I have read a lot of finance books and one of the exercises I completed was to write down the worst money decision I ever made. For me, this was an easy assignment as buying a house was the worst money mistake I have ever made. I lived in Eastern Massachusetts where houses are expensive. I bought an old (1790) house that was cute as a button and only 17 miles from work. 17 miles from the South Shore of Boston thru the big dig construction to Somerville which is just north of Boston. My daily commute was awful!
I didn’t have a 20% down payment and I didn’t do my research in terms of interest rates, closing costs, property taxes… I didn’t love the town the house was located in, I only knew 1 person who lived nearby. I knew my mortgage payment was going to be a huge chunk of change but I was dead set on owning a single family house with a fenced in yard.
Boy did I loved that house! It had 3 bedrooms, 1.5 baths, 2 fireplaces and a beehive oven. It had a huge yard and a garage. Did I mention 2 fireplaces – one in my bedroom!
I could pay the mortgage every month but all of the other costs were higher than I anticipated (if I bothered to even think about them before signing on the dotted line). I remember the first time I bought oil I locked in at $1.79 per gallon. Well a year later it was closer to $4.00 a gallon and I had a really big tank.
The property taxes came out of my mortgage but I still had to come up with the school taxes, garbage and water bills. Every time I turned around another bill appeared in my mailbox. I still was doing ok and making all of my payments on time with no great fuss.
The problem for me was I was tying up such a high percentage of my income in the day-to-day operations of the house that I couldn’t prioritize anything else. I consolidated my school loans so instead of a payment plan of roughly $400 per month for 10 years I had to pay $200 for 20 years. I reduced my contribution to my 401K from 13% of my pay to 6%.
I am not (and was not) handy but couldn’t afford to fix anything without going into more debt. So, I learned to strip wall paper, improved my painting skills, seeded my own lawn, fixed my leaky toilet, power washed my house. But all of these relatively simple tasks all came with a price tag for materials, tools etc.
I found a wonderful roommate who paid me $600 per month including utilities and that was a huge help. But I still never felt I was on top of my game in terms of managing my finances. I knew I was one large bill away from having everything blow up in my face.
Flash forward 4 years and I was dating someone who lived 40 miles away on the North Shore of Boston and we ended up getting an apartment together there. I rented out my cute little house for a bit less than the mortgage. This worked pretty good for a few years until I rented the house to – THE TENANTS FROM HELL and then things fell apart quickly!
At first they paid the rent in full every month, occasionally a few days late. Then it got later and often I would receive a partial payment and then another. They got further and further behind and I kept dipping deeper and deeper into my savings. It took me way to long to finally pull the plug and get them out of the house.
The final push was when I told them I was coming to inspect the house and it was in shambles. The garage door was laying inside the garage all crumpled. Their were holes in the walls, trash everywhere and black cobwebs hanging from the ceiling.
They had used the fireplace (despite being told not to in the lease) to burn every piece of wood stacked in the garage. It was clear they had almost burned the house down as black soot covered the ceilings. There were burn marks on my beautiful wood floors. Gallons of used cooking oil were shoved in the cabinets and layers upon layers of grease were all over the kitchen.
Once I gave them the final boot… Over the next 2 months, I spent all of my spare time cleaning and making the necessary repairs to make the house presentable. My amazing friends came to my assistance and helped me clean, dump, organize, tear up rugs, paint and prepare the house to be rented.
To make a long story short, I could not find tenants, I was unable to sell the house and I finally gave up. I initiated a deed-in-lieu of foreclosure and stopped paying my mortgage. Completing the deed-in-lieu of foreclosure process which I was told could take 90 days took almost 4 years.
I am someone who takes my responsibilities seriously. I did not take the decision to stop paying my mortgage lightly. Essentially I was told that the bank would not consider completing a deed-in-lieu if my account was up to date. I was draining my savings account rapidly and the only other option was to move back into the house. This was not really an option as I now worked 1.5 hours away and lived 5 minutes from my work.
So buying a house was my worst financial mistake. About 3 years ago the deed-in-lieu was finally completed. I could finally breathe freely. I could finally stop worrying that the banks would come knocking and demand the $190,000 that was still owed (one bank had already forgiven $20,000). I could finally focus on making one good decision after another in regards to my finances and this changed my life.
After this horrific home owning experience I was pretty jaded about home ownership. I had given myself a beating for making such a bad decision and I vowed never to go into debt again.
I think I have finally forgiven myself for making such a huge blunder. I have finally let it go. And who knows, if some cute little house in the woods or on a lake goes on the market in a town that I actually love… I might even go for it and try home ownership again!
Who knows how different my life would be if I hadn’t bought and lost that house.
If I hadn’t bought and lost that house, I might not be so driven to live life on my terms. I might not be so dedicated to living debt free with a focus on my relationships not my belongings. If I hadn’t bought and lost that house I might not be paddling in my little blue kayak toward and abundance of health, wealth and happiness!
What is your worst financial mistake?
Trust me, it is time to forgive yourself and move on.