Between our recent office move (it was wonderful seeing so many of you at our open house!) and the first anniversary of our home purchase, the topic has been top of mind.
As both a homeowner and a financial planner, the experience reinforced something we often discuss with clients: homebuying is rarely just a real estate decision. It influences everything from your monthly cash flow and emergency savings to retirement goals and future flexibility.
Looking back on our first year in our home, here are a few lessons the experience reinforced for me.
Lesson 1: The Down Payment Isn’t the Only Number That Matters
If you have ever bought a house, I’m sure you can remember waiting for the official closing documents that always seem to amp up the anxiety as you’re waiting for the final wiring amount to be sent over, usually a little closer to the deadline than you prefer.
However, if you go back through that document, there are a few items that weren’t included in that final number.
There is the furniture. The lawn mower. The ladder. The tools. The curtains. The moving expenses. The first grocery trip. The second grocery trip because you forgot half the things you needed. And, of course, the seemingly endless Lowe’s, Home Depot, and Target runs as you settle in and make the house your own.
For us specifically, we needed a lawn mower. Then we needed to seal the driveway. After that, we painted the garage. Then we needed a fan, and the list could go on and on! While none of those expenses are particularly surprising on their own, it is surprising how quickly they seem to add up.
Don’t spend every dollar on getting into the house because homeownership is really about everything that comes after the closing table.
This is where having a healthy cash bucket of emergency reserves can be valuable, as homeownership has a way of introducing expenses that don’t always arrive on your timeline.
Lesson 2: How Much House Fits the Life You Want?
Successfully purchasing a home and comfortably owning a home are not the same thing.
One of the biggest questions many buyers ask at the beginning of the homebuying process is: “How much house can I afford?”
Often, that question starts with a lender looking at your income, assets, credit score, and debt-to-income ratio.
Those factors absolutely matter. Maintaining a strong credit score can help you qualify for more favorable loan terms, and debt-to-income ratios are an important measure of your ability to comfortably handle a mortgage payment.
Getting preapproved can be a great first step in the homebuying process because it helps establish a realistic price range and can identify any potential issues with credit, debt, or income before you begin your search.
But as a financial planner, I tend to ask a slightly different question: “How much house fits into the life you’re trying to build?”
The amount a lender approves and the amount that allows you to sleep comfortably at night aren’t always the same number. In fact, those two numbers can sometimes be very different.
The mortgage amount is helpful as a budget starting point, but it’s important not to forget the taxes, the insurance, and the cost of maintaining the home that comes along with it.
- A larger mortgage payment may be manageable on paper, but what happens when you also want to:
- Continue saving for retirement?
- Build an emergency fund?
- Help children with future educational expenses?
- Travel?
- Replace vehicles?
- Have flexibility for whatever life throws your way?
The reality is that your home is only one of many financial goals competing for your resources.
Over the years, I have met people who felt stretched after purchasing more house than they could comfortably support, but I’ve heard very few people regret buying a little less house so they could maintain flexibility for their other goals and priorities.
Lesson 3: Why Flexibility Has Real Financial Value
I’ve often heard people say, “Buy the smallest house that comfortably fits your needs.” While every situation is different, I think there is wisdom in that statement. It’s not because larger homes are bad or because I’m suggesting you shouldn’t have your dream home. I think the underlying message is simply that flexibility has value.
The truth is, we all probably have a vision of our life ahead, but the reality is that we don’t know exactly what the next 5, 10, or 20 years, or even tomorrow, will look like. Or perhaps you’ll want to retire sooner. An unexpected life event might recenter what you think you value. Maybe you decide to travel more or help a child. Flexibility is what gives you more cushion to adjust as those priorities evolve.
As we say, “Life happens. Be Ready.” Sometimes you don’t fully appreciate the value of flexibility until an unexpected expense arises, you navigate a career or family change, or life takes a different direction than you anticipated.
Life has a way of changing faster than we expect. I’ve found that financial flexibility is one of the most underrated assets a family can have because it allows you to handle the unexpected and adjust your path accordingly.
- Flexibility allows you to:
- Handle unexpected expenses.
- Navigate career changes.
- Help family members.
- Weather market volatility.
- Take advantage of opportunities when they arise.
- Adjust when life doesn’t go exactly according to plan.
Every dollar committed to a larger house payment is a dollar that can’t simultaneously be used somewhere else.
That’s why, when we help clients prepare for homebuying, we’re often thinking beyond the mortgage itself. We’re looking at how the purchase affects retirement savings, cash reserves, debt management, education planning, and all their other long-term goals.
The home is definitely important, but so is everything else.
Lesson 4: Good Financial Decisions Aren’t Always Perfect on Paper
As a financial planner, I certainly love all the numbers and spreadsheets, but I would be remiss if I didn’t acknowledge something important: financial decisions are rarely made on numbers alone.
There are emotions involved in nearly every major life decision, especially buying a home. Maybe it’s the neighborhood where you want to raise your family, being closer to parents or grandchildren, having a shorter commute or having enough space to host family during the holidays.
The mathematically perfect decision isn’t always the right decision.
Sometimes keeping a little extra cash provides peace of mind. Spending a little more for a home that better fits your family’s needs can be worth it. In other cases, waiting a little longer before homebuying is the best choice.
Financial planning isn’t about eliminating emotion from the decision-making process.
It’s about understanding the tradeoffs so you can make an informed decision that aligns with both your financial goals and your personal priorities.
The homebuying process has a way of making you feel pressured to find the “perfect” home and make the “perfect” decision. Not to be disappointing, but there are very few things in life that are “perfect.” Everything involves trade-offs between logic and emotion. A spreadsheet can tell you one answer, but it’s not the full story. What is important to you matters too.
Homebuying Should Support Your Bigger Financial Picture
Purchasing a home is one of the biggest financial decisions you’ll ever make, but it shouldn’t come at the expense of your other long-term goals.
Whether you’re preparing to buy your first home, move into your next one or simply want to understand how a home purchase fits into your overall financial plan, we’re here to help.
Contact Hess Financial to see how thoughtful homebuying can support both your lifestyle today and your long-term goals.
