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CCM #20 - RESIDENCE - CAN/SHOULD YOU AFFORD IT?

Residence – Can or Should You Afford It?


Do you buy modest, or did you buy excessive?


If you’re fortunate, you own a residence; you likely also own a mortgage. When you bought it, you probably wondered how in the world you were going to be able to make, say 365 on-time monthly payments in a row and never be late. That’s 30 years, right? You wonder about whether there will be hard times in that life-time of making payments, like a job layoff, or something else. Over the past few decades, many households have two full-time incomes. Surely, you’d be careful and not let your debt get out of control as it’s taking two incomes to afford the house in the first place. Housing prices have increased sharply, and both incomes seem to be necessary to afford your lifestyle, and everything else that goes with it. And, with two incomes, you can, and probably did leverage up to the fullest, and bought more home than you needed, not to mention shortly thereafter, all the nice vehicles, toys, furnishings, and many of the finer things in life. And, rather than wait, you purchased your toys and vacations on credit too. In other words, you’re now highly leveraged – you’re heavily in debt.


Then comes the ‘wake-up’ call; starting to feel some pressure


But along comes a reduction of income; you knew it would come someday. It may be the result of being laid off from work, a family member becomes sick or injured, a working mother needing or desiring to be home with the children. What if you want to begin paying religious contributions to your Church? A full tithe payment can be 10% of your income, and how will that be done? For one reason or another, the household income is going to be reduced, or expenses may be increased. Pressure will begin to build everywhere. Suddenly, the sweetness of life has taken a challenging turn; anxiety and stress build and sweethearts become the first victims for criticism and disrespect. Yelling at and being mean to precious children becomes all too common.


Then comes the piling on; oh no, now what?


And, when timing couldn’t be worse, something big breaks, a major repair is needed, unexpected medical and dental bills find their way in to join the party. Out comes the credit card. And you, or your spouse, now decides it’s best to go back to school and along comes a student loan. Oh, and you needed to replace the driveway or go-in on installing a fence with the neighbors. Surprise, surprise; out comes yet another credit card. Before you know it, you are making the equivalent of two mortgage payments, and not one. One for the house, the other equals the sum of all the other payments, or more. Because of the rise in housing prices and some unearned equity, next comes a refinance of your debt into a new mortgage which gives you some breathing room – for now. Perhaps it’s a second mortgage, or a home equity loan. But the children absolutely need braces for their teeth, and the car’s transmission just failed. Out comes the credit card again. But, you’re smart. You go big and buy a brand-new car thinking that it won’t have any nasty repairs, but you now have a hefty car payment for the next seven years. You get the picture. How could all this happen? Well, it did.


A day of reckoning comes; a solution is in sight


You finally put together a Tunabudget worksheet plan one day and, for the first time, can look down the financial road you’re on for the next year or two, and ask yourselves some serious questions. You look at each other and there’s a sinking feeling. Neither of you want to bring up the fact that you may now be in a home or mortgage that you can no longer afford. You know that your debt level is very high, and that you’re working yourself to death, and your marriage and family relationships are suffering. You’re tired; you’re exhausted and spent. Maybe you’re sick and have been for some time. This isn’t what you want, right? There’s way too much stress.


Priorities change from the inside, and you’ll do anything for a fresh start


Something has to change. Do you sell the toys and get rid of some debt? Do you downsize the nice cars? Do you sell the home, start over in something smaller, and use the equity to payoff everything else? Do the two of you determine that you really can’t stand the heavy burden of crushing debt any longer, and just want the smallest house you can find? Are you there yet? Do you want something more in your life, for your children, than just working 24/7, and being upset and stressed all the time? How would it be to have some real savings in your account, and pay with cash going forward? Suddenly, your priorities have changed, and you just want a return to the sweetness of life, of living together, in love, like before. Suddenly, it doesn’t matter anymore to you how you look to the neighbors and your friends. Your Tunabudget worksheet plan has convinced you from the ‘inside’ that you just want to be out of debt, and to get a fresh new start. You are now willing to do whatever it takes to really start living instead of just pretending that you are. Your plan has opened your eyes. Excitement builds to make this new life a reality, and in three to six months, your world is reset. Small things matter; you are happy along with your spouse and children.


You now know if you can or should afford your residence


You’ve answered the question as to whether or not you could or should afford your residence and mortgage. There is more to life than that really nice big home; you know that, right?



CANDID QUESTIONS

  • Do you know of a friend or family member who has chosen to ‘have it all’, and paid a big price?

  • Where is your home, and thus, mortgage, on the modesty scale?

  • What about all the other things you have chosen to pay with credit?

  • How much debt have you acquired as a result of unfortunate events that have come?

  • Have you consolidated and refinanced your debts to where you owe much more than you did, say five or 10 years ago?

  • At what price are you willing to pay to ‘keep it all up’, at the expense of having other experiences in life with your family?

  • Do you want the heavy debt load to pay for your assets, or do you want something less so that you can have things like memories instead?

  • How much stress is in your life, your marriage, as a result of having excessive or overwhelming heavy debt?

  • Are you ready for a change?

  • Will you prepare a Tunabudget worksheet plan so that you can clearly see your own overall and financial well-being?

  • Are you sure?


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