Home Buying (and Other Big Purchases) as an Emotional Purchase

A few months before we bought our current home, my wife and I toured literally dozens of different houses, trying to find one that was right for us. We had come up with a budget for our purchase and knew what our firm spending cap was.

On one bright spring day, my wife and I were visiting three homes for sale on the same block that were all having open houses at once. None of them really struck our fancy, but we did notice a fourth house on the corner that was for sale at a price about $60,000 over our price range.

We toured that house. We fell in love with that house. Even now, it’s really obvious to both of us that it was our favorite house that we toured.

But it wasn’t the house that we bought. We ended up with another home that was within the price range we had originally set.

It was a difficult choice. It was a choice that, if we had entered into the home-buying process with less planning and less self-control, probably would have turned out differently. It would have been quite easy to simply give into our desires and buy that house, but if we had, we would have been drowning in mortgage payments now. It was also a choice that many people made differently – and that difference in choice caused the housing bubble and a giant mountain of foreclosures.

It is so easy to just let our emotions take control when we’re making a major buying decision. It would have been so easy for us to walk into that house, tour it, smile at each other, recognize that we could probably make the mortgage payments, and then sign the papers.

But that one choice puts us on a different life trajectory. I would have been much more worried about leaving my full-time job. In fact, I probably would have wound up choosing it instead of choosing a writing career – and that would have meant the closing of The Simple Dollar. I would have had less time to spend with my kids – instead of taking them to the zoo or the Science Center of Iowa or just spending afternoons with them at the park, I would have been behind a desk somewhere. We would have had more money stresses on our marriage. We would likely have never chosen – or even considered – having a third child.

Yes, I would have loved to have that house. Yet, when I step back and look at all the good things that happened in our life because we stuck to the budget, I wouldn’t trade any of it for that house.

A house is not a home, after all.

The next time you’re about to make a major purchase, whether it be a home or an automobile or even just a high-end home electronic device, and you’re thinking about jumping outside of your budget for that purchase because you fell in love with somethng that dazzled you, step back for a moment and ask yourself about what you’d be giving up for this thing. Would you be tied even more to your job, at the mercy of your boss? Would you not have the financial resources to take advantage of opportunities that came your way? Are you going to have to push yourself more to earn more, taking away time from the other things you value in life?

On the other hand, if you simply stick to your budget and get a slightly downscale model, you gain the freedom to choose the life you want. What’s better, after all? The 2,000 square foot home that you have time to enjoy, or the 2,800 square foot home that requires you to work tons of extra hours?

Houses and cars and televisions and boats are just stuff. Don’t sacrifice your life for them because you want them in this moment.

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  1. Christina says:

    Great post! My husband and I are looking to buy another house in the spring. In our area, it’s difficult to find a decent home in our budget. We own another home across the country that is being rented, but we want to be able to cover that mortgage too if something happens with our tenants. So our budget is a lot less than we could ‘technically’ afford. Even just peeking at houses right now, we am tempted to go look at one that is at the top end of our budget. I am thinking it would be better to not look at it at all, so we don’t do what you did, and fall in love with it!

  2. Lauren says:

    I agree complete with the idea expressed in this article, but why did you even step into the too expensive house? Of course, it was going to be much nicer that the other homes with that big of a price increase, and most likely you and your wife would like it the most. When I was buying my townhouse a few years ago, I wouldn’t even look at more expensive homes online because I knew they would most likely be bigger/nicer than what I could reasonably afford.

    It seems the easiest way to avoid this “lifestyle inflation” is to avoid looking at the expensive stuff. Don’t go to open houses for expensive homes, don’t go to Best Buy and wander around the TV or computer department, and avoid car dealships with all the shiny new cars.

  3. Josh says:

    Great post!

  4. Benjamin says:

    My wife and I were in a similar situation nearly 4 years ago. We had our home budget set yet we still routinely scanned the real estate sections for homes that were “well above” our set limit but still within our “lending range”.

    Although we “fell in love” with a few pricey homes, I’m glad we ended up purchasing the home we did.

  5. Jennifer says:

    I’m with you, Lauren. The best way for me to stick to my budget is to avoid temptation entirely. When I bought my little house, I had seen lots of other houses, but they were all within my price range, and I ended up with what I wanted, in the lower end of my price range. When friends of mine were moving and needing a place to live, they “just looked” at a place way out of their price range and fell in love. They moved in and struggled financially until they had to downgrade to a tiny place that is cute, but that dissatisfies them because they remember what they used to have.

