Guest Post: Get Real Quickly
January 21, 2015
Mrs. Micah briefly returns, like Godzilla from the sea with a rant. She was chatting with Revanche when Revanche ran across an article that pissed Mrs. Micah off so much she needed to respond. The piece was written by Robert Brokamp on Get Rich Slowly, “How to save for a down payment on a house fast.” Now, I’ve been out of the PF blogging “business” for a solid 4 years, but *harumphing sound* back in my day, GRS wouldn’t have published this kind of tripe (just tried tripe in pho, tripe turns out to be delicious, must come up with new metaphor).
This piece is crap from start to finish. First, let’s start with the premise. The couple got married and got pregnant pretty quickly. Either it wasn’t on purpose (accidents happen, even with birth control) or it was a “let’s see what happens.” In the latter case, this shouldn’t have been a “save fast” thing. You decide that after getting married you’ll be opening up the possibility of creating a new human? If you’re being financially responsible, you take into account all the possibilities, like needing to move.
But whether planned or not, the premise here is entirely flawed. A one-bedroom apartment is legally (in many places) too small for parents and a child, though with an infant in the crib and with everything else going smoothly, one may not have to leave instantly. Even if you can’t stay in your current place, that doesn’t mean you should instantly start house shopping.
If you’re going to start this kind of dramatic, unplanned lifestyle inflation once your kid arrives, you’re starting down a really bad financial path. Will you need a bigger car next? A preschool you can’t really afford?
Particularly awful suggestions from the list include:
1. Get help from family. This only works if you have wealthy and financially secure family. You know what I’ll inherit? I have no idea. If my dad lives another couple years max (at 70), maybe a tidy sum. If he lives another couple decades, I may have to support him. And my dad is comfortably upper-middle class…but not wealthy. Only the truly wealthy have that kind of money to safely throw around. I could ask my dad for money for a down payment, but that might well bite us all in the butt in a decade’s time.
4. Use IRAs. What. …you even admit, Brokamp, that this “almost hurts” to type. Yes, you’re absolutely allowed to take money out of various IRAs w/o penalties if you’re a first-time homebuyer. You can withdraw the money you put into a Roth because it’s post-tax. But are you going to let your lifestyle inflation choice take away from your future financial security?
5. Sell your body. Really out of left field. Unless you plan to sell your eggs (not an option if pregnant), this isn’t the kind of thing to get you big money fast. Medical testing carries inherent risks, it’s almost impossible to participate in the more lucrative tests if you’re also holding down a job (I looked into some at NIH), and…really? This is advice for someone who’s holding down two part-time jobs and finding other sources of income, not for someone getting a mortgage. Yay you got your wisdoms pulled for free, but that’s not really helping the goal here.
6. Get help from your boss. ahahahhahahahahahahahah you must be male. Heck, maybe it’s a good time to milk that male privilege for all it’s worth and take advantage of the biases men receive when starting a family. But be aware that your female colleagues are taking negative hits when they have children–in perception, in pay, in everything. This isn’t just the dozens I’ve stories I’ve heard from friends, this is study upon study backing up the stories. Start with “The Motherhood Penalty,” thanks Nicole and Maggie for that link.
Relevant reading: Have I lost my fire?
Negotiating a raise because of life decisions you made, however, strikes me as being the opposite of being a good asset to the company (although some companies will play along with it, at least for “family men”). You don’t deserve more money from your work because you chose to get married/have a baby/buy a house/etc. You deserve it because of the quality of your work.
Relevant reading: Terrible workplaces: A blast from the past
How someone could type any of these without stopping and saying “wait, do we really need to buy a house right now?” is beyond me.
What you can do:
A. Get a bigger apartment. Even if you want to buy a house, you don’t have to do it the instant the baby comes. A 2-bedroom apartment is plenty big enough for most kids. Maybe when you have a second kid or when your kid is getting older, you’ll want a bigger space, but for the first 5 years, minimum, your kid doesn’t need a big space.
(Yards are really nice as options, but a public park will do.)
B. Rent a house. If you really, really have to have a house, look into your rental market. Voila, now you have more space and a yard.
Now that you’re in a place where you’re no longer rushed? Start saving for that down-payment. Put time into planning where you want to buy.
The one decent piece of advice in the list, IMO, was:
2. Buy a fixer-upper that doesn’t need immediate fixing. When my dad downsized after my mom’s death, he sold our family house as a “fixer-upper” because he didn’t want to put in the time and money to make it good-as-new. The house had a good 25 years of family living put into it. Everything worked, but the paint was old, the linoleum scratched, and it needed maybe $30k of work to make it pristine according to realtor standards.
