Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

The Money Pit, part 2: Beware a House That’s Too Small!

By Keith Wheelan Subscribe to RSS | June 12th 2012 | Views:

I think we can call this “The Goldilocks principle of housing”. A few articles back, I wrote about misadventures during an earlier housing bubble, when we bought a house much larger than our family needed. With a super-sized mortgage, high property taxes and maintenance costs, it put a real strain on our monthly cash flow. We had trouble building equity and, just as important, that single high-cost asset kept us from paying down other debts or making other, better investments. We were on the precipice, so to avoid falling into the money pit we decided to sell the house and downsize to a smaller one.

A good decision, right? Absolutely…at least for the first few years. Immediately after downsizing we went from barely break-even to a solidly positive monthly cash flow. How nice it was to have that cushion! But we also had some growing children. We thought: Wouldn’t it be nice if we extended the house a bit further into the back yard? That sure would give us all a lot more living space. $100,000 later, that thought became a reality.

Shortly afterwards - I think we were in the new entertainment room at the time - we realized that the “older” part of the house didn’t quite match. The bathrooms in particular were a little old and outdated. I think you know where this is going.

After 10 years our smaller house was now a bit larger and completely updated. We had “caught up.” Trouble was, after adding all the costs, we spent more money on the downsized house than our original money pit. We just stretched out the expense over a number of years.

We really did enjoy our addition and the new baths. After all, not everything in life should be measured in dollars and sense. But if we made a better second housing choice we could have had our cake (or porridge) and eaten it, too. Instead of going from one extreme (too big) to the other (too small), we could have found a house that was just right. It would have cost a little more than our “too small” house but not nearly as much in the long run.

The moral of this story? If you’re shopping for a house you plan to keep for at least 5-10 years, take some time to think about what your future family needs will require of the house. And before committing to a purchase develop realistic cost estimates of likely repairs and upgrades to the house you’re considering. Unlike porridge, when it comes to a house purchase the impact on your cash flow of a wrong decision can be severe and long-lasting. If possible, like Goldilocks, try to find one that’s just right.

Keith Wheelan - About Author:
Keith Whelan is Cash Flow Navigator’s founder, resident financial expert, and author of the “Wealth is Good, Cash Flow is Better” e-booklet. He is a graduate of Columbia University Business School, teaches at Rutgers University, and has over 30 years experience in the banking and financial services industry. Keith, his wife Cindy, and their two sons live in New Jersey.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:

Related Finance Articles Subscribe to RSS

Plan sensibly for your future with best financial planners
Published by Dkfinancialplanning on December 15th 2011 | Finance
Financial planning is about helping you achieve your short, medium and long term goals, through prop...
Free Credit Score: right choice to understand your financial status
Published by Anthony Brian on May 15th 2012 | Finance
Every customer is granted one free credit score report from principal agencies each and every year, ...
Secured personal loans: an approved aid against your own collateral!
Published by Keith Kelly on May 31st 2012 | Finance
Secured personal loans as the name clarifies are hassle free option of attaining fiscal aid by pledg...
Loans for UK People: an easy financial solution
Published by Simuels Jack on June 11th 2012 | Finance
Loans for UK people are very helpful in times of need for monetary assistance. According to one’s ...
It is very hard to tell the worth of financial advice
Published by Ross Sorin on March 13th 2012 | Finance
People even in today’s fast times do not know the important of financial advice. The financial adv...
Independent financial adviser – Propel your earnings
Published by John Kendal on March 31st 2012 | Finance
A financial adviser covers very important issues like wealth management and advises the clients in g...
Bookkeeping is important while deciding future financial policies
Published by Nelson on February 1st 2012 | Finance
Complete End to End Business Solution offering various services such as Incorporation, Bookkeeping, ...
Bad Credit Secured Loan: Huge financial support in spite of bad credit
Published by Ian Foster on February 2nd 2012 | Finance
Bad credit secured loan has introduce by the economics establishment to continue the people whose cr...
Missouri, a State with a sense of personal safety
Published by Insurance Inde on January 18th 2012 | Finance
Missouri State has some of the drivers who have a high sense of personal safety on the roads in the ...
Short Term Loans: Fills the gap during financial crisis
Published by Annisa Nelson on June 5th 2012 | Finance
A short term loan manages your sudden expenses and pays out short term monetary urgencies....
Could buying a motor from Used Car Dealers Blackpool make financial sense for you?
Published by Mary Porter on June 19th 2012 | Finance
Most drivers know that when buying a car, getting a brand new vehicle is often unnecessary and that ...
Great hope for the people with poor financial status
Published by Alice Johnsonn on January 3rd 2012 | Finance
Personal loans no credit check are the best way to access fast cash without undergoing any credit ch...
Regain your financial standing through credit counseling Houston
Published by James on March 31st 2012 | Finance
There are lots of people who fall into a debt for different reasons. Usually after falling into a de...
HOA management- Capable providers for financial as well as property management
Published by Ema Sis on January 12th 2012 | Finance
HOA management companies shall be actual asset for communal administration amenities. They undertake...
Major reforms in UK financial regulation: Draft Bill and White paper produced
Published by Becky on March 15th 2012 | Finance
The most significant modification in a decade to the UK’s financial regulatory architecture began ...
Same day loans no credit check - fight with the devils of financial crisis
Published by Sam Hopkins on December 3rd 2011 | Finance
Same day loans no credit check provide instant funds to an individual without looking into their pas...
Payday Text Loans UK- Mobile phones give financial amounts!
Published by Cameron White on December 8th 2011 | Finance
Payday text loans UK is best way to overcome small fiscal hardships and it’s not difficult to get ...
Student loans in default, a rising concern for the financial market
Published by Michelsmith on January 2nd 2012 | Finance
Student loans in default state is growing day by day. The governments are really looking into these ...