I’m a zealot for financial empowerment; it’s one of the things I write about most. I think all women deserve it, given how hard we work, and the extra obstacles we face. Sometimes, empowering ourselves financially involves being real with ourselves, so we don’t look around in five or ten years and wonder, “Why am I treading water with my finances?” This post is about lifestyle inflation as it applies to owning a home.
Although my story is one of upward mobility, and I married a saver, my husband and I have stepped into some costly American dreams, namely a nice house with a nice yard. There are plenty of articles out there discussing how buying a house is not an investment. In my experience, it’s an enjoyable yet sneaky vehicle for lifestyle inflation, even if you buy “within your means.”
Some sources state that for a primary residence, buying within your means means spending two times your gross annual income. I followed this advice a couple years into my attending position, spending about twice my gross yearly salary at the time. With raises, our home purchase price is now around 1.6 times my gross annual income, so we are well within the recommended spend. Another common rule of thumb is that your housing expense should not exceed 30% of your gross monthly income:
“As a general rule, you want to spend no more than 30 percent of your monthly gross income on housing. If you’re a renter, that 30 percent includes utilities, and if you’re an owner, it includes other home-ownership costs like mortgage interest, property taxes and maintenance.”cnbc.com
Many of these items listed don’t apply to renters. As renters, we paid just $1900 per month for a sprawling, furnished 2 bedroom/ 2 bathroom condo. We paid the electric bill, amounting to a few hundred dollars per month in the depths of summer. But we didn’t have to pay for garbage, water, or HOA fees. We shared a common area comprised of a pool and a yard with grapefruit trees. Many occupants were absent much of the year, visiting for a few months as snowbirds. We had it pretty good.
After a couple years, I yearned for a place of our own. The snowbirds descended each year, drinking and cackling in the yard, as I worked in my office. Renters in adjacent units made small talk, asking if I was working again. (Yes, I’m a doctor; in general, we work a lot. Certainly we work more than all retirees.)
Beyond growing out of shared space, I drooled over the beautiful homes in surrounding neighborhoods. I thought, why don’t we take that $23,000 per year in rent payments and apply it toward equity in a home? My husband was more realistic than I, and insisted on a spreadsheet. We listed all the current costs next to the new set of costs associated with owning a home. The figures were staggering. And they were still an underestimate. To buy a home around the area median would be lifestyle inflation, overnight. But I wasn’t dissuaded. I was horny for a house.
Long before my husband was comfortable with it, I began hunting for a home. I searched and learned about our local market for a year before he’d actually tour any homes with me. A starter home close to the hospital would run four to five hundred thousand dollars.
Homes in this range were in the northern part of town, which enjoyed gorgeous views of the mountains, but suffered nightly winds, which detracted from the outdoor So Cal lifestyle. Homes nestled south of the hospital, in the less windy part of town, started around $100,000 more expensive, while comparable homes in the next town over were about $100,000 less.
My first offer was on a small, modern, characterless three bedroom, right under the flight path of the Palm Springs airport. Whoever remodeled the property was wise enough to install double pane windows. If you were outside at just the right moment, you could become intimately familiar with the massive underbelly of a low-flying airbus. A Veteran’s Association loan foreclosure, the home was listed at a discounted $320k. I thought it was worth at least $450k, based on my market research.
As a starter home, I found it charming. Yard maintenance would’ve been modest. Ultimately, I put in a couple of bids, my husband reluctantly dragged along for the ride. But we were quickly out-competed, in a field of multiple bids.
As my husband warmed up to the idea of owning a house, we began looking together in earnest, shuttling around Palm Springs in our realtor’s SUV. She called one day about a pre-market home walking distance from downtown, with a gorgeous, park-like yard, and its own solar panels.
As a bonus, the place was furnished, so we wouldn’t need to worry about buying furniture! Away in Sweden that week, my husband was smitten with the stats, and encouraged me to put an offer in if I saw fit. By the time he returned home, we had an accepted offer on a house.
As a renter or first-time home-owner, you may not realize (or take seriously) the notion that yearly maintenance on a house runs 1-3% of the home value per year. The older the home, the more likely you’ll end up on the larger figure. For a $700,000 home, that means a budget $7,000- $21,000 per year for maintenance! Maintenance can cost as much as rent, depending on the year. Whoa.
For us, that has been true. Since our home is 60 years old, and didn’t come with an instruction manual, we learn about it as we go. When buying, our home inspector guessed the water heater was ten years old. When we started hearing the popping sound of “kidney stones-” hard water deposits- rattling in the tank after a hot shower, I decided to drain the tank for maintenance. When the tank wouldn’t drain, I hired a plumber, and learned the heater was twice as old as we believed; I decided to replace it that day.
