Living like no one else

I've been thinking a lot lately about a quote from J.D.'s review of The Total Money Makeover:

Printed on the bottom of every page…is the book's motto: “If you will live like no one else, later you can live like no one else.”

My husband and I recently made an unusual decision, and I'm in need of a motto that I can repeat to myself every time I question our choice, which I probably will at some point.

A Loan Story

I've mentioned in previous GRS posts that my husband and I are building a house. As we started on the final construction documents,we began working with a lender to sort through the construction loan. It's not a fun process, let me tell you. Half of what the lender said went right over my head, despite my short-lived foray into the real-estate industry.

The first issue that arose was that we'd have to have a two-time closing. This means there's one closing at the start of construction and a second closing after the home has been built to refinance into a permanent mortgage. Apparently one-time closings, which are loans with a single close for both the construction term and the mortgage, are a thing of the past.

The problem is that my husband and I couldn't have a change in employment until the house was finished and the second closing was complete. But he's planning to start his own business. Also, if one of us happened to lose our jobs, we'd be at the mercy of the bank. Even if we could easily make our payments from my freelance income, the bank wouldn't recognize that income source until I had two years of tax returns on the business. It was a concern, but we decided to move forward.

Charges, Interest, and Fees

The lender sent the estimates for interim and permanent loans. As I sorted through the initial fees worksheets, I saw the standard stuff:

  • Origination fee
  • Appraisal fee
  • Processing
  • Underwriting
  • Closing
  • Document prep
  • Title insurance
  • Recording fees
  • Survey costs

And on and on and on…

It's not that I didn't expect these fees, but they were sure adding up quickly. Also, we could expect a good interest rate on our mortgage, but the interest we'd pay fora 30-year loan would double the total cost of our home. Again, not unexpected, but still disconcerting when I was plugging in our numbers.

Closing Delays

Another issue was that we'd need $15,000 to close the interim loan. With an interim loan, the bank requires 20% of the total value of the land plus improvements (i.e., the house). We have a lot of equity in the land, but not enough to cover 20% of land and house value. Since we were unwilling to tap our savings, we'd have to wait until autumn to start building.

I was getting a sinking feeling in my stomach, like we were going to be trapped. My husband couldn't start his business. If one of us lost our jobs, it would be the bank's decision whether to work with us, on their terms, or not.

Finally, the relationship with our architect, who also was to be our builder of record (another lender requirement), was deteriorating, causing us to reconsider the arrangement.

Assessing Our Situation

My husband and I are in a unique situation. My parents own land in the country, and we live next door to them, rent-free. This has allowed us to build a lot of equity in the land we purchased, which is five minutes away. My dad also is in construction, and he's able to do the majority of the work to build what he can for us and subcontract the rest.

It might sound crazy not to take advantage of our situation, but there's something to be said for having your home finished with all of the amenities you want, such as a dishwasher, carport, bigger kitchen, laundry room, and more space to host guests. I have this dream of what our home will look like, of what it will feel like to wake up in it every day, and it's hard to be patient.

Number Crunch

I started to run numbers on how long it might take to build our home if we paid in cash; assuming no change in income, it looks to be five years — six if I'm being super conservative. I assumed a completion date of April 2015. If we went with the loan, we'd probably complete the home in September 2011. By waiting about four years longer, we'd own our home and land outright, as opposed to paying on it for 30 years. Even if it takes longer than expected, it's still a good deal.Owning our home sooner would give us so many options:

  • We could scale back on work hours.
  • We could travel more.
  • We could put more into savings.

The point is that we'd have those choices. Our decision came down to having the home now, or having more freedom later. Again I thought of Dave Ramsey's quote:

“If you will live like no one else, later you can live like no one else.”

You can probably figure out what we decided to do. We're going to pay in cash, building as we can. Impatience is not worth the headaches, fear of losing a job or the house, and the interest we'd pay if we continued with the construction loan.

