Decide What You Can Afford
Jennifer and her husband have been approved for $800,000 to buy a house, but it won't put them where they want to be. Is it a wise move for them to look beyond their preferred area based on their budget?
QUESTION: Jennifer in Los Angeles and her husband are on Baby Step 3(b). Her husband is a sole proprietor, and they’ve been saving to buy a home. They’ve been approved for $800,000 to buy a house, but it won’t put them where they want to be. Now they’re considering relocating outside the area but don’t want to. Is it a wise move for them to look beyond their preferred area based on their budget?
ANSWER: You’ve just got to decide what you can afford. The whole first part of your call sounded like, “You know, really, my budget can afford a Chevrolet, but I really, really want a Mercedes. And when we were growing up, we all had Mercedes.” That’s what it sounded like.
Something’s going to give. You’re either going to blow your budget and you’re going to be stressed by how much house you own, you’re going to buy a small run-down house and not have the square footage in order to live in the neighborhood you want, or number three, you’re not going to live in that neighborhood. One of those three things is going to occur, isn’t it? I guess you just need to decide and choose your pain. And I’m okay with the smaller run-down house in the great neighborhood. I’m perfectly fine with that, and then build it up out of your cash flow and your business growing and that kind of thing and maybe even move up in house within that neighborhood as the business becomes more successful. That’d be fine.
In order to stay in this neighborhood, we’re going to sacrifice square footage. That’s not a bad choice. But I’m not going to go with, “Oh, we buy whatever the flip we want just because we want it.” That’s what destroys people’s lives, so you’re not going to hear Dave Ramsey tell you to do that. You know that.
I don’t blame you for wanting nicer things. That makes you a human being. We all want to do better. We all want nicer things. Most people have some level of desire for nicer things than they have. That’s not an unhealthy thing. But it is unhealthy when you go buy things you can’t afford. That would make you a Congressman.
That’s how I would do it.