Once you do have the money to buy a house, that kind may be a great starter house for you and your family. If you let some of the more dramatic stuff go until the kid is older, then it’s not as much of a crisis when they draw on the walls behind your back or take safety-scissors to the carpet. But unless you get a great deal on that house, you can still hold off on buying it until you are ready.
You have at least a couple years of your child not having a clue that they’re not living in a house. Where you are, where they live, will be home. Be smart. Don’t mortgage their future buying into the habits of a society that’s drowning in debt.
Haha, we posted on this exact thing on Monday.
Also, my worry with buying the fixer upper that doesn’t need fixing up is that ALL* houses need fixing up, usually dramatically right after you buy them, and in areas that aren’t covered by the home-buyer insurance and weren’t caught by the home inspection. Pipes burst, water heaters die unexpectedly, etc. etc. etc. If something is a fixer-upper cosmetically, who knows what is going on behind the scenes.
*possibly not all, but I have yet to hear from anybody who didn’t have some dramatic unexpected expense shortly after buying a house, even people who bought new builds, which leads me to think this is something you should plan for
Possibly we’ve been lucky that the last two purchases we made didn’t require any or very minimal, cosmetic (therefore ignorable for now) repairs.
Anecdotally the experience of homebuying friends has been about evenly split between MAJOR repairs and no repairs needed so this could go either way.
Seems like it’s more begging and borrowing than saving.
Exactly, what part of this is saving money? It seems more like “People to ask if you need money quickly”.
Agreed with both of you. That list had nothing to do with responsible finances and everything to do with using your privilege to your advantage. Not all of us have those privileges, or would consider that an option.
“A one-bedroom apartment is legally (in many places) too small for parents and a child” Wait, really?
Probably not, though interestingly there are some legal limits at local levels: http://homeguides.sfgate.com/many-people-can-legally-live-one-bedroom-apartment-83311.html
You can see that even in SF it’s ok to have 3 people living in a one-bedroom.
Some friends of mine found this out when they moved to a new place. I think it was based on the assumption that while their child was currently an infant, the landlord had to take into account that they might be long-term tenants.
My lease has a two-occupants-per-bedroom clause, not specifying age of the occupants. I’m pretty sure that if I had a kid, my landlord wouldn’t come down on me. But if I were looking for a new place, it’d be harder.
The article being referenced is clearly bad, but the suggestions here are not awesome either. 1) A 2 bedroom apartment may not be enough space for you and your kid until they turn 5. I mean, our 2 bedroom apartment is barely big enough for us and my almost 2 year old and we are super anti stuff. Kids need room to run and play and when all of that is happening in 1 main room, it makes you feel like a crazy person.
2) Saving for a house and getting a mortgage you can actually afford is very, very, VERY important. But! I don’t like the attitude here about wanting to own and how renting a larger space may be just as good. We spend a ridiculous amount of money renting and it is just being flushed away. And that is without any control over fixing up stuff we hate about the place, our loud neighbors who share a wall with us, or the people who smoke below us on their patio.
The voice of this is just so incredibly harsh in regards to people with kids. Sometimes you don’t know what you need until you need it. Now, I’m in the boat of very much wanting to own and needing the extra space, but knowing that it will take us another year to get to a place where we can even have a small down payment. But not everyone can see into their future and know what they’ll need/how they’ll feel.
I wish this retort focused less on the idea of the setup and more on the shitty advice.
Gee, we’re going to be most likely living in a 2br with two adults and two kids next year. I guess it will be horrible. Even though we know a ton of people who are doing it and seem perfectly fine.
Also it’s a common misconception that rent is “flushed away”. Rent pays for property taxes, upkeep, and mortgage interest (all of which are “flushed away” when you own). Whether it makes more money sense to rent or own depends entirely on where you live and what the going rates are. (And you can own a condo and still have to deal with smoke and noisy neighbors, or rent a house and not have to deal with that.)
Actually, come to think of it, my family (of 4) lived in a 2 bedroom apartment or duplex until I was 10 and my sister was 4. Somehow we survived and I have no bad memories about that at all!
I’m not saying it wouldn’t work for some and I’m definitely not trying to say your choices are bad ones for you. I’m not really understanding your tone.
When I say flushed away I mean it isn’t giving me any equity and it isn’t giving me any of the control I would like to have about my living situation. There are perks to renting: not having to spend money on upkeep, etc. But there are a lot of non-perks. There are pros and cons to buying OR renting. It’s about what you’re willing to deal with.
And just because I need more space, doesn’t mean you will. It wasn’t a blanket statement. I don’t understand why you are so snarky.
