I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011. Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k). As long as the cash flow was OK – I thought we were OK. We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards. So we thought we were doing good. Obviously, I (at least) had my head in the sand. This is our story. It’s not intended to be an excuse for our poor decisions, but to give some background.
When Dad and I met, we both had already been working and living on our own for 10-15 years. We each had careers, and more importantly: townhouses. We both bought during the great runup in home prices, luckily not at the very top. I bought in 2004, Dad bought his first house somewhere around 2002, and his second in 2005. He “made” a lot of money on the first house and put it into a down payment on his second.
We got married in April 2008, when the market was still somewhat decent, but things hadn’t collapsed yet. His house was worth more, in a nicer neighborhood, and didn’t need as much work on it to sell, so it went on the market right after we returned from our honeymoon. It sold in August 2008, and two days later, we had an offer in on “our house” – a single family – we both hated living in townhouses. We had a nice down payment of about 10% thanks to Dad’s old townhouse, but we had two loans – intending to pay off the second when my townhouse sold.
The market had pretty much started crashing at this point, and the value of my townhouse was about exactly equal to what I owed on the mortgage, so we decided to rent it for at least two years, and make a decision then. It rented for below expenses (mortgage, condo/HOA fee, management fee), but -$300/mth was a much better cash flow than -$1700/mth, so we took it. We were hoping that the combination of making mortgage payments, rent increases, and market value would let us sell it at some point in the future.