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peer pressure to spend

March 14th, 2016 at 03:33 pm

My neighbor's house is for sale. Very nice place and I'm sure there will be a bidding war. She's selling it because they want to cash out their equity and move to a cheaper neighborhood with a longer commute. That way instead of having bought their house for $420k with 5% down payment, she can have a bigger home, longer commute but put down 20% or more down payment depending on how much they make on the sale of the home.

The problem? EVERYONE (not me) has been telling them to just buy more home. She said they are doing it because they aren't able to live on her husband's paycheck and are dependent for her to work and cover the bills. Her husband pointed out if they sell and buy with more money down they can live on one income and she doesn't have to work and can stay home with the kids if she wanted. She works part-time as a nurse and makes good money. She isn't sure if she wants to stay at home full time but is sure she wants to live on one income.

She was telling me and asking how the heck we were living with no income. I told her the truth. We saved a lot of money and live cheaply. We've always lived on one income and I think that it's the way to go in today's society.

She said that coworkers, family, even their parents suggest buying more house with the equity they are getting. No one is suggesting they "downsize" and move somewhere cheaper. But she feels that not having the pressure to work and knowing they can afford the car payments, student loans, and mortgage on just her husband's income would be huge. I agreed that is would be incredible to do it. I did say I hate long commutes, but I can see the enormous benefit of living on one income.

What astounded me was when she said they were doing this to "downsize"spending (I mean really I'm not sure most on this board would say they could afford their house in the first place having put down only 5%), makes financial sense. Yet people are encouraging them, friends, relatives, real estate agent, to upsize in price of the home and spend money. Keep the payment the same but go up since you have so much more to put down.

Seems logical but not when the budget was tight to begin with. I think people go a bit crazy with mortgages and student loans. I think that MANY people justify both a larger mortgage and large student loans as "good" debt and don't really look at the big picture. They don't see how tight it could make a budget. Or how it could be useful to try to stay within certain income parameters. People who care about you actually encourage in some ways overspending. $50k student loans? Sure you'll get a job. Housing at 35%? Sure your income will grow.

I find it astonishing because lenders approve the loans and your friends and family support the idea.

I am starting to think we preach financial responsibility. But if our own friends and family encourage "good" debt and stretching ourselves financially, how can people be financially responsible? How can you learn if everyone else is doing the same? Or egging you on?

6 Responses to “peer pressure to spend”

  1. ThriftoRama Says:

    Wow. She shouldn't listen to those people!!
    No joy in being house poor and stressing about where the money is going to come from every month.

  2. MonkeyMama Says:

    I would hope that the idea of not having to work beats out all the encouragement to buy more. Yeesh!

  3. PatientSaver Says:

    There is nothing like the sense of freedom of not being weighted down by a mortgage, or any debt whatsoever.

  4. FrugalTexan75 Says:

    This is kind of like a recent conversation I had with Mr FT. He'd been sending me links to places outside of my comfort zone. When we sat down to talk about it, he asked me if I really thought the mortgage people / bank would loan us more than we could really pay. I told him that yes, they're not concerned with how much we can afford AND still have a life - they just want to make money. I don't want to be house poor. I outlined our various goals and reiterated that the less we spend on a house, the more we'll have to reach our goals sooner. He seemed to get what I was saying. Smile

  5. VS_ozgirl Says:

    I don't think people learn half the time until they get annoyed with their situation and realise that they don't have to live like this (ie being cash strapped). It sounds like your friend has realised there's a better, more financially secure less stressful way to live, which is great. The big house thing is part of society's notions of success and unfortunately so many people think this is the way to go, not realising that you can have a different reality where you don't have to continually update etc. You can have a smaller house, money in the bank and the freedom to call your own shots.

  6. LivingAlmostLarge Says:

    It is. I think that it's super easy to get sucked into buying a bigger and more expensive house because everyone (Family and Friends) are telling you what a great investment. They talk about what a great deal. How it's smart to invest in your home or student loans to get a degree.

    They never mention what it feels like to have a lot of pressure from such a mortgage. Or carrying lots of student loan debt but maybe a job that doesn't pay that much in 1 year. So it's crazy!

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