We are all reading the headlines and seeing even some of our friends impacted by the state of the housing market. Whether it’s people paying mortgages they can’t afford, two income families wanting a parent to stay home but they can’t afford it, bankruptcy, foreclosures, it’s reaching epic proportions. There is a huge debate going on whether the government should step in or not, and it’s a hard issue. One might argue, you make your own bed, and now you lie in it. However, I know too many people personally affected, to many personal stories, to much heartache to say that anymore. Plus that’s just a jerk thing to say isn’t it? I know when I’m in a bad situation the last thing I want to hear is, “TOUGH. Deal with it.”
We’re in a position where we are taking advantage of the market. The housing prices are finally low enough that we can get in. In a four bedroom, rather large house in the twin cities, almost $125,000 under the median sales price of a year ago. It’s amazing to me that we’ve been able to do it. It’s more amazing to me the mentality of people trying to sell their home. The amount of money their losing. The people who just want to refinance but can’t because of the backlash. We’re also experiencing that. Because of the mortgage industry tightening down, we’re paying 1.25% APR above what was considered normal for a 30 year fixed rate.
The housing market if nothing, is a mixed bag right now. I’m watching the economy and the markets closely, trying to decide when to lock in our rates. We can’t decide if we should just lock in right now, before they jump again, or if we wait and see if the government is going to help. Republicans are blocking a lot of legislation that would help people, and Bush is threatening to veto one minute and telling congress to hurry up the next. It just so in flux. My hope is to lock in tomorrow, and when the market recovers (perhaps when someone gets elected?) that we’ll see we’ve made a sound investment and in a few years can refinance if advantageous. Of course, that’s exactly what people buying with the risky mortgages thought too. Luckily we’re not in a position that if the rates only go up, so will out payment. We’ve luckily been granted a 30 year fixed rate, so the only thing that could happen is our payment would stay the same.
Our savings has gone into our home. Things are tight, and I say that with a smile. This time last year when I said that, it was because my husband was working an extra job, and we couldn’t make bills. Now I say that because of perspective change. To us, tight means lack of savings. We can pay our bills…and then some. So here’s our plan to get untight…
1. $2000 emergency fund - this comes first and foremost because let’s face it- the furnace blows out, the car breaks down, and the Swan family always comes up against this kind of stuff. Over the last year we’ve paid CASH for those kind of things because of our savings.
2. After we have that then comes 6 months of savings stashed away in a money market account. This is the kind of security we dream of. That if the boy lost his job, or couldn’t work, etc we’d be able to cover and not flounder all our bills and not lose our little house.
3. Retirement. This is kind of an ongoing thing. Currently we put $50 per month away in Grant’s college fund. By the time he graduates we’ll hopefully have increased that but for now we know he’ll have his first year paid for, if we just keep doing that. We’re also going to start an IRA account, and 401K contributions because the company the boy works for matches contributions.
4. Pay of ALL debt. Right now we don’t have a car payment, the only payments we have are student loan payments. The first goal is to pay of the student loans, then the mortgage. Once we have those it free’s up those payments to go towards retirement, savings, and college fund(s) since hopefully we’ll have more children by then.
5. Pay CASH FOR EVERYTHING. This means cars, everything. Right now we are putting off buying a second car (even though I complain CONSTANTLY about it) because we don’t want another car payment. Hopefully my husband can keep me hanging on to this one. We bought our second car with cash last year, and we’d like to do it again. If you put the car payment you’d be paying into a savings account that pays a higher interest amount, you can save the money in less time you’d be making car payments. Not only are you saving interest, but you’re giving yourself some leverage at the car dealers.
I’m not good at this stuff. My husband is only slightly better. We’ve struggled to make the turn from debt, to debt free living, but we’re on the right road. We’ve got LOADS of improvements to make, and I am the one who mostly has to make them.
In case you’re not convinced about the foreclosures, and housing markets. Go on your local craigslist. People are selling EVERYTHING in their house. I’ve been scouring ours researching the prices on used washers, dryers, microwaves, dishwashers because we’ll need to buy them when we move. People are selling EVERYTHING. Their furnaces, light fixtures, kitchen cabinets. Then go look at foreclosed houses like we have been. The houses are shells. People are desperately ripping their houses apart for the money their kitchen knobs will bring. The flooring even. It’s ridiculous!
I’m not starting a debate on who’s fault it is. I’m just saying we’re there. With credit card debt amounts still reaching epic proportions what can be said is it’s time to make a change. Whether anyone else can, is their own issue, but I know our family is tightening down. No more Sunday dinners out, one car until we can pay cash for the next, planning meals and buying what we know we’ll eat THIS WEEK. While I am supposed to be eating organic only, I’ve switched over to buying healthy things at Wal-Mart, until I can afford to switch the whole family over. We bought a older house that we can modify over time, instead of building one. (Not to mention the environmental waste that arises from building one.) We shop for the things we want at garage sales and Craigslist now. Grant doesn’t car if his truck is new, as long as it’s got wheels. And let me tell you, buying them at $.25 a piece is MUCH better than $5 new.
I’m not saying we’re perfect. We did buy a new couch, often times we throw out moldy fruit. We’ve eaten out when we’ve said we weren’t going to. Bought things on impulse. Instead of it being the end of the world, it’s about learning. Understanding that while eating lunch out for $40 is fun, it’s much more economical to fix dinner at home for $10 or less. And it’s NOT easy. I would much rather eat out on Sunday’s than come home and make a huge dinner. I would much rather have my child playing with new toys, than secondhand ones. For me it’s a pride issue. A large one. There are underlying reasons why I think I need the things I need.
Wow - okay I veered off into left field, so back to the issue at hand. I know everyone’s situation is different and personal, and none of my business. I’m just saying there is a huge problem going on right now, and it’s crazy.
