Friday Financial Foul Ups: Upside Down and Paying The Price

This week’s Friday Financial Foul Up will feature a guest post by Matt Jabs.  Matt is an IT Manager by day and a personal finance blogger by night.  He writes about debt and all things personal finance on his site, Debt Free Adventure.  Matt is also a staff writer at the popular blog Five Cent Nickel and can often be found on twitter (@mattjabs) or on Tip’d.

Matt is one of the hardest working bloggers I know, and I was thrilled when he told me he was willing to write a “foul up” for my site. Enjoy his story and his foul up “acquiring” a home only to have his mortgage become upside down. If you would like to add your own financial foul up to this series, please contact me here.

Circa 2005: My wife and I were closing on our first home together just days before leaving for our honeymoon. The morning after returning home from our “semi-elopement” we moved into the house and began living together for the very first time. In just two short months we went from dating and living separately to being married, financing our first home, and moving in together. It was a hectic, but exhilarating time to say the least! We lived in our first home for 2 1/2 years before selling it off and financing ourselves into the home we live in today.

The Current Sitch:

It was nearly three years ago now that we sold home 1.0 and financed our way into home 2.0 in the suburbs of Lansing, MI – primarily due to a job change. Though our first house payment was very manageable – if one of us lost our job we would have been able to manage payments – our current house payment does not afford us the same comfort. I should mention that most Americans would probably view our housing situation as quite healthy. Our house payment – which includes taxes and insurance in escrow – is only 21% of our NET income. But I’m not “most Americans.” And although it wasn’t always this way, my goal is to be completely debt free, which leads me to my next point.

The Foul Up:

You may have noticed that when addressing our home “purchases” I never use the word “bought” That was not by accident… We “acquired” both home 1.0 and home 2.0 via the good ole 0% down | 100% financed | bank money. With the first home we were lucky… very lucky. We sold just 2.5 years after buying, and even though it was March of 2007 and the housing market was already crashing we were able to sell for a $12,500 more than the amount we originally financed. Unfortunately, after paying the agents (rolls eyes) we walked away from our house sale with only $2,500 cash. Because we were still lacking sound financial habits, we did not have any money saved up to put down on home 2.0 – but we “bought” it anyway. When we financed home 2.0, because the market was already depressed, our purchase price was around $20,000 less than all our neighbors – who had purchased a year or so earlier (new development sub.) So we thought we were getting a good deal. But the truth is, our home has lost at least another $25,000 in value since we acquired… leaving us upside down and paying the price!

The Lesson:

This is the best part of the post because even though we make bad decisions, most of the time it is our bad decisions that teach us to be better. Thankfully, our situation was no exception!

I recognize now that we had a “thinking problem” when it came to “buying” homes – and most everything else for that matter. The problem lies in the simple fact that we believed we needed things before we could actually afford those things. While living with our parents we enjoyed a certain type of lifestyle, so when we set out on our own we wanted that same lifestyle or better. The thing is, it took our parents 30 years to achieve it… but thanks to financing… it only took us 3 – or so it appeared.

We had been trained to believe that by closing on our homes, we actually bought those homes. That is a lie. We didn’t buy them, we financed them with money we did not have, and will not have for 27 more years. And by the time that 27 years is up, we will have “bought” the house for nearly double what the original asking price was. This is not to say that mortgages cannot be used responsibly for others, but for us we are choosing a new road.

And the good news is… through these experiences we gained much wisdom, and in gaining wisdom we gained passion, and in gaining passion we gained a mission! Starting in January of 2009 we set off on a passionate and aggressive Debt Free Adventure. Our goal is to be completely debt free as soon as possible. We would have already sold home 2.0 if its value were not so far upside down. So since we cannot get out from under the home, we are focused on rapid elimination of non-mortgage debt. Once that is gone, we will move on to the 2nd mortgage, then the 1st mortgage. And once that 1st mortgage is gone… we will be completely debt free. Having a solid financial plan is akin to having no debt at all. Why? Because now that we have our plan in place, we know it is just a matter of patience and perseverance!

———-

Do you like this series? Check Out The Previous Foul Ups:

Foul Up #6 – Brian (MyNextBuck) – Overdue Books Prevent Me From Renting an Apt
Foul Up #5 – Kelly Whalen (The Centsible Life) – Poorly Planned Vehicle Purchase Costs $24,000
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money

51 Responses to Friday Financial Foul Ups: Upside Down and Paying The Price
  1. Playstaion 4
    November 2, 2016 | 1:37 am

    Helpful info. Fortunate me I found your website by accident,
    and I’m stunned why this coincidence didn’t came about earlier!
    I bookmarked it.