    It’s not worth it to me. We need to learn to be satisfied with less, and one way to do that is to stay away from the things we can’t afford. If I don’t window shop, I’m not tempted to spend. If I don’t watch commercials, I can’t be persuaded that I need the latest gadget.

  6. wanzman says:

    The unfortunate thing is, just becuase you had the discipline and self control to make a financially wise decision, your life still might be affected by the thousands (millions?) of other folks who did not.

    - Think lower property values due to the high number of foreclosures.
    - Think higher income taxes due to all the government bailouts.

    It stinks that in America the responsible few will undoubtedly be punished by the irresponsible majority who keep voting politicians into office that promise to give more handouts.

    Personal responsibility seems dead to me, other than just getting that warm fuzzy feeling for doing the right thing.

    There are days when I think…”Why don’t I just live like a rockstar like everyone else? It is pretty obvious that in the U.S., we are on a mission to remove all consequence for poor decisions.”

  7. Technophile says:

    I agree. I have made a matrix of apartments we’re looking at and while many of them are incredibly nice, they are also above my girlfriend’s budget. Yes, maybe I could afford them, but not at the expense of my girlfriend, that isn’t fair. The first place we looked at was very nice and very affordable and I have a feeling we’ll be sticking to that even after viewing the other ones.

    An extra $200/mo just for stainless steel appliances and wood cabinetry? I don’t think it’s worth it for the added expense. The place we’re looking at has brand new appliances and is huge for just two of us. It’s just the location that could cause a problem, which is why we’re still looking.

  8. psychsarah says:

    Wanzman-I hear your frustration, but there are other rewards to doing the “right thing”. As Trent pointed out, he was able to have a choice about where and how much he could work based on this decision. Hence,he and his family are the ones who benefit from this decision. Personally, I cannot tolerate the stress of living an irresponsible financial life, so I do the “right thing” so I can sleep at night and feel good about my future. As I always tell my patients, the only person whose behaviour you can control is your own. You can’t use others’ poor choices to justify your own.

  9. Johanna says:

    I don’t think the housing bubble was caused by people falling in love with homes a bit bigger/prettier than the ones in their price range, smiling at each other and realizing that they could afford the payments if they worked a few more hours and didn’t have any more kids, and signing the papers.

    As I understand it, it was caused (among other things) by people signing the papers for mortgages that they really *couldn’t* afford and/or didn’t understand, lenders having the incentive to issue mortgages regardless of whether they would be paid back, and those mortgages being bundled up and sold to investors who didn’t always understand what they were buying. It was caused by a whole lot of people subscribing to the absurd belief that house prices would increase much faster than inflation forever. Not by people who would rather live in a pretty house than blog full-time and have three kids.

    Also, it’s easy to say that “houses are just stuff” when there exist houses in your price range that have everything that is really important to you. Suppose that the $60K-too-expensive house on the corner was the cheapest one available in your preferred low-crime, calm-and-friendly neighborhood. You might have made a different decision.

  10. Maureen says:

    It may be worth looking at properties above your budget as a fact-finding exercise. What features of these properties appeal to you? Many of them may be reproduced in properties you can afford.

    You never know, you may end up buying that house eventually.

  11. chacha1 says:

    I think looking at property can be great entertainment, but then we are confirmed in our decision not to buy in our city. And for us, an open house is a good exercise in identifying structural, layout, and design problems. I read a book called “How to Inspect a House” and it was revelatory.

    We’ve gone through houses in our neighborhood priced at a million-plus, and we’ve seen that they need complete electrical and plumbing renovation, new windows, new ventilation systems, new kitchens, new bathrooms. Trees or shrubs planted too close to the foundation, garage too small for a modern vehicle, power drop running through tree limbs or over the edge of the garage roof, old plaster walls with no insulation. We looked at one house, priced over two million, that in most respects was lovely but it had Ikea cabinets in the kitchen! For two million dollars!

    There’s no such thing as too much information. Looking at houses you have no intention of buying can really help you form your *educated* vision of the perfect property for you. Looking at them objectively can also help you take the emotion out of what is, for most people, the biggest financial commitment they will ever make.

