The Big Home American Dream
One of the biggest financial mistakes that I see time after time from friends, co-workers, and family is buying a big house.
Human beings are dreamers and planners. We like to think ahead. Plan for the future.
So instead of buying a house for our current needs, most of us buy the house we think will meet our future needs. Isn’t the traditional “American dream” to buy a big home, fill it with a spouse, 2-3 kids, the family pet, and leave room to entertain a big crowd once or twice a year, after all?
While thinking ahead may seem smart or even financially strategic.
However, the outcome is usually this:
- We pay more for the actual home by tens, sometimes hundreds of thousands.
- We pay more for the interest to finance the home by tens, sometimes hundreds of thousands.
- We pay more every year on the taxes that result from having a home that has a higher tax assessment.
- We pay more every year on home insurance premiums.
- We pay more every year to heat and cool the home.
- We pay more for all of the new furniture and decor to fill all of the lonely, empty, dust-collecting room we don’t use.
- We pay more for renovations and upgrades.
- We pay more for maintenance.
- We encourage home builders to continue to build more giant homes, with huge environmental consequences.
- We spend more time cleaning all of it.
- We overwork ourselves to pay for all of this.
Does that sound more like a dream or nightmare?
I Fell Into the Big House Trap
On my first home purchase, I fell in to this trap. I was newly graduated, newly engaged, newly employed, and I thought to myself:
“Degree? Check. Job? Check. Wife? Check. What’s next? Ah yes, the house. But not just any house. The house that I’ll live in for the next 15-20 years because I won’t change jobs and will SURELY need room to house 2 kids someday.”
No ill intent. Just preparing for the future. Can you blame me? Can you blame anyone who does this when it is the go-to model encouraged by the media, industry, peers, and the tends of millions of homes we are surrounded by?
So I went out and bought a 1945 two-story, 1,500 square foot, 3-bedroom home with a basement and garage (ironically, the average home size in the United States for new builds is 2,392 square feet today, it was 1,660 back when the Census started recording it in 1973 – 44% growth!). I then bought a bunch of crap to fill it. And….. most of the home sat there, unused.
Then I Learned an Important Lesson
Three years, no kids, hundreds of unused square feet, and a truck full of new furniture later, I got a new job and we moved out. Buying the big home was one of my biggest financial mistakes.
Instead of buying a bigger home, we then did something odd. We bought a smaller home. A 50% smaller home. And a few years after that, I started thinking that I wanted to go even smaller, tiny home smaller.
An important lesson was learned.
Let me save you pain of learning the same pricey lesson, and recommend this:
Rent or buy the smallest space you (not your stuff – that can always be sold) can comfortably live in at the present time.
That may be the most impactful piece of personal finance advice I can offer anyone.
The thing is, you never know what you’ll encounter in life. Relationships end, your desire or ability to raise children might disappear, you may move multiple times, especially early on in your career. Life happens. And if you absolutely NEED more space later on, it can always be had. Or you can rent storage for much cheaper.
Besides, that old American Dream of buying a big house? It is dying a quick death.
Big House Discussion:
- Have you bought a big house and learned the same lesson I did?
- If you plan on buying a big house, why?
- What is the ideal square footage living situation for you?
- Down Payments: How Much Should you Put Towards Them?
- Should You Take Out a Rental Loan?
- How to Get Rid of PMI
- Buying Vs. Renting a Home
- Is your Home Really an Investment?