My post about what they didn’t tell me when buying a house had some good dialog. One of the things that came up, because I mentioned it off handedly in my post, was about equity. I figured I mentioned it, so I might as well share a little of my thoughts concerning it too.
First of all, “Equity” is a word that gets thrown around a lot when you start looking for a house. I realized the big selling point to buying instead of renting is sort of focused in the “Building Equity” vs. “Throwing away your Money” debate. This debate is usually based on the assumption that you can find a house with a mortgage payment equal to what you were paying for rent and thus slowly be building equity in a home (granted it will take 30 years to get there) rather then giving all your cash to your landlord.
With one exception, we’ve spent less then $500 a month on rent (including all utilities and phone/internet), on average about $400. Granted, this has involved sharing our living space, but the reality is it was only $400 a month coming out of our pocket. I see their point about building equity, but I still see the argument being made with an assumption of how much you should or need to spend for your basic living cost.
Secondly, “Equity” is based on the idea that your home has X dollar value. That is you have Y equity because your home is worth X dollars and you only owe the bank Z dollars on it. However, like my mother always told me about my baseball cards growing up, “They’re only worth that if someone is going to pay you for them,” and more specifically to houses, “if your going to sell it.” I don’t plan on selling our house. Not now, and not for the long foreseeable future. That being the case, the only benefit the X dollar amount has to me is to determine how much I owe in real estate taxes.
Finally, “Equity” is valuable to most people, because it allows them to stay in a continuous cycle of debt pursuing bigger and better toys. If you have “Equity” in your house, you can get a loan from the bank to buy a boat, or a jet ski, maybe a vacation home. Granted that pretty much means your tossed your “Equity” out the window, but hey, it’s your equity so who am I to judge. This house is the last time I plan on borrowing money ever (I’m young and maybe naive so I might be silly for saying this).

So, Equity, Shmequity, I’ll just take the House, Thank you very much.

We’ve been moved into our new home for about one month now. I’m sorry I haven’t done well at keeping you up to date on how things have been going here, but you can tell from the lack of updating that it has been busy. I’ve discussed our decision to buy on the blog a bit, but I’ll probably try and articulate it more in future posts. For now, I wanted to start informing my non-homeowner friends of somethings I wasn’t prepared for. This might turn into a series, but for now I just have one important tidbit to share. It has to do with justification.

Those who know me well, or have read my blog regularly, know that I’m fairly frugal when it comes to making purchasing decisions. If the item can wait to be purchased it waits. If I can buy it at a thrift store, we shop till we find it. If it’s not a need then you just have to save you fun money for it. All in all, I don’t like going out and spending money too much. The month of December was all about spending money. I won’t give you a total dollar amount but let’s just say we spent more in the last month then we normally budget for an entire year (that’s not a joke). Most of what we spent money on were home repair items: working appliances, furnace, water heater, service visits, roofing, replace windows, plumbing work, working kitchen faucet, etc. The cost wasn’t a surprise, and though there where some things we could possibly live without (water heater?), generally speaking they were all ‘needs’ for a basic USA standard of living. What I wasn’t prepared for though, was the draw and temptation as I was regularly whipping on my checkbook, frequently shopping at Home Depot and generally thinking about home improvement.

I found myself looking around the house and thinking about what need to be fixed, repaired or ‘improved upon.’ Not that any of these things are bad, but they just fit into different categories. Having a working kitchen sink is one thing. Installing a waterline for your automatic ice maker is different. We’ll probably install the waterline at some point, but how I budget for it will be different since it is not a ‘need.’

Walking around Home Depot, I found my self ‘shopping’ more and more. I wasn’t just going in with a list of the things I needed, I was walking the aisles, looking at prices, thinking about how certain ‘improvements’ would look in our home. Again, I’m not saying this is bad, just that you need to be aware and careful about it. We installed an electric thermostat, I feel like it was a good decision. Our doorbell chime is missing it’s cover, it’s just a black box with wires on the wall of our living area, but I don’t think it’s essential that it gets covered up. The ceiling fan in my daughter’s room is kind of ugly, but it’s not necessary that I change it. I might get a new ceiling fan, but I’ll budget for that differently then I will for a working refrigerator.

Just like most people, I want ‘nice’ stuff. The commercials and media have an affect on me too, and though most of the time I combat it, the desire is still there. What I find happening over the last month is a wide range of justifications seeping into my thinking. First, I would justify the thought of buying something as a ‘need’ because it was a part of fixing up my house. I’d try and convince myself that it was to ‘add equity.’ Or, I’d justify it by considering that we don’t plan on moving for years to come so a nice good quality item is worth it and justified. I’ve been coming up with all kinds of justifications when the real motivation underlying it all is that I simply wanted this item or that.

The point is not to say that any of these items or home improvements are bad, simply that we must be clear about whether they are ‘needs’ or ‘wants.’ And we must be careful about what our motives are, never deceiving ourselves into justifying selfish decisions in the name of something else.