Is Your Home Shutting Down Your Savings?
There’s a lot of blah blah blah about how many people are at risk because even a small increase in interest rates will create havoc in their budgets and their lives. (I’ll bet most of those people don’t have budgets, so I’m using the term metaphorically here.) What often not talk about is how often people shoe-horn themselves into a home, which eats up all their money leaving virtually nothing for long-term savings.
“But Gail, my home IS my retirement plan.”
Have you not been listening? If your whole retirement savings is wrapped up in your home, you’re assuming your home will continue to appreciate (there won’t ever be a down to the UP we’ve been on for so long), and that it’ll be worth a lot more just when you’re ready to sell to make some food money.
And what about your other savings: education savings for the kids, your emergency fund, that curveball account you need for the stuff that pops up out of the blue.
And what about your planned spending: the kids’ hockey fees, the car you’re going to have to replace in two years, or the roof that lost some shingles in the last wind storm.
Squeezing your budget tighter than a frog’s ass to wedge your way into a home you can barely afford is short-sighted and – well, let’s be frank – STUPID! I don’t care how low interest rates are now, how afraid you are of missing out on the real estate market or how often your mother tells you rent is “throwing money down the drain.” Strapping yourself so tight that you can’t take care of the other aspects of your financial life – really, you can afford the $350 it’ll take to make a Will? – means you’re too focused on one goal and you’ve lost sight of the big picture.
And then there are the IDIOTS who not only buy too much home, but go into debt to keep it by using their credit cards and lines of credit to supplement their incomes. Lord love a duck! If buying a home means you’re going to carry a balance on your line or on your credit cards, how can you ever hope to come out even.
If you added the cost of the interest on your consumer debt into your “shelter,” you’d get a more realistic picture of just how much of your money your home is eating.