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Home > A story about over-extending yourself, financially

A story about over-extending yourself, financially

October 15th, 2012 at 01:14 pm

It's a sign of the times, to be sure. But it sure gets you thinking a lot about it when it happens to your own neighbors/friends.

The couple who live behind me bought their house 9 years ago. He makes roughly $150K; she made I'm guessing about $50K before she quit her job.

When they bought the house, it was 2,000 square feet. Although it was just the two of them, plus his teen daughter who moved in with them, they decided to put on an addition quite some time ago. A big one, measuring 3,000 square feet. That's DOUBLE the size of my entire house!!!

She didn't want it, but he talked her into it apparently, saying it was "an investment in their future." Umm, yeah, or a noose around your neck.

Although he makes good money, he's not very good at managing it. I don't know that they have much in retirement savings.

So anyway, a few months ago, when they wanted to cut her hours at work, and there was some politics involved, she balked. Her husband said, why don't you just quit? I guess he figured they could still live quite nicely on his salary. Mistake #1. I'm sensing there was a disconnect in making the decision to quit over such a relatively small thing, with a general disregard for the state of the economy and their own personal circumstances.

Now they've learned that he'll be losing his job in March. While he got 6 months notice, he's getting NO severance. According to the wife, they didn't even actually say why, but she did say he was overpaid and I assume the toy company, likely experiencing a business slowdown, did it as a cost-saving measure.

The addition is still not finished; although it's meant to have a kitchen, it doesn't have a complete one now, they decided it would be too much money to make it rent-ready, and she doesn't want to give up her privacy, either. Plus their driveway is extremely long (about 1,000 feet?) and steep and would likely cause problems for a tenant. (They sunk somewhere in the neighborhood of $50,000 to pave the driveway because in the winters the gravel driveway used to ice up so bad their 4-wheel drive couldn't make it up the hill, so they'd have to park halfway down and walk up. The walk itself was treacherous as well.) The driveway actually belongs to me; an easement exists on their deed granting them rights to use it.

He's not even looking for a new job. He's in a somewhat specialized field: toy designer.

Their plan is she is looking for full-time work now at Starbucks where she can get health insurance for the two of them, and also the job would help them pay to do the minimal needed to finish their renovation enough to be able to sell it.

Then they'll put the house on the market in March, hope for a quick sale (she wants to get $800K) and then they plan to move to Tennessee and pay cash for a smaller house.

They plan to move there knowing no one there and even with no jobs lined up. They simply won't be able to afford the house they're in now once the renovation is done because it will boost their $9,000 property taxes to about $14,000.

She is most unhappy. She doesn't want to move, but that's what they're going to do.

It astounds me that this has happened. They're very intelligent people. I've socialized with them from time to time. I think they'll have trouble selling the house due to the driveway, which as I said, is very steep.

It's interesting that if people are working full-time, they may very well believe they are somehow immune to the economic diasters that have befallen so many others. In this economy, I don't think I would have given up that job, even if my husband was earning that much. And I certainly would never have added that kind of addition to the house. If he had that much money burning a hole in his pocket, I would have socked more away for retirement and then taken several extravagant trips abroad.

10 Responses to “A story about over-extending yourself, financially”

  1. ThriftoRama Says:

    I know a couple like this. It's one thing after another, and even though they make more than we do combined, they are always in debt and barely paying the bills. In their case, they think changing scenery will solve their relationship issues and magically solve all their other problems as well, but it never works out. They forget no matter where you go, there you are.

  2. Nika Says:


    But really, who makes a 3000sf addition to a 2,000sf house? and why on earth would 3 (soon to be 2, when a teenager grows up and moves out) people need that much space. (that needs to be heated and air-conditioned, and cleaned and maintained - so there are a lot of additional expenses on top of property taxes).

    But would they be OK if it were not for the addition?

  3. patientsaver Says:

    Nika, I'm not really sure if they'd be ok without the addition. she mentioned she needs cash flow, so is going to start paying only the minimum payment due on credit cards. I'm guessing that no, without either employed, they would still have problems. It is scary. A huge domino effect triggered by job loss.

  4. snafu Says:

    I'm guessing he has an engineering degree possibly in industrial design, product design, computer design or merchandizing marketing etc and could use his gift of time and skill sets to get another job. Since he isn't working to capacity now, it would make sense for him to take an additional part time job to pay for the work to finish the addition.

    It's too bad these folk have their head in the sand about the seriousness of their situation. Perhaps they have never had a major disappointment. If communities are downsizing police and teachers and municipalities like Stockton, Ca, Harrisburg, Pa., Jefferson Country, Ala have declared bankruptcy and defaulted on loans why does he think moving to another state will fix his problems?

    Your neighbors could help themselves by injecting a bit of reality. They can check on-line to see how many houses have sold in your neighborhood and how many days it took to sell. That isn't terribly accurate since if you change listing you re-set the clock and they may not have issues like awkward driveways.

    Can you imagine what a shock it was to all Lehman Bros staff to hear on the TV news that the company collapsed and even 6 figure salaries vanished! I can't imagine how many mortgage brokers abruptly lost employment when the housing market crashed. How many jobs were lost in the total housing market collapse?

    To be honest, I'm hoping a goodly number of politicians will lose their jobs in the next election but that's up to you.

  5. patientsaver Says:

    They're moving to TN because real estate is relatively cheap down there, the area they want to move to is experiencing strong growth and unemployment is lower than the national average.

    A couple who ALMOST bought my house when it was for sale in 2007 but who instead bought a house 3 doors down (bigger, more expensive) had to sell it when they realized they couldn't make ends meet. (He was a freelance photographer.)

    I discovered recently they are living in Chatanooga TN.

    the state seems to be attracting a lot of folks.

  6. Looking Forward Says:

    Hmm.. I'd say this is a story that is pretty common now days.

    I am surprised that her getting a job w/Starbucks would help so much. I didn't realize it paid so well??

  7. patientsaver Says:

    It's not the income, it's the health insurance that Starbucks offers part-timers that is of most value to her.

  8. Dido Says:

    A friend of mine moved to Knoxville TN (from Huntington Beach, CA, where he was a renter) where he bought a fixer-upper for 40K cash, both because of the cheap real estate and the lower business taxes. He's an industrial designer type who builds up his own businesses and found the CA tax and business regs too costly. It's not a great house for 40K..I gather there is a fair amount of work to do, much of which he is handy enough to do himself...but still, it's an entire house, paid for in full.

  9. FrugalTexan75 Says:

    Wow .. they sure have gotten themselves into a financial pickle. Is an $800k house even a reasonable house for your neighborhood?

  10. Thrifty Ray Says:

    Oh those rose colored glasses can block out reality sometimes, cant they? I have my share of (financial and other) blunders to show for it. Hopefully they are learning along the way and making better financial choices as they go...unfortunately, they are in good company. :/

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