I’m Officially Going Into Debt Again…and I’m Already Freaking Out

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going into debt againI paid off my school loans, my credit card, my ex-wife (long story), and even my house. By my 30th birthday, I was completely debt free and I vowed to never go back into debt…until now. I’m officially going into debt again…and yes, like the title says, I’m already freaking out…

I’m Officially Going Into Debt Again…and I’m Already Freaking Out

Liz and I currently live in the city. We look out the window above our sink and we’re staring directly into the living room of our neighbors. When we lay in bed, we see into the bedroom of our other neighbors. When I sit on the porch, I watch our rear neighbor cook dinner and do laundry…

Needless to say, things are pretty tight on our 0.2 acre lot, and my wife is pretty much over it. She would love to move out into the country again (it’s how she grew up). And, to be completely honest with you, I wouldn’t mind a little peace and serenity myself.

So, we decided about a year ago that we would start looking.

The Discovery, the Realization, and the Wait

About 15 seconds into the “search” (in quotes because we were just curiously looking and not ready to buy), we stumbled upon the perfect house (of course). It was a 3 bedroom, 1 bath farmhouse on 11 acres of property and it had a walk-in attic space that could be easily converted into another bedroom and bathroom… It was pretty much the house of my wife’s dreams.

The kicker…we had about $8,000 in the bank and the house cost $259,000…

The rest of our money was tied up in our project house. We sadly had to wave goodbye, walk away, and hope that something else would come on the market once we sold the project house and actually had some cash.

Months passed by…

Nothing.

I mean, properties came on the market…but they were either 20 miles out of our desired area or they were $350,000+. After the sale of the project house and our primary house, we’d have about $260,000. Soooo….by purchasing a $350,000 house, we’d basically be signing ourselves up for 3 years of grinding to pay the debt off, and then saving for another two years to build a barn for my wife’s future horses (did I mention that I, Mr. Finance was going to own one of the worst financial investments known to man?…yeah, horses…;)).

Waiting five years to fulfill my wife’s life-long dream just wasn’t going to cut it.

The House That’s Making Us Go Into Debt Again

And that’s when it finally came on the market – a 3 bedroom 2 bath, 1900 square foot house with 6 acres (and an unfinished basement if we wanted to add some more living space) for $284,900.

going into debt again for this house

We looked at it on a Tuesday afternoon and put in an offer that night (we weren’t going to lose this house after our extended wait!). The roof looked a little old and the chimney was in need of repair, so we put in what we thought was a very fair offer – $275,000.

On Wednesday morning, our realtor contacted us…the sellers got another offer. 

Ugh… Liz and I were both sick to our stomachs. Here we go again…yet another house that we like that we’re not going to get. Our realtor dug into it a bit for us and discovered that the offer was for less money…but it was a cash offer.

Annnnnnd guess what? The seller took the cash offer.

Seriously.

Over the next two days, Liz and I moped around, trying to stay positive about the next house that might even be more perfect than this one…but in reality, we were still just down in the dumps upset… 😉

Then The Unthinkable Happened

This is where the story gets really crazy. On Saturday morning, we got a call from our realtor. She was upbeat and speaking as if she had a huge smile just plastered all over her face – quite different from her demeanor two days prior when she let us know we lost the house…

Could it be? Was this really happening? Did we get the house somehow?

“The buyers backed out of the deal. Turns out he was buying it for his dad, but when dad saw the house he didn’t want anything to do with it! The house is yours to buy!”

NO WAY!

I couldn’t wait to relay the message to my wife. We were going to move to the country!! She was surprised, shocked, and stoked all at the same time. Lol. It was awesome.

We’re Going Into Debt Again…But By How Much?

“Alright, so what are the numbers Derek? I doubt you’re going into debt that much here.”

True, but it’s still killing me…

At this moment, we’ve got $100,000 to put down (thanks to the sale of the project house), which means we’ll need to borrow $175,000 to make up our $275,000 offer. Once we sell our primary house, we’ll get a check for about $155,000, which means we’ll still be short about $20,000. That will be our total mortgage debt at that point in time — $20,000.

