House Poor: What it is and How to Avoid it

Have you ever felt like a complete and utter failure?  I am talking about a total breakdown, tail between your legs, wondering how life will go on from here … flat out FAILURE.  That’s how I felt on that fateful day in the stairwell at my auditing job while speaking with my wife. I had finally come to grips with the fact that we had to move because we were house poor.

That meant selling the house where we started our married life together in 2011.  Here we were, less than 5 years later, having to sell it.  We wouldn’t see the fifth year anniversary of our wedding or closing date in our home.

It was the realization of our EPIC FAILURE.

It was the house our first child (Davey Joe) came home from the hospital to. The home where my wife become a rock star real estate agent in the area and we spent countless nights scheming for her to continue her rise.  The neighborhood where we spent at least two summers planting countless miniature U.S. flags for July 4^th.  The house and a community that we called home was now quickly going to become a place to visit.

The holidays around the dining room table that we got for free. We hauled the damn thing in a rented pickup truck for a half hour or so hoping that it wouldn’t tip over into traffic.

The blood, sweat and many tears that went into painting walls, laying floors, and hanging crown molding. My wife and in-laws did the majority of the work while I went to my job.

It was the home where we learned our pug had lymphoma. But, the little girl beat the odds and was cured.

We experienced ups and downs while we lived there for sure. That said, we loved that house.  We loved that neighborhood.  And we loved that town.

Unfortunately, we were the very cause of our own downfall. We created the circumstances that lead us to have to sell our first home and relocate.

Let me explain where we went wrong and how we bounced back.

We bought way too much house and were house poor (like many in our neighborhood and across America).

Our guts told us that we were overdoing it and our actions could lead to becoming house poor. However, we (regretfully) listened to family and friends who told us “we could afford it” and our incomes would rise.  Unfortunately, they did not or at least not as quickly as we needed them to.

Now, we shouldn’t place the blame on them. Absolutely not.  But, we were the ones who needed to be comfortable signing on the dotted line – and we weren’t.

We purchased the home for $450,000 and our monthly payment was $2,500. We were fortunate to have a solid down payment from savings and gifts from parents.  Furthermore, $2,500 per month was insane and clearly not sustainable.  Thus, we were house poor.  We barely made it on two incomes.  Couple that with our overspending and the fact that my wife wanted to be a stay-at-home mother … and we had no choice but to downsize.

We continued to overspend.

My wife and I have a weakness for going out to eat. It’s been our main source of entertainment for years.  After working all day, you just want to get out, have a beer, and eat a good meal.  Plus, neither of us really loved to cook.  So, it was a win-win – or so we thought.

We spent hundreds or even thousands on going to eat each month. It was killing us.  Again, take that with the monthly mortgage and we completely screwed ourselves each and every month.  The credit card debt had to go as we were reaching our max!

We were in denial and way too proud.

We fed off of each other’s desire to stay. My wife would say we had to sell and I would say we could figure it out.  I would get stressed about credit card debt and my wife would get upset about having to leave the home that featured Davey’s beautiful baby room.  It was gut wrenching for us.

Sure, I can imagine that we sound like whiny babies. But, we worked hard for this house.  We were proud to have such an accomplishment.  In hindsight, however, that pride led to our inevitable down fall.  Not a pretty picture.

So, what did we do to correct course?

We admitted our mistakes.

We had to face the fact that we overbought. We bought way too much house and, yes, we were house poor.  Even after two refinances of our mortgage, we were only down to $2,200 per month.  Yeah, it was that bad.  I desperately wanted to get us under $2,000, but it didn’t work out.  In the end, it still wouldn’t have been enough.

We had a lot of mistakes. Some small but some HUGE.  Having a huge mortgage is the foundation for many future financial hardships.

We stopped living in denial and swallowed our pride.

We had to wake up. We couldn’t sit in a corner and cry anymore.  It didn’t matter how we felt.  It only mattered that we take action and quickly.

Clearly, we were not better than anybody. The fact that we even thought we were lead to our overbuying in the first place.  There was a reason other couples in the neighborhood (some 20 or 30 years older than us) bought in the townhomes on the other side of the neighborhood first before moving to the single family homes.  We leap frogged them and thought we were amazing.

Yeah, no. We were idiots.  Life is a cruel teacher when you let pride be your guide.

We bought a home that we could afford on one salary and we are no longer house poor.

My wife wanted to be a stay-at-home mother. The only reason she is home with Davey, who is 17 months old as I write this, is because we downsized.  We purchased a more appropriately-priced home for our income.  The home we have now is $350,000 and we have a $1,500 per month mortgage (including a $165/month HOA fee).  A much more affordable – and responsible – alternative!

We live on a budget and in a cheaper area.

The area where we live now is much cheaper than our previous home’s location. We dropped something like 10 to 15 points in the cost-of-living calculation.  It really helps your dollar go further.

Further, we live on a budget. We don’t just spend, keep track in our heads, and hope my wife’s real estate deals cover the gap.  We control our expenses and money – and not the other way around.  So, when issues arise, like my son’s stomach flu encounter that sent us to a few doctor’s visits, we are better able to absorb those unexpected expenses.

Learn from my story.

This was not easy for me to share. I hate reliving this part of my life.  The fact that it’s almost a year to the date we put the home up for sale brings back tons of memories.  It’s still a wound that hasn’t completely closed for us.

Let our trials be your inspiration. Learn from us and be better off for it.

Do you have a financial regret or failure? Have you experienced something in life that you bounced back from and lived to tell the tale?  Tell us about it below.