One of my blog readers recently found a house that he felt would be good for his family and met their needs. He made an offer on the house, but his offer was not accepted. He is currently continuing his search.
He contacted me because his friends, after hearing about the house he put an offer on, told him he should “spend more and get a bigger house.” He is now confused about what to do and asked my advice.
His comment was “I do not want to move to a house and regret buying because we need more space, but neither do I want to move to a house and become house poor.”
So, what do we do when we have decided what we want to do, but our friends encourage us to spend even more?
I remember what this was like in high school. There is always that “friend” who tries to talk you into doing something you either don’t want to do or shouldn’t do. The “friend” is usually trying to make you look bad or trying to justify something they have already done that was bad to make them feel better about doing it since you did it too.
Who needs friends like that?
Unfortunately, I was once that “friend.” I told a story in a group that was very embarrassing for one of the members in the group. They denied it and called me a liar. I later confronted that person and asked why they said I was a liar when the story was true, and they knew it. He told me the story was very embarrassing and he would deny it to the grave. Then he stabbed me in the heart by saying “a real friend would never share that story with anyone.”
That was when I realized what I had done. I was telling a story to make everyone laugh at the expense of my friend. I couldn’t believe I had done such a thing. I felt bad and apologized to my friend and never told that story again. It will go with me to my grave, as it should.
But when I told the story at the party, I did not think at the time that what I was saying could seriously hurt the other person. How many other times have I hurt a friend with my words? How many times have your friends given you advice that was wrong for you? Maybe they didn’t mean for that to happen. Maybe they didn’t realize the advice that worked for them was bad advice for you.
This is a common problem with “friends” giving you specific financial advice without knowing your specific financial situation. Maybe the house you are buying is already stretching your budget and when your friend says you deserve a bigger house you feel like a failure. If you buy a bigger house, you will be house poor and maybe even end up bankrupt. Keeping up with the Joneses is never a good idea, especially if the Joneses are your friends.
Even if you don’t buy the bigger house, the friend’s comment will always make you wonder if you should have purchased a bigger house.
Since your personal house is not an investment, you should not be trying to buy the biggest one you can afford or one you can barely afford. Your personal house is an expense; you should be working to minimize your expenses.
Please don’t ask your friends or a social media group about what house you should buy. You should only be asking your spouse after carefully reviewing your spending plan and your family’s needs. The only people who need to be happy with your home purchase are you and your spouse. No one else’s opinion matters, including mine.
I wrote an article last year on How Much House Can I Afford. If you are interested in learning how to calculate how much house you can afford, read the article.
The most important step to take before deciding how much house to buy is to make an accurate budget. If you don’t have a good budget/spending plan, then you have no idea how much house you can afford. Although there are guidelines on the internet on how much to spend on housing that you can follow, they are generalizations and are not specific to your situation. We each must calculate the house price that is right for us and then stick to it.
My wife loves to watch house remodeling and house buying programs on TV, especially since we set out to refresh our house. It is amazing how frequently a couple will tell the realtor the maximum amount they can spend on their new house, yet the realtor always shows them houses that are over their budget.
Why can’t the realtor take the upper price limit and only show houses that meet or are less than the maximum price? Why do they have to show houses that are outside the budget? Because they get a bigger commission on the higher priced house.
When we shopped for our first house, we had carefully considered what we should spend. We gave the figure to the realtor. The realtor then had several houses to show us and we set out to pick a house. The first house we saw was fantastic. I was drooling all over it. I told the realtor I couldn’t believe such a great house was in our price range. Then the realtor said it wasn’t. In fact, it was more than double the upper price we gave him.
I asked him why he showed us a house over the maximum figure we gave him. Seeing this house make every other house we toured look bad. He told us he wanted us to see what we would be able to afford in the future, when I had been a doctor for a while.
I told the realtor I gave him an upper limit for a reason. If he shows us another house outside the parameters I gave him, he would be fired on the spot. He got the message and the remaining houses we were shown were within our budget and we purchased one of them.
How many of our well-meaning “friends” truly understand our financial situation. They want the best for us. Best usually means bigger or more expensive. Best seldom means comfortably within our budget. Best also means what they like, not necessarily what you like. I am running into this with the contractor redoing our bathroom. I am continually reminding him that this is our bathroom, not his, and we are making it to our specifications.
Figure out what price house you can afford and still meet all your other wants and needs. Buy a house that meets those needs. You will be happy for many years with your decision. If you buy a house that doesn’t meet your needs or that is too expensive, you will likely be unhappy for as long as you own the house.
Don’t decide on your house price based on the current housing market or the interest rate. Make it based on your family needs and the mortgage payment you can afford, and don’t forget to include all the other expenses that come along with owning a house.
Your home should be a sanctuary of joy not a mill stone around your neck.
Save sharing this decision with your friends until you invite them to the housewarming party.