Patience and Resolve

I realize we're in a fortunate position. If our circumstances were different, this might not be an option, however, I believe our choice and Ramsey's delayed gratification advice is relevant to everyone.

Every time I've put my impatience aside, the outcome has been positive. This was the case when we put off buying a second vehicle and when we moved out to the country, originally thinking we'd buy a house in the city as soon as possible.

Besides patience, delayed gratification also requires resolve. When you make choices outside of the norm, friends and family members might think you're nuts. They mean well, and they're only thinking of you, but some of them will definitely think you've lost your mind. One car for two people?! You're just asking for a divorce! It can be hard when you're already questioning yourself. The trick to not letting these comments derail you is to remember the reasons why you made your decision, and maybe find an affirmation, which is why I'm going to print Ramsey's motto and read it often.

Delayed gratification isn't easy, but it usually brings the most rewards.

How has delayed gratification benefited you? How have you exercised patience and resolve? Share your tips — I'm probably going to need them!

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Suzanne
Suzanne
10 years ago

Wow, great question! Love this post. I made a similar choice about 10 years ago to not buy a condo. At the time, I knew it would have been too much of a stretch. I was single (still am) and worried about having no real savings. 4 years later (by then with a downpayment saved) I lost my job. I cannot tell you how much easier my life was without a home I couldn’t afford. I had the freedom to pursue my dreams – I found my true calling and moved across the country for a new job and better… Read more »

JP
JP
10 years ago

I’ve been working as an IT professional for 14 years. For the last 12 I have lived in a 2 bedroom basement apartment, driving the same car and spending conservatively. My salary is excellent and I have been living on 30% of my take home pay. By living this way I have funded my 2 kids’ college funds and as of the end of this month I am taking a year off to travel and reconnect with family. People have come up to me saying ‘I’m so jealous you can do this’. You can do it, you just have plan… Read more »

Allison
Allison
10 years ago

What a great story! Good luck with the build. My husband and I have saved a lot of money over the last 2 and a half years by sharing a 2001 paid off sedan. Sometimes it’s inconvenient (like this week, when our car is getting repairs done), but we make it work. But this has been a big benefit for us because we’ve been able to put thousands of dollars in a savings account for a second car. When we move in June, we’re hoping to pay cash for a 3 or 4 year old truck. Then we can start… Read more »

Collin
Collin
10 years ago

Interesting post. I was recently in a situation where delayed gratification could have benefited me financially. About 6 months ago my girlfriend and I were living about an hour away from eachother. She was living with her parents (paying no rent) and saving a large amount of her income. I was living with a few roommates for very cheap. Financially, this was almost ideal. Our housing costs were low and we were located very close to our jobs. However, we were both getting tired of our living situations and wanted to be together more often. Fast forward to now. We’re… Read more »

Adrian
Adrian
10 years ago

I see two significant themes in this post that can be applied to each and every GRS reader: patience and individuality. Whether trying to pay down debt, save for a special item, or simply waiting on savings to grow, patience is an EXTREMELY important aspect of personal finance, as the opposite is clearly what lands people in a state of financial turmoil. Individuality can be very difficult when it comes to breaking social norms. Whether it’s skipping that lunch out, that extra latte, or night out, know that being unlike others is one of the corner stones in personal finance… Read more »

James | Tech for the Masses
James | Tech for the Masses
10 years ago

April,

Thanks for the great topic you brought up. Oddly, I am FINALLY learning what it means to delay gratification. And you are right – every time I have stopped being impatient, waited, planned – it has been totally worth it. Now if I could of only told this to my younger self.

