“As for the Pyramids, there is nothing to wonder at in them so much as the fact that so many men could be found degraded enough to spend their lives constructing a tomb for some ambitious booby, whom it would have been wiser and manlier to have drowned in the Nile, and then given his body to the dogs.”- Henry David Thoreau, Walden
- Have we been spending our lives building our own pyramid, in debt, living paycheck to paycheck, which was mostly allocated to mortgage payments?
I have been to banks a lot lately, spreading my cheer around several different branches of the bank where I have my two mortgages.
Around this time in 2010, my husband and I were newly-weds, looking to buy a house. We had been renting a condo from the mutual friends who set us up on a blind date in the first place. My car had just been broken into in the condo’s shady parking lot of the Southside neighborhood and I felt violated. The tenant in the condo underneath ours had just written a scathing complaint letter about how we needed rugs on the hardwoods because he could hear me stomping in my stilettos like an elephant. Gee, thanks, man! Plus the condominium’s site felt haunted to me, with a presence of an evil spirit that even holy water couldn’t wash away.
Dave and I met up at the bank where we have the mortgage and were approved for a loan. The first home we toured with a real estate agent fell through because someone more qualified scooped it up before we could get a contract. No worries, because we found a nice 3 BR/2 BA in a fairly quiet neighborhood a few weeks later.
If you were to look back at the US economy in 2008, the highlight (low point) of the year was the crash of the real estate market! The greedy dogs at the FDIC approved financial institutions threw loans out to anyone like free Moonpies at Mardi Gras. People could no longer afford their mortgage loans and thousands were foreclosed upon.
The negative impact of the 2008 economic crash was still in disarray in 2010, two years later. The interest rate I was able to get on that home loan was about 5.3%, even with a decently-sized down payment which cut into my life savings. Nevertheless, Dave and I were proud to be homeowners together in our new marriage. We closed on the house in the first week of May and moved in the very next day. Yet, this definitely put a damper on our friendship with the people from whom we were renting, and in anger, the couple decided to never see or speak to us again. Their loss.
Moving on, my monthly mortgage payments did not feel that bad. At the time, they were about a third of my monthly income, with Dave’s money as not even a factor in the picture. Three months later, we were set to expand our brood and I fell pregnant with my son right before we even started officially trying. Okay, we took a trip to Las Vegas and I didn’t actually expect to get pregnant so quickly. Sam was just ready to be hatched in this world, I suppose!
Even with a new mouth to feed, everything was financially stable. I sold my old house with my ex-husband and collected a small fortune which I applied to buy a used Mercedes Benz station-wagon. I had to haul around so much baby stuff that it made sense…and I felt superficially that I was moving up in the world. (Deep down, I knew the car was probably a hoop-tee. And yes, it did die three years later. But this article is mainly about mortgages, not car loans. See my future article for that.)
We enjoyed living in that 3&2 house in the quiet neighborhood very much. It was about 13 miles from my office downtown, and Sam was being dropped off at my mom’s house 10 miles away while Dave and I worked.
During my off-time, I would go walking around the neighborhood where some residents had horses and chickens. A pre-Civil War cemetery was just one street over, which made for an interesting hike. Not all parts of that small town were as sylvan as our neighborhood. The downtown area had a cinematically-famous restaurant, a quaint railroad-view shopping strip, and a cute library I used to visit every summer as a child for the reading programs.
My husband Dave would pack me and an infant Sam up on Tuesday nights for the City Council Meetings of the small town. We became very involved in the political scene and he was vetted to run for City Council in our district. I became his campaign manager and we knocked door-to-door for a grassroots trail. The first question people would ask him during these face-to-face home visits was, “Where do you go to church?” Question 2 was, “Are you a Republican or a Democrat?” and 3 was regarding college football teams, if he made it that far.
Small towns in the South really want you to belong to the First Baptist, First Methodist, or First anything big and protestant. Political affiliation is totally insignificant in small towns where the candidate is running for city council. Big deal, right? WRONG. Dave lost by only a few dozen votes because voter turn out on that Tuesday night at my precious library was very minimal. It wasn’t a presidential or a gubernatorial race, so residents didn’t care that much. I slapped on my red dress and Jackie O sunglasses and pretended to not be a sore loser’s would-be first lady’s wife. At least Dave and I both gained a tremendous amount of experience with him running for office. We met a ton of lovely townsfolk and made lasting friendships with other candidates and their families. Even his opponent, the incumbent, has remained graceful and kind at the point of this writing.
