conversation. But, outside of pride, why don't you talk to us about strategy number three?

Speaker 2: 17:09

So strategy number three, 1950. The average size of a home was about 983 square feet. So we talked about that already, right just under just under a thousand. Yep, um and the. But the average family size this was this is just interesting it was three, 3.67 people. So that's the average amount of people that lived in 983 square feet. That's 268 square feet per person. So I'm just trying to think of that's like 12. What is that? How big of a room would that be? Let's say, 22 by 10 or something, I don't know. I'm not doing the math very well here 26 by 10. Yep, right, it's not doing the math very well here. 26 by 10. Yep.

Speaker 2: 17:55

Right, it's not, it's not a lot of space, not not like today. In 2000, the average was about 2,250 square feet, but the family size is 2.62. So, and that's according to the website Satista, and that means there's 858 square feet per person. So, and that's according to the website Satista, and that means there's 858 square feet per person. So, from 1950 to 2000, we increased the square footage per person by what? 600 square feet, almost an entire house, compared to 1950 standards, and we have less people in the same space, so there's less people annoying each other. Right In 2019, like we said before, it's 2,500 square feet. We're down to 2.52 people per house. That's 9.92 square. 992 square feet per house or per person. Okay, so this is back to our base model is different than a luxury model. Right, the price of homes is going up. We know this is buy a single family home. It's getting more and more and more expensive. But we're also demanding 992 square feet Decked out nicer than ever before too, mind you.

Speaker 2: 19:19

You've got crown, trim, molding, you've got beautiful fixtures on everything. It's a much nicer finish than ever before. So we have more cost to finish it. We have more regulations per square foot. Land costs more than ever before. Like everything, we have more costs to finish it. We have more regulations per square foot right. Land costs more than ever before. Like everything right, everything costs more and we've increased our square footage to basically a house per person by 1950 standards. So there's one thing that you can do to control the cost of housing buy a smaller house. I mean that that it's unfair to say that to people, you know, because you should buy whatever you want. If you want more room for the kids, bigger bedrooms, whatever I love, big bedrooms, right. But if you're having a hard time with the affordability, you know, buy a smaller house. Like people used to live almost four people in 983 square feet. Now we have 992 square feet per person. Buy a smaller house.

Speaker 1: 20:30

Well, we talk with people all the time through financial planning and none of us have any idea, as we bring this series to a close, as to when we're going to check out from this thing called life. You can passionately pursue the dream home, the forever home, but life, when you talk with people that are on deathbed or don't have a long time, it's about the experiences in life. We're not trying to necessarily convince you one way or another. If having a dream home is bucket list number one for you and you have the means to go, do that, empower yourself, but be mindful of the fact of what those two chapters of your life, like you had talked about, are being written and what's really important to you. Because if you've got kids at home, the experiences that you give them, the things you're going to be able to do as a family, the way you give back to a community, the things that give you purpose in life, that is the stuff that's important to people. And you might say that's not important because you've never had to make that decision just yet.

Speaker 1: 21:27

But if you look back on your life and the legacy you're building and man, did I really get the most from this life?

Speaker 1: 21:33

I don't know that many people would look back and say it's because I had my forever home. It's going to be about the lives and the community and the impact that you make. And we're just you know, we're speaking from our own life because we're all about giving back through our work. But just dealing with clients over the years and what's really important to you, we always think it's having more money, it's having more stuff, but most of the people that you talk to that have accumulated those things have said when I finally got to the pinnacle of the thing that I actually wanted, it was actually very lonely or it wasn't what I thought. So if we could help now that's not the case for everybody but if we can help you potentially avoid chasing something that may not produce the kind of fruit that you're looking for. Having a smaller house is a way to really combat, then, what's really important. So any final thoughts from you, partners, as we wrap this series to a close?

Speaker 2: 22:23

No, I think that you have to when you approach the housing. I think that it's really easy to get caught up because houses are fun. I mean you go and you look at houses and people have some beautiful houses, I mean just some absolutely incredible houses. And what you need to do, I think individually, when you're thinking about housing, is think about your situation. If you've got young kids and they're going to, you know, run around like little monsters and wreck stuff, why are you worried about how fancy the house is? Yeah, get something that the kids can beat on, you know. I mean frankly. I mean like, why would you pay a premium for something that they don't care about?

Speaker 2: 23:07

You know, if look at your values. If your values are that you want the kids to get outside and and, um, stay away from the xbox so much and all those types of things, consider a smaller house. They're not going to be able to hide in. You know that they're going to get forced to go outside because that's where they can play. I mean, for generations, people played outside, even in the winter, you know. And so think about family values and what you want out of it. You know, and if you want a bigger house because you want to have a craft room and you want to have a guest room for when the parents come in and you want each of the kids to have a bedroom, and you know what I mean. You want to have a playroom and you can afford it.

Speaker 2: 23:43

Then by all means do it. There's no reason not to. You can't take it with you when you're gone, right? You can't take the money with you, you can't take the house with you. So you know, live.

Speaker 2: 24:00

Got to look at where are you trying to live. You know you can't say it's unfair that you can't live there if you can't afford to live there. Right, you know what I mean. That just means that, like, you didn't pick the right profession or you got too much student debt, or you know you got to work two jobs or something like you can make the changes if you want, but you're competing with other people that are coming from different walks of life.

Speaker 2: 24:22

And don't be in such a hurry, don't be skipping steps. Like it's okay to be in your 20s and be in a starter home, or even be in your 30s and be in a starter home, or in your 40s if it's the first house you've ever bought. You know, maybe you're kind of a late starter and you're just getting started but you finally have. You know, maybe you came into a little bit of inheritance or something and you want to get your own place. Like it's okay to start small. Don't be embarrassed by that. You know like it's be embarrassed when you do something that's not in alignment with your values.

Speaker 1: 24:53

Yeah.

Speaker 2: 24:54

I love that.

Speaker 1: 24:54

Before we let you go, let me leave you with a couple of resources in case you're new to Ditch the Suits Travis and I hope that you will subscribe on whatever platform you listen to so you never miss an episode. We do want to remind you that you can also watch, along with every episode we have, over on our YouTube channel at NQR Media. That's NQR Media, but you can also check out our three other flagship podcasts Unleashing Leadership with Travis Moss. I have my own interview style show, the One Big Thing. And then we have a college planning which we've spoke about throughout this series the Cost of College. Today you can check out Cutthroat College Planning, but if you would leave us a comment or review about your experience with the show. But again, we hope that this isn't your last stop on Ditch the Suits. We hope that this has been an empowering episode that helps you get the most from your money in life. And until next time, thanks for being our guest on Ditch the Suits Podcast.