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Scared to Spend Savings!

December 12th, 2006 at 04:15 pm

I took a real look at my savings and investments and was plesantly surprised! I'm not a millionaire by any means but I do like the idea that, if I really wanted to, I could go into a decent car dealership and pay for it with cash, in full. Not that I'm looking to abandom my dear Toyota that gives me 30mpg =)

Anyway, I've been putting much thought into purchasing a house, or a townhouse, next summer. I am very frustrated with apartment living. I've done the math and found that, indeed, costwise what I'm paying in rent could be much better spent towards paying off a mortgage for a REAL house.

All said and done, even if I don't touch my retirement savings (I only just started a 401K and roth IRA), I can definitely put down a 20-30% downpayment towards house in the $200-300K range. Yet....I can't believe this, but after all these years of saving, I am scared- yes, scared!- of tapping into my savings funds. Why? Aren't savings meant to be used eventually? Am I having First Homebuying Panic? It sounds so silly, but I really have to readjust myself to spending money!

7 Responses to “Scared to Spend Savings!”

  1. janH Says:

    I've known a number of people who almost got physically sick thinking of spending money for their first house. It is a lot of money and took a lot of hard work to get there. I don't think that it is silly at all.

  2. tinapbeana Says:

    maybe it's just me, but the money i put down on my home (and into my home for that matter) doesn't strike me as spending, i feel it's a form of saving because that money is still there, under my feet and over my head, keeping me warm in the winter and cool in the summer.

    look at it this way: say you spend $500/month on rent, or 6k a year. say you're planning on having a 25 yr long retirement. you'll need 150k stashed just to pay your rent during retirement, and that's assuming no cost of living increase! 20% on 200k is 40k, but if 'spending' that 40k now means you won't have to come up with 150k during retirement for housing, did you get a good return on your investment?

  3. mbkonef Says:

    I agree that you should look at it more as investing than as spending. A house is something that you could resell and generally recoup your investment or even make more unlike "spending" on clothes, a vacation, etc. which cannot be recouped. Would you feel the same panic transferring your savings to a different investment vehicle like switching funds, banks etc. If not, I would look at buying a house in sort of the same way. You are simply switching to a different type of investment even though it is not one that is as liquid as a fund or bank account. Perhaps you could also work on really boosting up your savings so your down payment "investment" does not consume all of your liquid assets. That might be one thing that is creating panic - I know it does for me.

  4. Ima saver Says:

    You know, I bought my first new house at age 21. It cost $13,000. after adding a room and a pool ($7000), I sold it for $45,000. I built my next house for cash and sold it later for $80,000. My third house was build with cash and solf for $120,000. My last house (now) was built with cash and is now worth over a half million.

    I don't think my money would have turned from $13,000 to $500,000 just sitting in the bank. I think of it as a form of saving.

  5. Aleta Says:

    Think about it this way. The rent you are paying every month is going to your landlord's investment while his property appreciates. It's always a scary thing to make a purchase that big. The day you can pay for your car in cash would also be a great day as well. You're on the right track.

  6. baselle Says:

    I think it will help if you run the numbers.

    Make sure that your mortgage payment is less than or equal to your rent, including insurance, maintenance, and taxes. And I mean really run it. Don't depend on folks telling you that "renting is throwing money away". If you think that, well, start paying property taxes! Smile Also make sure that you get a mortgage that does not have a teaser rate - the payments have to be consistent.

  7. jersey jen Says:

    well, think of it as a transfer of asset from cash to real estate equity. for example, buying stocks is transferring cash into security equity. they are still assets, just in different forms.

    as for buying a house, typically they say if you can afford a house that's 200X of your current rent. say, if your rent is $1,000/month, then you can afford a $200,000 house. another guideline is 4X to 5X of your annual income. of course, all these are guidelines and depending on exact interest rates and other debt. in jersey, property tax and association fee can be extra 50% of your mortgage payment!

    good work, you have strong wealth at this age!

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