Manage Your Money, With Feeling

(Graphic: Kat Borosky/

A few years ago, I dreamed of quiet, tree-lined streets, quality neighborhood public schools, a car, a dog, and a yard. My husband and I had had it with city life, so we began hunting for homes in New Jersey. We must have looked at fifteen homes over the course of a year. But after all that, we decided to move just a few neighborhoods over in Brooklyn, where we could get at least 80% of the things we wanted. (We still don’t have the yard or dog. Some day, perhaps.)

I always find it interesting to hear why people make homeownership decisions. Some people do a cost analysis and decide that it may be cheaper to own than rent, or predict that it will be a better long-term investment. Some people buy simply because they like the idea of home ownership and they’ve always imagined themselves as a homeowner.

Unlike many other types of financial decisions, such as how much to contribute to a 401(k), owning a home is a deeply personal decision since, of course, you literally live with (and in) it. And spending on your home can give you far more pleasure than a fancy car or a designer shoe collection. You can remodel your space into your ideal living environment. Heck, if you want to upholster your bedroom from ceiling to floor in pink Naugahyde, and it’s your thing — do what you want to do.

For example, my husband and I had a 30-foot long, floor to ceiling bookshelf installed to hold all of our books. To some, it might have seemed frivolous, especially as more and more books are read on devices. But as avid book lovers, we could browse at our leisure, anytime, with ease. To us, it was “worth it”.

I remember watching a home improvement program where a couple had invested in specialized marble fixtures and was unable to recoup their costs. The commentary was about how you should always to be sure to spend on items that will improve the resale value of your home, rather than concentrate on your own tastes — ones that future buyers might not like (and pay for) when you eventually sell. I imagine that it can feel like a slap in the face to invest in what you see as an improvement, only to later realize it’s a liability.

Some experts might say that making any housing decision that is not financially beneficial is irresponsible. There is no denying that many people in the US don’t save enough money, and that many use their home as a forced savings mechanism by paying principal and increasing the equity.

Which can be good or bad. Good financial planners can help identify long term goals and help you frame homeownership decisions within the context of the goals you want to achieve.

Personally, when it comes to investing in a home, I say do what you want. But don’t do anything unless you are fully informed. I can’t begin to tell you how many ignorant housing decisions I made in the past, simply as a result of naiveté.

When I was refinancing a home in 2009, for instance, we wanted to save money and took another 30 year fixed loan. If I had known how much more we could have saved over time if we took 25 or 20, we would have made a different choice.

That’s one reason I started the site Feel My Money: to make it easy to understand home financing decisions before you make them, and to know the impact of those decisions over time.

People in the U.S. spend on average 30% or more of their income on housing. Having the power to make informed choices can mean real advantages for you and your bottom line.  When you have the knowledge about your options and can choose what is right for you, you can literally save thousands of dollars. Even a 0.25% better interest rate, opted for from knowing how to compare mortgages effectively, can yield $3,000 -$ 6,000 and up within just five years of owning a home.

Do you want to get an adjustable rate mortgage because you can better afford the payments? Do it. But do it after investigating alternatives and knowing exactly what happens during each adjustment and exactly how much you’ll be on the hook for.

Do you only want to put 10 percent down on a 30-year mortgage? Fantastic. But make that decision knowing what sort of interest rate you might get if you put more money down, and what sort of equity you’ll have down the road.

Make sure that your most personal decisions, and the ones that impact your money the most, are fully informed. Knowing your options before making these decision means you’ll have no regrets. Except perhaps with that pink Naugahyde.

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