~ James

Eric
Eric
10 years ago

I read this blog fairly often, but don’t often feel the need to comment. I don’t have a lot to add to what April said, but I do want to say … congratulations! That is a tough choice to make, especially when it’s so “normal” in the world to just take on the debt. I seem to see in my line of work that very few people would disagree with the idea of delayed gratification – live like no one else – but then they rarely put it in to practice. Sacrifice is just that…sacrifice. If it were easy then… Read more »

leslie
leslie
10 years ago

For what it is worth…I completely agree with your decision. You don’t have to delay all that long in the grand scheme of things and you will have soooooo many more options going this way. Freedom and flexibility are worth it…

kelle
kelle
10 years ago

My husband has used debt quite successfully in the past. He has taken out a loan, did home equity and credit card borrowing, but had the money to pay that amount already. What did this do? It kept the cash available for us in an emergency or need. It made the bank happy and the credit score high. If there was a job loss or health crisis the money was there to take care of us first. If the bank misbehaved, they could be payed off immediately and got rid of. But, the money to do this came from patient… Read more »

Meredith
Meredith
10 years ago

Great Post April… We’re facing a similar decision… We have plans to add an addition to our home, which became very real when we sat down with our architect for the design study. Because I own my own business – we have to wait the 2 years to prove to the bank that I’m good for it – so our plan was to construct during the summer of 2011. Once we set that goal – it seemed unchangeable. It also seems very unlikely at this point, and therefore, we’re becoming disappointed in ourselves – we set ourselves up for failure… Read more »

Steven
Steven
10 years ago

You can’t apply extra payments to that 30 year mortgage?

I would imagine you can finish that loan in MUCH less than 30 years if you apply what you would save to pay in cash towards the loan.

Did you run the numbers on how much more you would pay in interest versus putting the cash in bond/CDs and earning interest?

You say you can save the cash needed in 5-6 years, and I can’t imagine the interest being so high that you couldn’t finish the mortgage by year 10.

mary
mary
10 years ago

Good for you, April! As one who firmly believes half the fun (or more) is in the journey, I have come to embrace delayed gratification. It gives me time to enjoy all the bits along the way. Good post.

De
De
10 years ago

I like this – the concept of delayed gratification is so foreign to most folks but can be key to a lower stress financial life.

Please keep us posted on the house construction – we want to do something similar, but I struggle with how to build a house slowly? Seems like most of the cost of the house will be required to get it weathered in, which you must do reasonably quickly.

Pamela
Pamela
10 years ago

As a nonprofit housing counselor I’m very impressed with the care you gave to thinking this through. You brought a courage and thoughtfulness to the process that I encourage in my clients. I’d strongly encourage anyone looking at a similar enterprise to take advantage of the wonderful programs offered by nonprofits to help first time and other home buyers (and homeowners) make good decisions. And sometimes they can even provide low or no interest financing. One source of good nonprofit help can be found at http://www.nw.org where you can search by zip code for a local housing agency. Neighborworks charters… Read more »

Lizabeeth
Lizabeeth
10 years ago

My husband and I are huge Dave Ramsey fans. My husband makes a good income, but it was all spent on paying for debt years ago. We read Dave Ramsey, paid off all our debt, and now actually have a nice nest egg and many income producing investments. I would recommend Dave Ramsey to everyone!

HollyP
HollyP
10 years ago

Another reason you made the right choice: you didn’t even mention potential medical issues. Eight years ago while expecting our second child, my husband & I decided to move. We bought far less house than we could afford, and it turned out to be a good thing. Our newborn had to have a year of medical treatments which were difficult to manage with two f/t jobs. Although dealing with a creaky old place was maddening at times, it gave us the flexibility for my husband to stay home for a year to take care of our kids without significant financial… Read more »

Chris
Chris
10 years ago

Debt is slavery.

Bev
Bev
10 years ago

Delaying gratification…In our era of fast food and instant everything…this concept is fast being lost. When it is embraced it never ceases to give rewards. If we can teach it to our kids it is one of the most valuable lessons they will ever learn. Good for you!!!!!