The Wednesday after the lost election, Dave, Sam, and I went out to a hibachi Japanese grill to celebrate our efforts and to mourn our losses. After enough sake, I convinced Dave to drive us around to look at houses on a whim. We explored one town over from our current residence and really became interested in moving. Maybe it was the defeat talking. Or maybe I didn’t want Sam to go to Catholic school, which he would have done had we stayed in the small town where we had our 3&2. I was ready to move! This was in the early fall of 2012.
By October of that year, there I sat in an attorney’s office, closing on yet another house with the same bank who gave me the first mortgage loan. My mother tried to warn me by saying there’s no way in hell she would’ve owed a bank for two loans, totaling way more than I ever care to share in a blog. Being the stubborn Taurus that I am, I headstronged my way into that deal anyway.
With the help of the internet, Dave had found us a 5 BR/ 3 BA in a great city with an amazing school system. The house was a deal because the current owner was in the military and on a “RELO” program where he had moved to Germany. He only wanted to make back what he owed on his loan, giving me a good $75,000 in equity in the house per tax value on signing day.
I did not have buyer’s remorse on our “mansion” but I certainly felt the impact of loss in my take-home paycheck. Now I had two mortgages with the same bank owing X amount of dollars, nearly 6 times my annual income!
Being “house poor” exists, ladies and gentlemen. Dave Ramsey refers to the situation where someone spends a majority of her income on a mortgage loan, with little left over. I wasn’t saving much money then. I had a toddler to finance AND I was keeping up with the Joneses. The new city was upper-middle class, and most denizens had a certain look, while keeping up the elite image. I swore to my parents I would never get the “XYZ Haircut” and would not wear the same stupid shoes or carry the stupid purses the ladies of XYZ town wore.
To stimulate my rebellion, I went thrift store shopping a lot. Dave and I made it a habit to share a pitcher of beer and a meal at Logan’s Roadhouse with Sam, and then head over to the thrift store to shop. We had stuffitis (another Dave Ramsey coined term). I had to buy stuff to fill the McMansion with paintings for the walls, tchotchkes for the bookshelves, and clothes for my walk-in closets.
It makes me sick 4 years later to stroll into my basement and see all the wasted items I bought from thrift stores that I didn’t need in the first place. Wonky IKEA discards, ill-fitting clothes, uncomfortable second-hand shoes, crappy toys for Sam, wall art that’s always been ugly.
Since getting turned on to the minimalist way of life, I have purged hundreds of bags of items to the Salvation Army. I wasted thousands of dollars looking good for the Joneses in my McMansion with a bunch of crap.
I am a very careful thrift store shopper now. If I buy a used LL Bean shirt, I find two unliked shirts in my closet to purge for the needy. If I buy a thrift store book, I find two to donate to my grandma’s nursing home or I leave them at the RV Resort laundry room’s pile of community books. One in, two or more out.
I got with the Dave Ramsey program last summer and have snowballed all of my debt into non-existence except for the two mortgage loans.
I did not have to learn the hard way for very long on the 3&2 house because Dave eventually found a lovely renter who has contracted to rent our home since late 2013.
In light of the downsizing and Tiny House Movement, I have mentally planned to move back into the smaller home in the next 9-15 years or so, depending on Sam’s education. I can fit a tiny house easily in the backyard of the 3&2 or even my parents’ RV if they get sick of it at the Lake, a.k.a. Walden 2.0.
By moving back one day, I would have to purge the enormous amount of furniture/furnishings that simply will not fit if we downsize. In a little notebook, I jotted down all the furniture and wall art I actually want to keep. I can have an estate sale or sell the other crap on Craig’s List when the time comes. Also, donating items to family, friends, and the poor is the richest experience!
Basically, I’ve learned not to over-borrow ever again. Banks are only out to make money, not to be my personal charity. Don’t keep up with the Joneses. Live your own truth, despite the zip code. Strive for low interest rates if you have to borrow. Follow Dave Ramey’s Financial Peace and eschew debt once you’ve snowballed it away. Save money; plan for retirement. Live below your means. And NEVER EVER EVER make yourself house poor. Leave the pyramids and palaces to the pharoahs and kings.
Will I get a lower interest rate on that first loan? Probably not. Refinancing is going to be too retroactive to my financial picture at this time. Dave and I decided to grow our liquid assets as we simultaneously pay on the principal of the smallest loan first, staying true to the debt snowball theory.
If you have had a similar experience with home mortgages and being house greedy then poor, I truly feel for you. Calculate your debt and schedule principal payments. If I make an additional $500.00 on principal outside of my renter’s monthly dues, I can pay the 3&2 off in a little over 8 years.
Here’s ’til then!