http://money.cnn.com/2012/02/09/news/economy/mortgage_settlement/index.htm?hpt=hp_t1
Since three days prior to graduating from high school twelve years ago, I have been a renter and have lived alone close to 90% of that time. My finances have been mine and usually mine alone to navigate. I can count on both hands the number of times that I have requested financial assistance from my parents in the last eight years that I have supported myself. And when I say I'll pay them back, my word is as good as gold. I toot my own horn, pat myself on the back and give a self-round of applause for all of that. Struggling alone has never been easy, but when you do it, you respect yourself more. In a way, I thank a Higher Power that I dropped out of college when I did. At that point, my parents politely (and justly) stopped inserting the silver spoon into this well-fed mouth. It forced me to grow up. Although I always knew and continue to know that I can rely on them if absolutely necessary, I receive tremendous satisfaction from knowing that I can pay my own way.
The subject of the above article has me thinking about the way in which I conduct myself financially. I have made poor monetary decisions for years. I remember being around eleven years old and finding out about a raffle. When someone explained to me how the raffle worked, I got excited at the prospect of winning money. I walked one mile home to get my tiny safe, then full of dozens of coins and dollars. My Mom took me back to get a ticket for the raffle, at which point I handed over what must have been months of savings. We stayed around for the raffle drawing with my sure-to-be winning ticket in hand. Other than saying, "You know that you might not win?", my Mom said little. She knew what she was doing. Needless to say, I was devastated when someone else won the jackpot, which was well over $100. To this day, I cringe when I think of putting any substantial amount into a slot machine, lottery or trip to the bingo hall. That teachable moment at eleven years of age takes the credit.
Credit has been quite the learning experience as well. When I was first on my own, I made purchases on my credit card and would get so annoyed at the balance that I would make an exhorbitant payment to cover them. At the end of the month, I would be using my card again because I had--yep, you guessed it--spent too much (or all) of my cash flow on the credit card payment. It took me entirely too long to figure out that one. I then went into reverse and started paying just over the minimum balance until it dawned on me that I was covering the accrued interest--and barely touching the principal. Years of leaning on credit finally took its toll and just eighteen months ago, I was forced to face the financial music. It wasn't pretty, but after months of budgeting, strategizing and taking advantage of good advice from my parents and my ex, the reward is about to be sweet: I will soon be credit card debt-free for the first time in seven years.
Some lessons are part of growing up, and some come with experience.
I think that I started growing up financially in the spring of 2009 when I decided that I wanted a condo. $8,000 was a great incentive for a first-time homeowner, right? I needed to jump 'now', right? Hey, I had a stable job and a decent income--why not?! So, I got myself a realtor, who, in turn, helped me find a mortgage broker. Within weeks, we had found a gem: a gorgeous, spotless place in a great part of town. There was only one problem: it was on the high end of what I thought I could afford and the seller didn't want to come down much on the asking price. Fortunately, my realtor wasn't too pushy. He could've made life hell for me since I was seeing the condo with stars in my eyes--and not the necessary objective realism. But when the mortgage broker and I sat down over coffee to look at what few assets I had and how it would all play out, the stars came crashing down--hard.
My mortgage payment would be significantly higher than what I was paying in rent. There was an earnest fee, PMI, the works--not to mention nightmarish property taxes. My home loan would be at least three times my salary--and that didn't include the monthly Homeowner's Association fee. Basically, by going through with it, I wasn't just going to be house-poor like most others. I was about to walk the plank--and jump. I would have been so financially maxed out that something as small as a broken water heater would have likely put me into default. I told the broker and my realtor that I needed time to think about it. Three years later, I'm still just thinking.
This "housing crisis" has shown us that renting and its usual negative stigmas ("I don't own it so I can't do what I want", "you're paying someone else's mortgage", "you're throwing your money away") must be fairly countered by highlighting negative stigmas to buying ("This house is so expensive to maintain", "my interest rate keeps changing", "I can't live my life the way I want because I'm broke.") It does not matter that your property taxes and what-not are "thrown into the mortgage." It does not matter that you get to write off the interest on your income taxes. It doesn't matter how good the rates are or how little is required for a down payment. What matters is that if you don't read and heed the volumes of fine print, take time to budget and think about how you want to live your life, you have no business owning a home.
I have blogged about this before, but in light of the settlement, it bears repeating: people are quick to blame the greedy mortgage lenders. People are also ready to apply part of this crisis to Reagan's claim that "government is the problem." But on the issue of personal, financial accountability, most of the blame usually lies elsewhere.
It's in the mirror.
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