IN AN EARLIER ARTICLE, I wrote about a catastrophic stock market loss that taught me—the hard way—about the benefits of diversification and the importance of managing my own investments. That loss derailed our plans to build a large and expensive home in the hills overlooking Austin, Texas.
We were heartbroken at the time. This had been our dream for several years. But it’s funny how life works out sometimes—and it may have been the best thing that ever happened to us.
As we planned our dream home, I knew it was going to involve taking on a huge mortgage, but that gave me no pause. I was young, ambitious and already accustomed to long, stressful hours at my job. It never dawned on me that I was putting myself on a path that I’d likely feel compelled to stay on indefinitely, or at least until that big mortgage was finally paid off.
And the mortgage was only part of it. A big expensive house also costs more to maintain, the property taxes can be a huge burden and it can propel you into a more expensive overall lifestyle. That last factor is worth special consideration. When you buy or build a home, you aren’t just acquiring a place to live. Rather, you’re becoming part of a neighborhood, a school district, and a group of friends and neighbors.
When that’s all on the upper end of the wealth scale, your finances will be affected in myriad ways. Even if you can resist the peer pressure, you’ll feel it through your kids, who will be much more susceptible. You’re basically locking yourself into a way of life. Consoling yourself with the thought that you can always change trajectory by selling the house? That’s much easier said than done, especially when the kids are at local schools and have neighborhood friends.
Ironically, when we were clobbered by the stock crash and our dream home went up in smoke, it may have been a blessing in disguise. We had been living temporarily in a more modest home, but one we had come to love. It was spacious, in a great school district, sat on a wooded acre with beautiful views and was close to a lake where our kids liked to swim. Although it was far from the city, meaning a significant commute for my wife and me, that also made it affordable. Not long after the stock crash, our landlords—fortuitously for us, but not them—went bankrupt. We had the chance to buy the home from the bank at a terrific discount and we jumped at the opportunity.
Looking back from almost 30 years later, we’re thankful this twist of fate kept us in the house. Our lifestyle hasn’t been fancy, but it has been comfortable. Our costs of homeownership have remained modest year after year. That enabled us to save and invest more, and we’re now happily retired with a healthy nest egg. The path we chose—or rather fate chose for us—has meant a sense of freedom, of not being held hostage by that huge mortgage and elite lifestyle we thought we wanted. My wife says that if we’d gone in the original direction, I’d likely be dead by now, the victim of a heart attack or some other stress-related malady.
Everyone’s different and there are many deep-seated psychological reasons for the choices we make. For some, the expensive dream home, with all its attendant joys and burdens, may be the right choice. Still, with the benefit of hindsight, I’d suggest thinking carefully about what you’re getting into.
Andrew Forsythe retired in 2017 after almost four decades of practicing criminal law, first as a prosecutor and then as a defense attorney. Along with his wonderful wife, kids and grandkids, he loves dogs and collecting pocketknives. His previous article was Saved by a Crash.