Does Your Household Live on an Over-Extended Budget?

January 19, 2009 · Posted in Currency Trading 

Many people today are caught in a vicious cycle. People are caught up in a cycle of consumption. I see it all the time when a person calls our office to sell their house and on the surface they seem to be in very good financial shape but after a little digging I find that they have some very big problems.

I’ll give you an example, a couple that I am very good friends with has purchased a single family house. They originally bought the house with the attitude that even though the payment was high, they would really like this big house and eventually they would sell the house at a profit. They are both employed and have good jobs making a sizable income.

On the surface it seems that they are living the dream. The couple bought the house and moved in about 10 months ago. When they moved into this large house they realized that they needed to furnish the house with new furniture because you can’t have a nice, big house and have cheap apartment furniture.

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So they went out and purchased new furniture for the house and they also did some improvements to the house. Their logic was that the improvements would make the house more comfortable for them to live in and it would also allow them to sell the house for more money later on. They financed the improvements to the house and they even paid for the furniture out of savings. Every thing seemed to be going fine but what most people don’t realize is that when you buy a bigger, nicer, house all of your expenses related to housing are likely to increase.

The water, gas, and electric bills were higher than they expected. The property was new construction when they purchased and so when they moved in the taxes were assessed for vacant land but they have since been re-assessed for a new construction house and the taxes were significantly higher. The furniture which was paid for in cash needed additional accessories like rugs, knick-knacks, and new paint. After everything was said and done this couple had seen about a 25-30% increase in expenses not including their new higher mortgage payment. And since they had paid for the furniture cash, they had depleted their savings. Now the couple is realizing how much they are really spending and they have found themselves in financial trouble.

They have had trouble keeping up with their mortgage payments and they are now trying to refinance. Ultimately this couple will have to sell this house probably at a loss unless they get a windfall of cash from some unexpected source. I see this scenario all too often because when people buy new houses they don’t look at all the true expenses. This can all lead to unnecessary stress and can put a strain on your marriage. As is the case with this couple. My advice to this couple and anyone out their like them is to keep it simple. Whenever you look at upgrading your home, find a property that will allow you to live below your means. That way when unexpected expenses come up and when your see the real effect of your new house it will still be an affordable deal for you. If you are already in the house and living below your means is not an option then consider downgrading your living. Go ahead and sell that house and move to a smaller one. You may be worried about your friends and family looking at you, or what they might say because you are selling but who cares. You do what’s best for you.

Till next week Good luck and God Bless and remember… If you have any questions about saving or selling your home or any topics on real estate that you would like to know more about please email me and I will answer your questions in this column.

Arthur Veal is owner of We Buy Houses Home Services. We Buy Houses Home Services is a real estate investment company that specializes in renting to own and selling on terms. They have helped hundreds of families sell their houses on terms. They also specialize in private mortgages and work with several passive investors through their site at http://www.earnasecuredreturn.com

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