I was responding the same way you responded to the original article, “The voice of this is just so incredibly harsh in regards to people with kids.” It wasn’t, not unless you read into it. So I read into your comment the same way.
FWIW, I read it as an indictment of the methods proposed, not of wanting or needing more space, regardless of the reason.
I was one of two kids that grew to teenhood and older in a 2 bdrm apartment, as are many of my generation and we were (are) lifelong renters. I know it’s very doable, but I still want more space – I do! But to do it in the ways Brokaw suggested … well, I think we’d (personal we) be better off finding a way to deal with our small place til we can afford it in a responsible or more realistic way.
I’m a huge proponent of living with what you need, buying what you need, using the space you have to the fullest, etc etc. And not living beyond your means or beyond what your NEED to a certain extent. So many of my peers jump into purchases just to have them, spend more on cars or other things than they need to just because and then suffer with those choices later.
I wasn’t intending hostility to people with kids. I was intending to address the root point of the post which was as bad as some of the advice in it, namely that when you have a kid, you’ll want to get a house, or that any decision to become homeowners should be made in that kind of hurry and with that kind of logic (the simplistic implication of kid = house). It’s natural not to want to live in a 1-bedroom with a kid longer than you have to. And it makes sense for a parent to start looking for a house as a result of their family getting bigger.
But simply going out and buying the house in that 9-month period without putting any planning or prep into it (as the poster I was responding to did) is not a healthy financial decision that should be recommended in this kind of post. I thought it was important both to respond to the ridiculous advice in the post and the overall message of the post.
As for whether people can do it… I live in a very expensive area (DC) and I know lots of people who are raising their kids in 2-bedroom or other tighter situations. My cousins grew up in a small two-bedroom house where 3 kids shared one bedroom until adolescence. When you are very poor, there just aren’t options sometimes. Poor families make it work because they don’t have that option.
I also think there’s a lot to examine in “money-down-the-drain” saying that people toss around. True in some rental situations, not in others. I’m currently a renter because I live in an area/make a salary which would make buying a bad choice for us. We’re not 100% invested in staying in this area, we found a place to rent which lets me walk to work, etc. It doesn’t build equity but it puts a roof over our heads and we don’t have to worry about maintenance, etc. For where we are right now, it’s a good place.
I feel like I should add that my cousins were three kids of two genders. That makes the bedroom-sharing much harder long-term than all-boys/all-girls.
Ahhh yes. Thank you! I totally agree!! And yes, we’re about to have 2 kids in our 2 bedroom and we are looking for a house (but it won’t be for another year). We started with 1 kid in a 1 bedroom and have slowly moved up as space demands. <3
I never even WANTED a house most of my adult life but now it is all I can think about. I do know people who did it the "right way" with buying property first and then ya know, getting their ducks in order, but now they are stuck in a bad neighborhood with property they will have a hard time selling, etc etc etc. I'm so happy we are taking our time even though I want to put my child in a cage sometimes. haha.
Whoa, waitaminit. Two bedrooms is not enough space for one married couple and ONE child? How did that happen?
My parents lived in two-bedroom dwellings, mostly apartments but once or twice rental houses, from before I was born until I went off to college at 17. I do not recall ever feeling disadvantaged.
My father, who admittedly was a bit on the extreme side in the tightwad department, would not buy ANYTHING on time — including houses. Or cars. He set aside money in savings and purchased these things, in cash, when he was ready to do so. We always lived in solidly middle-class housing, even during the period when we lived in San Francisco, which has always been an expensive city. When he decided to retire (at the age of 51, early retirement being one of his several financial goals), he took the money out of his retirement savings and bought a house in cash. In 2013 dollars, the amount he paid would come to about $92,000…it was, yes, a two-bedroom house.
The apartment complexes where we lived had playgrounds — there was plenty of room for kids to run around outside.
Rental rates are, indeed, absurd now. But that’s because the cost of real estate in general is absurd. While it appears, on the surface, that the money you put into rent goes down the tubes, in fact the much trumpeted mortgage tax deduction is not that big a deal; the cost of maintaining your house is much higher than most people understand; your taxes and insurance add to the cost of the mortgage; mortgage interest over thirty years effectively doubles the amount you pay for the house, which may not be worth twice its purchase price after you’ve paid it off; and you have to come up with a substantial chunk of cash up front, little or none of which is ever likely to return to your pocket. And if, as has happened more than once during my lifetime, property values fall, you lose your shirt.
Whatever works for you, of course, works. But…in retrospect, I thought my father was crazy at the time, but now I see he was crazy like a fox.
Oh, by the way, the Old Man was not some kind of high-paid executive. He was a blue-collar boy with no high school diploma. Went to sea with the Merchant Marine.