The Freak-out

“Derek….Really? You’re freaking out about going into debt again…by $20,000? You’ll have that paid off in 6 months…”

Put simply, yes, I’m freaking out about this. I’m trying not to, but I just can’t help it.

  • What if I lost my job tomorrow?
  • What if the house needs more repair than we think it does?
  • If we wouldn’t be able to make the payments, the bank would have every right to take all of our payments AND the house…

…Let me try to explain my freak-out a little more elaborately…Who knows, it might make more sense this way!! 😉

Have you ever read the Harvard business case about making decisions in reverse?

Typically, our decision-making goes something like this:

  • We own a stock that’s worth 50% of what we paid for it two years ago
  • We really don’t like the stock anymore, but we feel inclined to hold onto it because we don’t want to take a loss on the investment
  • So, we do nothing for years and the stock continues to suck and severely under-perform the market.

According to Harvard, this line of thinking (even though it’s completely normal) is ludicrous. Instead of making decisions based on past loss, we should reverse our thoughts and instead ask ourselves, “If I had all that money just lying on the table right now, would I invest it in that particular stock?”

If not, then we should just sell it and move on with our lives. Every day that we decide not to sell the stock, we’re essentially buying it all over again.

What This Has to Do With the Debt on the House

As I said earlier, we’re going into mortgage debt by approximately $20,000 after the sale of our current house. I would love to say that we’re going to start tackling that debt immediately, but there are a few other things we need to take care of first:

  1. We need to paint the interior of the house – we’ll likely hire some of this out
  2. The chimney needs some repair – this could easily be a few thousand bucks
  3. We may have to spend some money on the boiler to get it working properly again (for some reason, the upstairs is disconnected…and we’re really not sure why)

Granted, yes, we’re going to pay cash for all of these repairs…but we’re doing it while we’ve got mortgage debt…. If I flip my thoughts and start thinking in reverse as Harvard suggests, this is just like having no mortgage debt (since we technically still have our emergency fund in the bank and could use it to pay off the house), but then deciding to put our home remodel on a credit card! Which of course, I would NEVER do.

Would You Have the Freak-outs?

First of all, I hate debt, so this whole “going into debt again” thing is super hard for me. But secondly, I’m the sole provider of a family of four! I was pretty conservative when I was single and only had myself to worry about, but now that I have a family to provide for, these sorts of things REALLY freak me out. I mean think about it, one wrong move in the stock market and our lives could be sent into a tailspin!

  • The down economy could reduce spending of consumers
  • The company I work for could struggle and need to institute layoffs
  • I could be one of the unlucky souls that is let go
  • Our income would drop by 70%
  • And suddenly, we’d be struggling to pay the mortgage each month…

For those that have piles of cash during a recession, they’re licking their chops while reviewing dozens of investment opportunities out there. But, for everyone else that owes money to a lender, they’re left worrying about making payments and staying afloat.

I don’t know about you, but I’d rather be the wealthy man sitting on top of a bunch of cash, building my net worth with ease even when times are bad…

So Why Did We Do It? Why Did I Agree to Go Into Debt Again?

If going into debt freaks me out this much, why did we move forward with this house?

Quite a few reasons actually:

  • We technically have the cash, but we want to hold some back just in case of an emergency (after all, this house is totally new to us – who knows what could happen! Ever watch “The Money Pit”?)

  • We’ve been looking at houses for eight months and this is the first one that my wife and I both gave the head nod AND that was actually in our price range
  • The house is perfect. It’s a solid 1970’s build, it has plenty of space, and it has an attached garage, which is going to be AWESOME during our harsh winters.
  • It could be our “forever” house. The location is great, we’re on 6 acres, and it’s totally private. You couldn’t ask for much more!