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Trackback URL http://mynextbuck.com/friday-financial-foul-ups-upside-down-and-paying-the-price/trackback/

Friday Financial Foul Ups: Upside Down and Paying The Price

This week’s Friday Financial Foul Up will feature a guest post by Matt Jabs.  Matt is an IT Manager by day and a personal finance blogger by night.  He writes about debt and all things personal finance on his site, Debt Free Adventure.  Matt is also a staff writer at the popular blog Five Cent Nickel and can often be found on twitter (@mattjabs) or on Tip’d.

Matt is one of the hardest working bloggers I know, and I was thrilled when he told me he was willing to write a “foul up” for my site. Enjoy his story and his foul up “acquiring” a home only to have his mortgage become upside down. If you would like to add your own financial foul up to this series, please contact me here.

Circa 2005: My wife and I were closing on our first home together just days before leaving for our honeymoon. The morning after returning home from our “semi-elopement” we moved into the house and began living together for the very first time. In just two short months we went from dating and living separately to being married, financing our first home, and moving in together. It was a hectic, but exhilarating time to say the least! We lived in our first home for 2 1/2 years before selling it off and financing ourselves into the home we live in today.

The Current Sitch:

It was nearly three years ago now that we sold home 1.0 and financed our way into home 2.0 in the suburbs of Lansing, MI – primarily due to a job change. Though our first house payment was very manageable – if one of us lost our job we would have been able to manage payments – our current house payment does not afford us the same comfort. I should mention that most Americans would probably view our housing situation as quite healthy. Our house payment – which includes taxes and insurance in escrow – is only 21% of our NET income. But I’m not “most Americans.” And although it wasn’t always this way, my goal is to be completely debt free, which leads me to my next point.

The Foul Up:

You may have noticed that when addressing our home “purchases” I never use the word “bought” That was not by accident… We “acquired” both home 1.0 and home 2.0 via the good ole 0% down | 100% financed | bank money. With the first home we were lucky… very lucky. We sold just 2.5 years after buying, and even though it was March of 2007 and the housing market was already crashing we were able to sell for a $12,500 more than the amount we originally financed. Unfortunately, after paying the agents (rolls eyes) we walked away from our house sale with only $2,500 cash. Because we were still lacking sound financial habits, we did not have any money saved up to put down on home 2.0 – but we “bought” it anyway. When we financed home 2.0, because the market was already depressed, our purchase price was around $20,000 less than all our neighbors – who had purchased a year or so earlier (new development sub.) So we thought we were getting a good deal. But the truth is, our home has lost at least another $25,000 in value since we acquired… leaving us upside down and paying the price!

The Lesson:

This is the best part of the post because even though we make bad decisions, most of the time it is our bad decisions that teach us to be better. Thankfully, our situation was no exception!

I recognize now that we had a “thinking problem” when it came to “buying” homes – and most everything else for that matter. The problem lies in the simple fact that we believed we needed things before we could actually afford those things. While living with our parents we enjoyed a certain type of lifestyle, so when we set out on our own we wanted that same lifestyle or better. The thing is, it took our parents 30 years to achieve it… but thanks to financing… it only took us 3 – or so it appeared.

We had been trained to believe that by closing on our homes, we actually bought those homes. That is a lie. We didn’t buy them, we financed them with money we did not have, and will not have for 27 more years. And by the time that 27 years is up, we will have “bought” the house for nearly double what the original asking price was. This is not to say that mortgages cannot be used responsibly for others, but for us we are choosing a new road.

And the good news is… through these experiences we gained much wisdom, and in gaining wisdom we gained passion, and in gaining passion we gained a mission! Starting in January of 2009 we set off on a passionate and aggressive Debt Free Adventure. Our goal is to be completely debt free as soon as possible. We would have already sold home 2.0 if its value were not so far upside down. So since we cannot get out from under the home, we are focused on rapid elimination of non-mortgage debt. Once that is gone, we will move on to the 2nd mortgage, then the 1st mortgage. And once that 1st mortgage is gone… we will be completely debt free. Having a solid financial plan is akin to having no debt at all. Why? Because now that we have our plan in place, we know it is just a matter of patience and perseverance!

———-

Do you like this series? Check Out The Previous Foul Ups:

Foul Up #6 – Brian (MyNextBuck) – Overdue Books Prevent Me From Renting an Apt
Foul Up #5 – Kelly Whalen (The Centsible Life) – Poorly Planned Vehicle Purchase Costs $24,000
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money

51 Responses to Friday Financial Foul Ups: Upside Down and Paying The Price
  1. Playstaion 4
    November 2, 2016 | 1:37 am

    Helpful info. Fortunate me I found your website by accident,
    and I’m stunned why this coincidence didn’t came about earlier!
    I bookmarked it.

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