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My Most Naïve Money Decision

At the time, I thought it was the best possible option. In 2011, I had been divorced and was living with a lovely family on the northside of town. Yes, I was living in their finished basement for close to two years. I had started putting money into retirement way before my divorce and was ready to buy a home of my own. Even at 33 years old, I thought that taking money out of my retirement account to purchase a home was a “reasonable” thing to do.

I was warned several times by different people, including the person who helped initiate the transaction, that it wasn’t a good idea. I was going to pay taxes on the money I withdrew twice, pay an early withdrawal penalty, not to mention the lost earnings on the money that I’d be withdrawing from the retirement account. However, I couldn’t be swayed to not do it. All I could think about was having my own house to come home to every night.

So, I did the research. I looked at houses in the winter. I found a small house in a decent neighborhood that I thought would be a good “starter” home for me. I also thought that it could be a good rental at some point. I was full of pride that I could “afford” to purchase a home of my own. I was also very nervous. I didn’t have a ton of extra money to maintain the home. Things like lawn mowers, trimmers, fencing, air conditioners and pest control weren’t in the “budget.” Let’s face it. I didn’t have a budget. If I had a budget, I would have figured out that I wasn’t financially ready to buy a home of my own. If I had a budget, maybe I would have strengthened the “no” muscle and created some habits to help me save for a home of my own AND have money left over for the repairs and maintenance.

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Once I got remarried, I moved into my husband’s home, just north of downtown. I love the location and the character that the turn of the century home has to it. We decided to rent out “my” house for a while. The renters were less than desirable. My husband had experience renting properties, so even though the background checks came back clean, and the payments always cleared the bank, they just didn’t take care of the house like I did or would.

After about two years, my husband Kent and I started down the path to living a debt-free life. This meant it was time to part with real estate that wasn’t creating positive cash flow. I had no idea that there’s an equation to determine if you can charge enough rent to pay the mortgage on the house. (Incidentally, this equation should be used before purchasing a rental property) I was sad to see the house go, but in retrospect, it shouldn’t have been mine in the first place.

The curriculum for Financial Peace University last night had us learning about investment opportunities. We learned about 401ks, 403bs, IRAs, Roths, and what kind of investments to sink our money into. The idea of real estate investing was mentioned briefly. It made me remember the greatest learning that I’ve had with money. There has been lots of learning opportunities along the way and I’m sure there is more. I hope you or someone you love can learn from my experience.

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