Overall, I couldn’t be happier about the house. I just have to get past my mild freak-outs from time to time. More than likely, we’ll get our minor repairs taken care of in the first month or two. Then, we’ll start paying down the mortgage by $2,500+ a month. The debt will be gone by summer and we’ll start making plans to clear some trees and put up a barn. Dang, this is going to be fun!

So What’s the Point? What Can You Gain From This Post?

Did I write this post just to ramble on and on about myself and the future house we’re about to buy? Or was there actually a point to this whole emotional account? Well, for the most part…it’s rambling (let’s be honest with ourselves here), but there still are definite takeaways for you, the reader.

1) Personal finance is more than just numbers

I could have crunched the numbers, proclaimed to my wife that we would not be buying that house because we couldn’t pay for  it with cash, and then stomped my way out of the room to signal that there would be no rebuttal to my statement.

…This style would not illustrate a partnership. Instead, it would more resemble an 1880’s model of man’s authority and dominance over women. In a marriage, there should be give and take: for date nights, in child rearing decisions, and yes, with money – in fact, especially with money.

Our lives without acreage would have been okay – I mean, we would have easily survived and enjoyed the city life – but the excitement of owning property and the options that were laid before us outweighed the financial risks that we would take for this transaction.

In short, this property added more potential joy than the debt took away. Net net, we’re ahead emotionally (and soon, we’ll be ahead again financially).

2) When you make a decision, own it and keep moving forward

This post will be the last time I ask myself if this was a mistake.

I have actually convinced myself in this post – it wasn’t.

If I keep looking back and second-guessing this decision, I’ll probably take a misstep going forward and accidentally smack my face on something else. Instead of trying to walk forwards by looking backwards, it’s best if we just let the past stay in the past and start mapping out our fantastic futures instead.

Life’s too short. Make a decision, own it, keep driving forward.

3) There’s no one-size-fits-all plan

Dave Ramsey has his infamous baby-step plan, and he uses the exact same template for every single caller that presents a question.

“Oh, you have a 0% personal loan and you want to invest with your employer that matches up to 10% of your income? Nope, sorry, you should wait to invest until you’re completely out of debt.”

Ummmm…that doesn’t make a whole lot of sense. There’s just no one-size-fits-all plan for personal finance.

Each decision has differing cash flows, varying levels of emotional attachment, and different future projections! No personal finance situation is the same, and at some point you have to decide for yourself what option is best for you and your family.

For us, we decided that a 1970’s home on 6 acres was perfect for our present and our future, even though we have to take on $20,000 of debt to do it. Write me all the hate mail you want, Dave Ramsey, but we made this decision and we’re sticking with it. And likely, we’ll be glad we did.

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15 comments to I’m Officially Going Into Debt Again…and I’m Already Freaking Out

  • Derek, Dave never begrudges a mortgage debt if it is affordable to your personal situation. Obviously, this is a decision you have the money for….maybe not 100% but close for an opportunity. Dave would not express distain if you put down 20% for this transaction…. you have no other debt and the mortgage was 25% of your income. I think you are being way too hard on yourself and need to look closer at Dave’s philosophy. You are correct, no two financial situations are the same. After this $20,000 is paid off, you will have no mortgage debt in a year or so…. give yourself a break. Dave would! You will fulfill your family dream. Sometimes it takes a little money to get something you want! Congratulations. This is not the type of debt that Dave refers too….

    • Well…Dave does say that once you’re completely out of debt, he sure wouldn’t ever go back in! In his words, I probably “failed the FPU class”. But you know what? I think this is going to be an awesome house for us – possibly for decades. 🙂

  • Cooper

    I don’t know if the photo of the beautiful house is the one that you are buying or not but congratulations on making what I think is a wise decision (happy wife, happy life), Derek. Just keep enjoying life because it is just a short time on this Earth.