Meg
Meg
10 years ago

Very cool – and I think Dave will be proud of you. 🙂 DH and I have our own story of delayed gratification. We got married in ’05, at the height of the housing market. People kept telling us “you better buy a house, and right now, too!” We didn’t have much of a down payment, so what we could afford wasn’t anything worthwhile – we would have only been able to buy a condo that was slightly larger than our one-bedroom apartment. So, we saved and saved, and bought a house two years later – right when housing prices… Read more »

Nick
Nick
10 years ago

It can be difficult at times, especially with family members and close friends saying you should take the plunge, but you definitely made the better decision! My fiance and I have been experiencing similar pressure. Her family thinks we should buy a home now while the market is low. Sure, we might end up paying less until you consider that we have NO money set aside for a down payment. I will not do it, no matter how much they pressure us. We also are only using one car. It makes it somewhat inconvenient as public transportation isn’t an option… Read more »

ElvisKungFu
ElvisKungFu
10 years ago

Thanks April! Great story!

Mykl
Mykl
10 years ago

April, I’ve been buried in debt and I’ve been debt free. I much prefer the latter. Having cash gives you choices. Choices give you freedom. The verse which says that ‘the borrower is slave to the lender’ is lived out in the conditions of your building now instead of waiting. In your choice to delay the building of your house leaves your life and your freedom in YOUR hands, not the bank or the economy.

I applaud your choice to wait and build slowly. Enjoy building your dream.

Greg C
Greg C
10 years ago

If you live like no one else, your heirs can afford to give you a nice funeral.

Jessica
Jessica
10 years ago

I’ve decided I want to make big changes in my life, not only in what I’m doing, but how and why I’m doing it. The problem is I’ve been making choices based on fear for so long that I really have to think hard about why I’m making a decision now. I’m 29 and I recently decided that I want to go to college for the first time. We are a one car household, and I actually don’t even drive (again, out of fear). I’ve decided that I am going to get over this and get my license. But we’ve… Read more »

Greg C
Greg C
10 years ago

Some thoughts on this specific situation:

What about inflation/cost of construction,etc? Do you know what the cost will be in 5-6 years?

Can the husband start a business while still keeping his job? A lot of people do this.

Overall, I am in general agreement. The complications from doing a construction loan and regular mortgage/double closing make paying cash even more attractive.

Sam
Sam
10 years ago

I really enjoyed reading through your decision making process. Not that you need me to ratify, but I agreed with just about everything you wrote. The only question I had mimic’s Greg C’s, because of the housing slump cost of construction, supplies, etc. is a great “bargain” right now. You might lose out on that savings but it sounds like you’ll come out ahead.

We’ll be building a home at some point, we have the land, and its a daunting process.

Jackie
Jackie
10 years ago

Funny, I wrote about patience today too. (Or rather, dealing with the impatient feelings that crop up while patiently doing the thing that will be best in the long run.)

This sounds like an excellent decision for you. Whenever you get antsy about the waiting, just remember how trapped and anxious you’d have felt by going the ordinary route.

Mike
Mike
10 years ago

Hey April,

I felt a little overwhelmed reading that post. It seems like a lot is going on and a bit overwhelming. I’d like to chalk it up to your awesome ability to trascend your mood into your writing rather than my own jittery feelings. Haha.

My entire life is about delayed gratification – working too much, studying too hard. It’s all about the journey, right?

Nice post, April.

April
April
10 years ago

@Mike–Jittery is pretty much how I’ve been feeling, especially with the architect problems. That has been a major headache, and it’s not over yet. By the way, I love the name of your site. I had to go check it out based on the name alone. Those ninja cartoons are great!

Nicole
Nicole
10 years ago

Not feeling trapped is so important.

I remember your talking about building this house earlier and I vaguely recall that people on the comments were skeptical for some reason.

This more relaxed process seems so sensible in so many ways.

DH knows a couple that spends weekends literally building their own house. That’s a bit time-consuming too. They’re in no hurry, but they’re not much for socializing on weekends, for years.

April
April
10 years ago

@JP–Thanks for the comment. I think a lot of people see these choices as depriving yourself, when actually, you’re living according to what is most important to you.

