This morning I woke up and read Sam’s post on Financial Samurai – Irresponsibility of Borrowing Money to Borrow More Money. This is an interesting question for my husband and I, because while we don’t believe in credit card debt, we have been discussing borrowing money from his parents for a down payment on a house when our financial circumstance settles down. This is why:
We are hoping to buy a house in the next year or two for about $300K. We had about $20K saved up in cash and still have around $13K in investments (not retirement). But since we uprooted back to the PNW, we’ve spent a lot of the money we saved. Obviously we hadn’t had enough for a downpayment, but we were getting close – now we’re much further back.
His parents have money saved that they can easily lend us and are willing to. We plan on – if we actually end up borrowing from them – paying them back within 5 years with interest. They have declined the interest, preferring to “gift” that portion to us. That’s something to be discussed if and when this happens.
We have a little townhouse that we’ll be moving back into when our tenants lease is up, but it’s a tiny 2 bed/1 bath place with no backyard or room for two boys to run. It’ll be great for the next year or so, but when the second starts running around we’ll definitely need to get something a little bit bigger – not too big, but just right.
In our case (and doesn’t everyone like to think that their own case is special?) we do plan on paying them back, and we do plan on buying within our means. So what do you all think of Sam’s point – and do you think that us borrowing money to borrow money is ok?
If you own your townhouse, I would seriously just stay in it, even though it might be tight. To borrow money to borrow money for a bigger house in your current financial situation is very dangerous. I’d work several more years, build that war chest and then reconsider.
There are families of 3 who live in 1 bedroom places that I know of. 2 bedrooms is great!
We’re refinancing as soon as we move back in, which will knock about $400 off our mortgage. If I can find a job after the baby is born and we can bank my paycheck (if we can maneuver our schedules to avoid childcare costs) and save up for our down payment. That is the preferable thing to do, for sure. I haven’t seen our house for over 3 years, so we’ll know for sure when we move back in how it will work out with the toddler and newborn. It’s about 800-900 sq ft, so it might be tight but cozy. Definitely it’ll do for the first year of the second baby’s life!
I’m a new reader to your blog, and have been following it with great interest — but biting my lip (to keep it shut) a LOT. I don’t want to ‘rip you a new one,’ as you’re fond of saying when you spend more than you could have. (And know it) And it’s clear that you’re gradually teaching yourself to make better financial decisions. Which is good, too.
There’s got to be a point, though, when you’re going to have to start standing up for yourself and your family, no matter what. Example: holding your ground when the restaurant check gets split…and paying your fair share, not what others have added.
Honesty’s got to play into this, as well. If you’re not paying rent for your current squat (lucky girl), you can’t be griping when people suddenly want to show up and see the place. That’s totally normal when a place is up for sale. And quite frankly, that’s part of the price you have to pay for your current situation.
And however interesting this “borrow a downpayment from the folks” issue is — aren’t these the same parents you were saying a few months ago that you didn’t want to be beholden to AT ALL? Are you sure you want to put yourself in that position again? Because even if they’ve got the money to loan, and you repay it back quickly (which is going to be tough, considering your husband is just starting work, and you’ve got the baby coming)…do you really want to do this to yourself?
It’s not fair that you’ve had so much trouble looking for a job — but again, think about it honestly. If you were the interviewer, I’m guessing you would also hesitate, knowing that person is going to take time off in the very near future to give birth and recuperate.
Keep being honest with yourself and your readers — but really think about your choices now. If you’re going to apply for foodstamps and other aid (obviously, you’re going to need some kind of medical help too, since the policy was denied), don’t think your readers are going to think that a $150 meal at a fancy restaurant is just fine. That’s our taxpayer dollars helping you guys out right now.
While I don’t begrudge it, I do have trouble understanding some of your choices when we’ve been skimping on things, buying clothes at the thrift shop, holding off on trips, etc. just to keep our bills paid. I’ve never come close to paying $150 for a meal ANYWHERE. Couldn’t you hold off on ideas like this just a little longer, until you’re actually paying for it yourself — instead of people like me subsidizing it?
I’d also suggest thinking about where you go…if you go to a festival, you tend to spend money. If you go to another town for a weekend, you spend money. (And $5.33 a meal per person, however good for eating out — is still a lot more than you would have spent at home. I’m guessing, also, that it all went on the credit card.)
We’ve never met. I’ve never lived in Hawaii, then tried to move to the mainland. (I live in Colorado, which is expensive enough.) So watching you adapt is interesting. But if you want to show us how you’re thinking things through — and doing better at it — do think through ALL the options. Not just those that are easy and/or fun for you and your family. Keep writing…and I’ll keep reading.
I love this comment! I read a blog called Our Debt Blog and his spending habits drive me crazy, and now I drive you crazy! It’s the beauty of blogs to see your life from the eyes of someone else.
Amazingly enough, if you can believe it, we are the frugal ones amongst the people we know, so of course the changes we make seem like enough to us- it’s interesting to hear from someone else that they’re not enough. When you hear your entire life that you are obligated to be polite and pay for others, it’s a hard habit to break. 8 years ago when i was 22, my brother wanted me to throw his 30th bday party for him. I was still in school and working as a cocktail waitress – I put together a whole party for him and paid for the food and venue (about $500). I asked that his friends pay for their own drinks, as I definitely couldn’t afford everyone’s drinks. My parents scolded me for being so cheap – I was throwing a party and therefore I was supposed to take care of the food and drinks for everyone. I told them I couldn’t afford that, and they said it was my duty as hostess.
Those are rules that I’ve been ingrained with that I’m trying to break.
As for borrowing the down payment – it wouldn’t be from my parents, it would be from my in-laws. But still, I’m getting more and more wary of the idea as we travel along this path.
And the $150 dinner was my, well, fantasy. Obviously that wasn’t going to happen! But in my deepest of dark hearts I definitely wanted to do it – but brains do triumph – most of the time.
Yep, the trip to Vancouver went on our credit card but we carry no debt as we pay it off every month. The only reason we use credit cards instead of cash is for the points (and the ability to track all expenses) – if we didn’t have savings to pay for things we wouldn’t buy them. Neither of us believe in credit card debt.
Thank you for reading my blog and for telling it to me straight! I love it.
…and thank you for not ‘ripping me a new one’ when I was honest with you! Obviously, I grew up in a way different environment. We spent $2500 for our entire wedding back in the Eighties. That was expensive for my folks — Michigan farmers. They would have lectured me for putting out $500 for any kind of party, rather than scolding me for being cheap. WAY different parents.
On the other hand, they saved a heck of a lot of money on a small income — and my mom is taking care of herself just fine financially, in her mid-70s. So go figure…
I hope you’ll keep on telling us what you think, even when we (or I) disagree with you. It helps. Thank you for your blog!
To Cindy’s point, can you see how readers would be scratching their head if you are on welfare, but willing to borrow $60,000 to be able to borrow $240,000 to buy another house even though you have an existing one?
Or, is this just the American way? I’d love to understand the psychology of this reasoning. Thx
I can’t imagine a situation in which I would want to be owing my in-laws ANYTHING. Living quarters may be tight for a little while, but try and save as much as you can that year so you can pay for it on your own.