  • Jennifer Dunevant Letterman

    This is one of many of your articles I have really enjoyed. But this is probably my favorite. I commend you and your wife for holding off until you could actually afford your family home. With a responsible husband and father like you, I don’t think your family has to worry about having a home to make memories in for years to come. Relax and enjoy these amazing years of your life..God bless you all

  • Hey that is just barely in debt. But that would be quite expensive for the same house around here. Our house is almost 3000 sq ft on two acres with four bedrooms and four baths and I doubt I could get more than $200k for it if I sold it. But at least it is cheap compared to San Francisco! My wife grew up on a 500 acre farm in the country so she appreciates the 800 acres of wooded wetlands in our backyard that we don’t own but can use at our pleasure. I think getting out of that crowded place was a smart move and a real win, even if you face a little debt for a little while.

    • 500 acre farm??? Holy crap! That’s HUGE! Makes my 6 acres sound like a NY apartment. Lol.

      Yes, the debt is small, but still leaves a little pit in my stomach. We’ll pay off the $20k as quickly as possible.

      Where do you live? I think your house is probably worth more than you think! I live in one of the cheapest areas around, so it’s shocking to hear someone say that $275,000 for this place is pricey!

  • Julie Robertson

    Hi Derek! I know this debt is killing you but I encourage you to pray through it. You are buying your forever house and you are looking beyond yourself and putting your family’s happiness above your need to be debt free at the moment. All of the things you mentioned that could go wrong might happen but I know if they do you will hustle yourself into a better position quickly. If you really want to cut down on something maybe wait to paint until the house is paid off. We held off on painting, remodeling and decorating until our house was paid off. That would be my only suggestion though. Have a goal of when you will pay off the house and continue to make strides to do that. Look at it as perfect blogging content! Congratulations on the house!

    • Thanks Julie. I’ve been much more at peace with the decision lately. Things just seem to be falling into place. Our current house is already under contract (shhhh, don’t tell anyone. I’m announcing this in a future post), and a well-known site has reached out to me to write for them at an unbelievable rate. It’s as if God is telling me, “Derek, it’s okay. You’re doing the right thing.”

      I’m excited. The guy that owned this house before us was there for 48 years. I predict we’ll carry the torch for the next 48 years. 🙂

  • Amanda

    $275,000 for that house? Holy crap. My one-bedroom condo is worth $380,000!

  • Jackie

    So Derek, I’m so happy for you and for your wife to have a home (and hopefully a forever home). I live in FL and have a beautiful home, around 200K in a very nice subdivision in a wetlands area (nice backyard, fenced for puppies, but see the wetlands and a pond out the back (nice!!)……My husband and I go round and round with getting a new house to give me a nice sandy beach near walking distance (VERY EXPENSIVE) and him a pool in the backyard. Would definitely mean moving from here to a more expensive area and probably add another $100-200K to the price tag of a home easily. It’s a dream and we would search and search to find that forever home and take a little time (we took nine months renting just to find this perfect home (but as a few years show, a couple things missing). If I told you I had the money to pay for this new home we are looking for, would it be a good investment? I’m just not sure, and I really like this house, and well need/want/minimalism come into my mind so many times. It will take the PERFECT home to find to leave here, even for a beach and a pool. PS….my husband and I are 56yo and I’m a housewife and he is a school bus driver. We are pretty much FI, but the extra income helps a lot to pay for extra fun times we enjoy now.

    • Hi Jackie. Thanks for reaching out! I used to live in Boynton Beach/Boca Raton, so I can definitely place the visuals you’re writing about! The beach scene is very nice in Florida, but you’re right, it’s expensive! BUT, we don’t just choose not to do things in life because they’re pricey… If we can afford them and they don’t hinder our ability to retire or for us to eat, clothe ourselves, and enjoy life, then sure! Spend the money!

      If I were in your shoes at 56 years old, I’d want to have over $500k in investments (that I wouldn’t touch for at least a decade…and let them grow to a million). If I had the $200k difference in cash and a $200k house to get me a sandy $400k house, then yup, I’d probably do it!

      Hope that helps. Be sure to catch some sun for me while we head into winter here in Michigan!

  • […] Somehow, that deal fell through and the house was ours! […]

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