  12. Little House says:

    I think it’s important to agree on a firm budget before purchasing large items. My husband and I are hoping to purchase our first home this year or next. We have a budget, but it’s difficult finding a home within it! If we can stick to our “guns”, we will be happier in the long run. It just might take us longer. But patience is a virtue, right?

  13. Debbie M says:

    Once my parents took us to tour really expensive houses (just for fun). We noticed they were larger and had more interestingly angled walls. But in most cases, the regular rectangular room shapes seemed more practical for furniture placement. Also, we were surprised that these new houses were built no better than our house—the walls still weren’t perfectly vertical, the woodwork still was messy, etc. That tour actually taught me that sometimes a more expensive house isn’t worth more money (not even counting the extra you’d have to pay to air condition and maintain a larger house).

    I also went on some tours of crazy expensive houses with my sister last year, and most of them were just laughable. One we called the house of dining rooms. Of course they had both a dinette and a formal dining room. But they also had an additional formal dining room. Plus a huge porch with gas oven and dining room table in the back. Plus several more tables on the front porch. And not a single one of these >million-dollar houses had a laundry room big enough to set up an ironing board in. Crazy.

    Generally I agree that it’s best just to look at what’s affordable, though. I do this in stores, too—I don’t go to expensive stores (unless I’m in more of a museum mood than a shopping mood). One thing that really bugs me is how real estate agents tend to show you things only at the top of your range (and above it). In my case, the top of my range was only half the median price for houses in my area (I assumed I probably couldn’t afford anything yet), but people with bigger budgets might like more affordable houses if they saw some. (Most of the ones I saw were too far away from my job or too broken down, but I did see two acceptable ones.)

  14. Mike says:

    When we were looking for our home, we consentrated on what was most important. We wanted a great school district and a great community. We found both. However, home prices, as expected, were rather high in that area. We scoured and hunted for the right deal. After waiting MANY months, we found a foreclosure deal that needed some work (which I can do) and made an offer. It was accepted and we have been there just shy of a year now. We couldnt be happier, the mortgage is do-able, and the repairs are coming along slowly. But we KNOW this is the house we want to be in for teh next 30-40 years and raise all our kids in. It just took the right house to find US!

  15. matt says:

    @#11

    100% amen to this. Having just bought a house I thought I had caught most of the things that would have bothered me, been difficult. Now that I have lived in the place for 6 months I am wishing I had known more and spent more time evaluating things. Heck even the counter top colour drives me insane because it hides dirt and spills (seems like a great feature until you try to clean it or stick your elbow in a big splotch of sticky catsup that you cant for the life of you see, but can feel).

  16. DivaJean says:

    We totally lucked out of the emotional house buying! When we were looking to move into our neighborhood 5 years ago, we frequented open houses on weekends looking for the right house. We fell for a big colonial house with 5 bedrooms, needing extensive roof repair. We got into a bidding war with another potential buyer and ultimately had to turn away. We regained our voice of reason and ended up buying the 3 bedroom ranch we love and now would never leave. And we only owe $30k on the $100k mortgage after 5 years! The “beauty” wasn’t there- but the house is 3 blocks from my mom’s, 6 blocks from my in laws and in a good school district. We had one month between the closing on our “new house” and our old- so we used the time to paint, decorate and bring it from the 70′s into the new millenium.

    I have told my partner I will never move again if I can help it- that’s how much I love my house!

  17. Marc says:

    Lauren and Jennifer (#2, #5) you have to consider how much self-control you have. If you don’t trust yourself then you’re probably right – but remember just because you’re looking at something pricier does NOT mean you can’t get a deal on it. By avoiding a certain price range you’re shutting yourself out completely and could miss out a good deal. You can also gather perspective that could help you negotiate on a lesser purchase.
    Obviously this doesn’t apply just to houses. For some people looking beyond their price range is like playing with fire, but I’d say occasionally it’s justifiable IF you know you can keep a lid on your emotions.

  18. stella says:

    One of the many reasons that some folks don’t buy homes, even if they can afford it, is for some of the reasons that people DO buy homes: They don’t want to get attached. Cause it’s easy to do.

    Today, people are suffering because they are literally and figuratively (and financially) attached to homes they can no longer afford.

    It’s the other side of this coin. People often bought conservatively and carefully, but as values declined in their areas, etc., and their own income declined or they lost jobs, they can now no longer afford those homes. Nor can some of them even afford to downsize and move, because nothing else affordable is available.