Did you know that in Southern California, plants will work really, really hard to find water? They are desperate, because well, it’s a desert. That means if they sense any weakness in a cracked pipe, their roots will slither into the crack, widening it over time, sometimes occluding a pipe altogether. A few months ago, our toilet clogged, and was refractory to plunging. When we called for backup, the plumber unseated the toilet to find a root invading the plumbing. He cut the root, and applied root killer, to buy time until the next time another root tries to slither in. Basically, plants are trying to take back our house.
A root in the toilet is nothing compared to the roots that invaded our sewer line. Last year, we hosted a house concert, and the group of musicians who performed for the night. Everything went off without a hitch, until we had five morning showers, a load of laundry, and ran the dishwasher. As the musicians waved goodbye, and piled into their van, water seeped around our feet, from the nearby water closet. Fragrant sewage regurgitated into our showers. The sewer line was overwhelmed.
Made of a historic post-war material called orangeburg, our sewer had reached… the end of the line. The consistency of tar-impregnated cardboard, the pipe was decades old. The plumbers oohed and aahed at the uncovered relic. Formerly a three inch diameter, the pipe had blown out to 6 inches diameter, with a gap allowing sewage to seep into the front yard, beneath our well-fed bird of paradise plants, for who knows how long.
A snake was attempted, then a camera, like a colonoscopy for the yard. This uncovered a veritable invasion with roots, which had cracked and wriggled into the pipe, occluding it. To fix it required digging a 30 foot trench to replace the line with contemporary ABS. We’d need to reline a section beyond that, all the way to the connection to the city sewer. We even purchased a costly “top hat,” which would serve as a hatch to cap off our sewer production. I hope this is the last $19,000 repair we have for a while.
Most recently, we had an unexplained increase in our water bill. Exceeding our usage tier, we were hit with penalty charges, doubling our bill. There had been a couple earthquakes, and I considered various worst case scenarios: could we have an underground leak? Was there an irrigation leak in the yard, or a leak in the pool? A combination thereof? We watched our usage creep up, until we felt compelled to hire a leak detection specialist. For several hundred dollars, he used sounding equipment to listen to pipes and fixtures beyond what a plumber could see visually.
Since our old pool heater conked out, I decided to replace it, for $2800. It’s expected to last 5 to 10 years.
As the pool tech checked our aging setup, he detected a steady leak from the pool filter. Now the filter had to be replaced, for another $1,000. At least this would answer part of our water leak question. Luckily, our pool pump passed inspection, needing just a minor part replacement. After the $4,000 bill, we were ready to enjoy our lifestyle inflation- I mean, winter soaks in the hot tub.
Another huge, somewhat ridiculous cost is having a gardener. The backyard is the best part of our property, with a lush, mature landscape. It sports palm trees, prickly pears, and giant blue yuccas; it is a pleasure to behold. In front, we have a desert-scape, with three olive trees. Squished olives dot our driveway, and sometimes, gnarly branches drop under the weight of the fruit, and must be removed. The gardeners tame the beautiful mess for $150 a month. Like a swat team, the descend, tackling various tasks, and leaving the place manicured.
That wouldn’t be so outrageous if it weren’t for the giant ficus hedge, which is over 10 feet tall. It affords tremendous privacy, and helps keep road noise to a minimum. To maintain its rectangular shape, it must be trimmed 2-3 times per year. Since one side grows faster than the rest, I touch it up myself with a battery-operated hedge-trimmer. It provides me occasional stress relief. Otherwise, maintaining the behemoth costs $250 each time. On top of that, our twenty palm trees should be trimmed each spring to avoid a mess. This costs about $35-50 per tree, for a yearly spend of $700 plus.
I love my home and consider it money well spent. But I don’t consider it an investment, and it’s sure to slow my path to financial freedom. It’s one way we are living and enjoying the “now,” rather than living for the future. One thing’s for sure, our house has been a vehicle for insidious lifestyle inflation.
It’s not that I’d recommend everyone rent their whole lives, but I suggest weighing the decision to buy a home carefully. Be cognizant of ownership associated costs that are guaranteed to slow attainment of other financial goals. Consider the opportunity cost of this kind of lifestyle inflation, juxtaposed with the ability to pay off your student loans, grow your net worth, or start your own real-estate empire, for example.
As a daughter of immigrants, I want you to know there’s not just one American dream, there are thousands. And which one you choose is up to you! Here’s to your financial journey, my heroes and heroines.
The path can be riddled with failures, even if you're doing it right. In this recording, I share some of my gaffes with you.