@James–Believe me, delayed gratification is new to me, as well! It’s been very difficult to learn, and I’ve still got a long way to go.

J.D. Roth
J.D. Roth
10 years ago

When April told me she wanted to write about this, I was reminded of something I just saw in Belize. Kris and I were puzzled by why there were so many seemingly abandoned homes and half-completed structures. “What’s the deal?” she asked one of our tour guides. He explained that often, people in Belize will build their homes over a period of years. He did so himself. They can’t afford to build all at once, so they pay what they can to add on when they can, very much as April and her husband are planning to do. You don’t… Read more »

Chris Gammell
Chris Gammell
10 years ago

Slowing down on construction shouldn’t be too big a deal…just pretend you have a run-of-the-mill contractor. Their delays are about 5 years on average, right? I really liked how you phrased this story and I really think you’re making the right choices. Your slow, deliberate building of this house will allow you a lot of time to think over what you really want in a home. A suggestion I would have for you is to start using a program like Google Sketchup or some other modeling program for architecture (hopefully very simple to use) so that you can model your… Read more »

Tiffany
Tiffany
10 years ago

My fiancee and I are house hunting right now…it’s a great time to be in this position! House prices are at record lows and we could get houses we couldn’t dream of before…IF we push out budget up by 20-30,000. Our response…no way. We have student loan debt and are big savers. We want to have kids, take vacations, retire, and enjoy our life, not be working to have an extra bedroom forever. We’re going to get a much nicer “starter” home than we could have before the drop in house prices…and we’re going to do something radical and STAY… Read more »

April
April
10 years ago

To add to what J.D. said, my dad suggested this route in the very beginning, and I quickly dismissed the idea. I wish I had listened; we could have done a few things differently had I known I’d come around to it.

I wanted everything now. I wanted it built and my home life settled. I understand why some might not get why we are doing this because one year ago, I would not consider it, either.

Meg
Meg
10 years ago

JD, I think that most Americans try to build their entire house at once out of pride. We want things now, not later – so taking four or five years to build a house just doesn’t jive for a lot of people. I think this was especially true when banks gave out loans like they gave out lollipops – if you couldn’t get approved for a loan to complete construction, or if you chose not to get a loan, people probably thought there was something wrong with you.

Joan V.
Joan V.
10 years ago

I love the mantra and the whole post. My husband and I bought a tear-down on a beautiful piece of waterfront property ten years ago with the intention of tearing it down and building our small dream home. After a similar process to April we decided to wait until we were more comfortable with our finances, the offer from the bank, etc. We are still living in the tear-down, or serious fixer-upper. BUT we still can make our mortgage payment, have a savings, 401K, etc. and that’s after both of us losing our incomes (we were both self-employed)….me taking a… Read more »

Monique
Monique
10 years ago

“When you make choices outside of the norm, friends and family members might think you’re nuts. They mean well, and they’re only thinking of you, but some of them will definitely think you’ve lost your mind.”

I’ve had this experience more often than I’d like, and I’ve found that you’ll get this reaction no matter how thoroughly you’ve thought things through. The best way I’ve found to deal is to trust your own conclusions. Clearly you’ve done that too. 🙂

Good luck with the building!

Moneymonk
Moneymonk
10 years ago

@JP

You are my twin. I realized that living modestly is the trick. A house and car is mostly peoples problem. It takes up so much cash flow. If people can be conservative with just these two debts most people will be upper class.