    Nobody really talks about how it is on all levels (emotional, financial, etc.) to be in that situation today. But a lot of folks are in it thru no fault of their own. We personally know two families of very fiscally conservative folks who had the bad luck of living in the wrong area at the wrong time AND losing their jobs.

    You worked hard. You paid the mortgage. now, you have to walk away, losing it all. With nothing to show for it and possibly nowhere else to go.

    Watching people go thru this is gut-wrenching and nobody (govt) is really helping.

    And yet, those guys in the banks are still getting their bonuses aren’t they?

    Yea. It’s a great situation for hard-working people who are now royally screwed.

    We need more affordable homes and rental apartments and less greed by developers, etc.

    Off-topic, but reading this reminds me of the real world today where people don’t have the luxury of checking out homes they aren’t in the market to buy because they’re too busy looking for jobs, trying to not be foreclosed on, and looking for somewhere to live.

  19. Bill says:

    Buying houses should be done as we buy cars – look at a lot of them, to minimize the emotional attachment.

    I grew up in a big, older (pre-WWII) house – bathrooms the size of closets, no built-in closets, bizarre plumbing and electrical issues.

    It was fun to live there as a kid when I wasn’t the one paying the bills.

    I now live in a house half the size, which is cheap and easy to maintain.

  20. Sara says:

    It seems like realtors always want to show homes over their customers’ budgets. I told my realtor my limit, but more than half of the homes she showed me were over my limit, by up to 25%. I ended up buying a home that was about 5% below my limit (and it was arguably better in some ways than most of the expensive ones: more square feet, nicer neighborhood, closer to work). I could afford the more expensive homes, but I’m glad I bought this one because it gives a lot more flexibility in my budget.

    I’ve noticed on the home-buying TV shows that they always show homes over the buyers’ budgets, too, no matter how high the budget is. They can say their budget is $1 million, and the realtor will show them houses that are $1.2 million. Just an extra $200k, like it’s pocket change.

  21. Mike says:

    The Federal Reserve created the housing bubble, if you don’t believe me, see for yourself and google mises, lew rockwell and ron paul.

  22. Mandolin says:

    I agree with the post, partially.

    I think it is important to stick to a budget. I also think you need to get what you need out of a house and not settle for something when you feel like buying. I am currently in the process of buying my first home home. We took a really long time to find a place that met our needs and fell within our budget. It was possible, but it took 3 years of searching to find the right place. If we’d bought the first year we looked (we put an offer on a large 1 bedroom condo) we’d really regret it now that we have kids and I work from home. If we’d gone over our budget that would have been awful too since I took a year of maternity leave.

    My sticking points were a three bedroom house or condo, with parking, near a public transportation line or metro station, with a small space for storage, and a functional kitchen. Where I live this is very hard to find for under 200,000, which was our budget.

    I would say, definitely buy within your budget but don’t settle when you buy. Its better to rent a place that isn’t perfect and move next year without having to sell it, than to buy a place that isn’t what you really need.

  23. Amit (India) says:

    Trent,

    Nice post.

    There is a saying in our local language (Marathi) that “See the size of your bed and then spread your legs”

    Simply means – See your budget and then decide

  24. Shevy says:

    Funny. I once asked to see a condo that was a little over the budget I’d given my realtor. He wouldn’t show it to me. It pays when your realtor is someone you know. A stranger would probably have just had $$$ signs up.

    And I disagree with Bill. A house that you’re buying as an investment, either to flip or rent out should be totally businesslike. But a house that is meant to be a long-time home for your family should be something you’re attracted to and become attached to. Otherwise you may as well just live in a hotel suite or something if it’s totally impersonal.

    That’s not to say that you throw caution to the wind. It has to work financially too or you’ll never see the house you love because you’re too busy working 70 hour weeks. But don’t buy a house you don’t really care about (or can’t see potential in).

