DH and I have often been envied by friends because we to have our financial lives mapped out. Another blogger asked me how did I afford to buy a house in CA making less than the median US salary? And how did we get so lucky to be financial pretty secure in our 20s?
Were these all lucky moves or was it smart planning on our part?
I know luck played a huge part in our finances. But honestly smart moves also played a role. We are scientists by nature and we calculated the odds of every financial move we made. When we first bought a condo in CA, we thought the market's peaked if it drops what will we do? We decided it doesn't matter, it costs as much as renting. Let's do it.
We decided we could easily afford to hang onto the home during a downturn. Plus because we were so young, we decided we could only afford a 1 bedroom though the bank said easily 2 bedrooms. Most of our friends said we were stupid buying a 1 bedroom because they are harder to sell. Also we bought in a lesser location because we could not afford to live close to work, and not in a good school district. We compromised and weighed all these factors and still chose the area because it worked for us. We also decided that we would take all of our savings and buy a home. The market looked terrible and we didn't have the time to research our portfolio's like we had in the past.
So was it really luck or a smart choice? How many people are willing to live in a tiny one bedroom as a couple? And how many are willing to drive a bit further to afford to buy? These are choices we made that contributed to our financial security.
Then we moved cross country and bought another place. We again decided against a house again. This time we could have bought a single family home, much farther out. But as we were not having children for at least 3-4 years, we decided a townhouse would be a perfect compromise. We would be able to live closer and thus saving a lot of time on our commute. Sure we paid a premium for a great location, but the commute turned into a blessing.
With DH working full time and school part-time, our time together is limited. By saving on commuting, he is able to focus on finishing school faster and thus increasing our income. We wisely decided to buy a townhouse which has space for us to have 2 children. Though we planned on only one child before moving. We also considered that our townhouse is large enough for our parents to live with us and provide childcare for an extended period of time if necessary.
But because of the location both of our parents feel comfortable living with us and not driving, while not being isolated in the suburbs. Instead they would be able to walk and ride the bus into the city, shop, and occupy their time easily. They are very happy with our choice, the only problem is that we lack a full bath on the first floor, something which we had been searching for when buying a townhouse. This was to accommodate our elderly visitors.
So financially our townhouse has been a great investment. We pay about the same as renting a townhouse. But of course our neighbors do leave a lot to be desired. Thus our sacrifice of having neighbors, while I question it, probably is smarter financially than a single family home.
But at our current ages 28 and almost 30, most of our contemporaries are struggling to afford single family homes. They feel a townhouse is beneath them. That it's not the right place to raise a family. They are saving to get into a home. But we've already gotten ourselves used to owning, building equity, and we understand this is a temporary choice until we can finally afford a home we love. But how many people again are willing to make this sacrifice? So smart move or luck?
Third, we've just about saved $75k in retirement savings in a little less than 2 years. All through hardwork and sacrifice. During our "leaner" years I told DH when we make "real" money our lifestyle will not change until our retirement options are maxed out. We won't build up to it, we'll take it off the top before taxes, rent/mortgage, everything. It was to be a non-negotiable, budgeted line item. We did exactly that and it's been a painless transition. Now our raises/bonuses go to school tuition (an unexpected expense because we didn't know it would be so expensive). But our lifestyle is still pretty cushy.
Finally, we own two newer cars that while are not fancy, are workable. They do not match our "income" and they do not always fit our needs. But how often do we need larger/fancier cars? We can rent or drive both cars if necessary. We were forced to buy 2 newer cars starting out because unlike many of our contemporaries, our parents never gifted us with an older, used car. More than a few people were given their parents older car as a first car. So did we get lucky, or was it a smart choice? Luck would have been getting a free car, smart was sticking with our cheaper cars even though we make a lot more.
So has all these financial decisions been smart or lucky? I have to explain a bit because people always ask how do we manage? Not easily and everything we've done has required sacrifice. We've chosen not to buy new cars, have children, or shop all the time because we're trying to build our financial foundation now. But everything comes with a price tag. If you review your own purchases, did you make the decision consciously or not? Were the choices you made lucky or smart?