Nicole
Nicole
10 years ago

#32 JD– I think the short answer is probably access to reasonably good credit markets. I don’t know much about Latin America, but that would be my guess. My guess would be that they would *want* homes right away if they had the resources we have here in the US.

ctreit
ctreit
10 years ago

When I got my first major raise, I went out and bought a new car almost immediately. We had been driving around in an old beaten up car without air-conditioning and I thought that we could afford the car payments. We could. But I hated the monthly payments. I also hated having to pay for comprehensive and collision on my car insurance which also cost a ton of money. I learned two things from this car loan. (1) Making more money does not solve your money problems. It can create (bigger) problems, because money finds a way to be spent.… Read more »

Marla
Marla
8 years ago
Reply to  ctreit

Buying a good used car that’s only about 3 years old can save you about 1/2 the cost of the car. Definitely better than losing all that value in the first couple of years.

partgypsy
partgypsy
10 years ago

You have resources that many people don’t have: having a place to stay rent free, a father who can do construction, having the land in your name, etc. Add that with your gut feeling and complications of a 2 time mortgage I think your plan to avoid taking on a mortgage is completely the right one. Five years is not too long to wait, especially as when you are done you have have both a house and NO MORTGAGE!

BibleDebt
BibleDebt
10 years ago

Congratulations on your decision! It would be an amazing feeling to have your dream house and actually own it 100%! Imagine the possibilities….apparently yo already have. Please update us on your progress.

quinsy
quinsy
10 years ago

April, this is a really good point that I think we always need reminders of. I’m a medical resident and since the beginning of residency, I have had an old style, gray and black screen candy bar phone that came free with my plan. All the other attending doctors, residents, and even the medical students have smartphones, mostly iPhones, and I have been envious. But every time I think about buying an iPhone, I remember that it is not the cost of the phone that gets you, but the monthly charge for the data plan (we don’t even have text… Read more »

Budgeting in the Fun Stuff
Budgeting in the Fun Stuff
10 years ago

We suck at delayed gratification…luckily we’re also frugal and love money or we would be very screwed up right now. I know we’ve rushed things a few times and have gotten lucky that everything has worked out. We’re working on this now. Congrats on your choice! I think it was the right one because of all the hoops you don’t have to jump through. I was wondering why you wouldn’t have been able to pay off the 30 year loan quicker? I think you made the right choice, but I was just wondering if they weren’t going to allow extra… Read more »

Beth
Beth
10 years ago

We are huge Dave Ramsey fans as well and I love the phrase “Living like no one else.” We’ve made the decision to only ever pay cash for things going forward. Our backyard is empty, covered with landscape fabric until we have the money saved to begin implementing the landscape design we want (probably another two years). Thanks for the article — it’s nice to hear about other “weirdos” who want to avoid debt.

heidi
heidi
10 years ago

Delaying gratification is much easier to do if you don’t keep comparing yourself to your peers. I think I’m the only doctor in town living in a duplex and driving a beater. My school debt it huge and this is fastest way to pay it off. am generally happy knowing this is the smartest plan in the long run, but am occasionally envious of my colleagues and their fancy houses etc…

Jarrod
Jarrod
10 years ago

Congratulations! You have made a difficult and IMHO correct choice. There are many paths to financial independence and this happens to be yours. While few would fault you for going into debt for a home, a few of us “weird” people giggle like schoolchildren when we see other “gazelle intense” individuals. My wife and I are both 33, have a 2 year old and are 100% debt free. When I went to the drug store to send the last house payment via certified mail, I told the fifty-something clerk how great it felt. He gave me a look I can… Read more »

Julie
Julie
10 years ago

I’m not sure about instant gratification or pride when it comes to finishing home construction. Don’t cities have codes or legislation about how long it should take to build a house here in the US? I can’t imagine neighbors enjoying the view of half-built houses, listening to construction noises, or telling kids to keep out of a potentially dangerous construction zone for years on end.

Tyler Tervooren
Tyler Tervooren
10 years ago

Congrats April! Awesome decision! A couple words of advice, if I may: Don’t start framing until you have the cash to get the whole house in the dry (watertight). The last thing you want is to have the most expensive and important part of your home sitting out in the rain for who knows how long before you have the money to finish it. You could run into rot and and mold issues down the road. No good! If you’re planning to continue with the same design/build firm, plan on paying around a 5-10% premium to have them build your… Read more »

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