  25. deRuiter says:

    Nothing wrong with looking at homes above your budget AND MAKING AN OFFER IN YOU BUDGET. It’s amazing that a lot of people will sell for a lot less. Some people inherit a house and will sell quickly for a low price to solve the problem of owning an extra house and BECAUSE THEY GOT THE HOUSE FOR FREE AND WHATEVER MONEY THEY GET IS THEIRS. Others need to do a short sale. Some people are fed up and want to walk away, they will take any offer. A spouse has died and the remaining spouse doesn’t want to live there, wants to move near the chidlren, theyve owned a long time and house is paid for so the person will sell cheap. I look at lots of houses, I’ve bought more than 20, mostly for fix up, rental , prepayment and eventual sale. Lots of times, besides lowering the price, you can get owner financing. You never hear about the enormous number of people in America who own their homes outright or have tiny monthly mortgages on them. The housing bubble was caused by our government and “The Community Reinvestment Act.” This law FORCED banks to give loans to mostly minorities and illegals who could not afford the payments. These people also signed up for stupid loans with teaser rates, ARMs. People on welfare, people who lied about income, all these folks caused the bubble. People who bought many buildings with no money down loans, looking to make a fortune in a year on appreciation of the purchase price. People who flipped a house, made money, and then put contracts on a half dozen thinking the appreciation would never end. People who had affordable houses and affordable monthly payments and then took out huge equity loans to buy stupid stuff: second house, boat, fancy cars, massive kitchen with granite counters and custom cabinets, huge additions, swimming pools, designer handbags. All these people are responsible. They thought they were buying, but they were “renting” until their money ran out. Now the economy is bad because their judgement was bad. Can’t afford it, don’t buy it. Can’t afford it? Don’t look to be bailed out with my tax dollars!

  26. Jeroen says:

    Great post, except for this line: “It was also a choice that many people made differently – and that difference in choice caused the housing bubble and a giant mountain of foreclosures.” It seems to put the blame of the housing bubble on the buyers alone. Of course, they aren’t free of blame but in negotiations with mortgage brokers, the broker has the upper hand information-wise, so they are to blame too. (rule number 1 in banking used to be: don’t lend to people who cannot pay you back) The assumption that both parties made: house prices will only go up (and I can forgive people for that, seeing as you only buy 1-3 houses during your lifetime, but not the professional who does it daily) If you get told that by a professional, why doubt it? I’m not making excuses for those people who knowingly bought a house that was to expensive, but I think the larger part of the blame of the bubble lies with Greenspan and the lenders. (Discloser: i work for a large bank, specifically in loans and financing.)

  27. Jeroen says:

    Oh. and deRuiter: there is -again- to much lies and desinformation in your post that i wouldn’t even know where to start correcting you.

  28. PF says:

    This is an excellent post Trent. You are so right about it minimizing your choices.

    Everybody so far has gloated about how well they did and how much self restraint they showed, so
    I guess I’ll be the one to fess up to having too much house. We built a custom home during the housing bubble and the cost of materials and labor was outrageous. Nobody would stand by their bids/estimates and our house ended up costing waaaaay more than we expected.

    At least we did over 50% of the work on it ourselves, so we aren’t upside down like ALL of our neighbors. Now those houses are going into foreclosure and our home value has dropped by hundreds of thousands of dollars. We can’t really sell the house and we can barely afford it. We are house poor; no doubt about it.

    For those of you out looking, heed Trent’s advise.

    (okay, on the flip side, we have a gorgeous, energy efficient, passive solar home on acreage with views. It’s not all bad and it will all work out.)

  29. Jennifer says:

    Marc, you make good points, but in my case, my price range was 50-75K. I simply could not afford to look at a house worth 120 or more just to see if the owners would come down in price. I ended up paying 57, with a reasonable mortgage and a little house that I love.

  30. bethh says:

    This is one of the main reasons I did NOT get swept up into the bubble. I might’ve been encouraged to borrow x dollars for a house, but it would’ve been very stressful trying to meet the monthly obligation.

    It’s a good thing, too, as I wound up completely uprooting my life a couple of years ago – all the major changes I made would have been impossible if I’d gotten into the real estate market at the wrong time in my life, just because my emotions were telling me to do it.

  31. Dawn says:

    My father always said about things like large houses and fancy cars–you don’t own them, they own you.

  32. Caroline says:

    Powerful post! I like these real life examples.

  33. Caroline says:

    I just read the comments, and while this post is insightful when it comes to purchasing a home, I also like how it can apply to other areas of my life. It’s another reminder that every time I go out to eat (which is a lot), I could be socking that money away for grad school and travel! They’re small purchases, but they add up. I know this is a major theme on your blog, but sometimes a particular post like this one is quite striking.

  34. Mike says:

    If you are going to buy a home make sure you get half of the agent’s commission while getting full service. This nifty website spells it out http://www.EmpoweredBuyer.com.

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