Being house poor is a common factor among home owners – specifically among new home owners. Have you ever heard someone say “I can’t go on vacation for at least a couple of years because I’m buying a home” or “I’ll never be able to go out for brunch again after I buy the house”? That’s being house poor. It’s the idea of putting every cent you have into your new home to make it perfect. The idea is great because everyone wants to live in a beautiful space, however financially it’s not very practical.
As a soon-to-be first time home buyer (yes, we finally closed and we move in at the beginning of August) I am learning just how much it costs to buy a house, especially a newly constructed house. Although this is the biggest purchase I will ever make, I keep promising myself that I don’t want to be house poor. I know that my lifestyle will change once we buy a home, but I don’t want to feel financially restricted. If I can avoid it I’m going to do everything in my power to keep from being house poor.
Here are tips to budget wisely for your home and avoid being house poor:
Be realistic about furniture and décor
It’s a nice idea to want your house to be perfect the day you move in. However, it’s not very realistic. When you rent an apartment all you need to worry about is décor; when you buy a house, you need to prioritize furniture and functionality over things that look good. We have savings for necessities such as blinds and a new sofa, the wall mirrors and vases with branches will have to wait.
Save as much as you can beforehand
Budgeting is great and as a financial planner I fully support smart saving, but the truth is we can never plan every single cent – especially when it comes to buying a home. Avoid being house poor and racking up debt (in addition to your new mortgage payment) by saving as much as you can before you move in.
After the down payment is saved and your mortgage is approved, it’s time to start stacking cash for all the extras that come with buying a new home such as moving expenses, notary fees, add-ons to faucets and fixtures as well as minor improvements for convenience such as no-slam kitchen cabinets. Yes, those are a thing, and trust me you will be happy you upgraded.
Only offer the minimum down payment
One of the smartest things we did to avoid being house poor is only offering the minimum down payment required. We kept some of our savings for unexpected costs and items that you don’t know you need until you buy your first home. Did you know that new homes don’t come with grass or a driveway? We have a garage, but no driveway and a deck with no grass.
If we don’t spend the rest of the savings on the house, we’ll keep the cash in an emergency savings fund. I feel much better about making the financial commitment of buying a home knowing that we won’t deplete our savings account to do so.