Long-Term Thinking Pays Off

This guest post from Heather Roth is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. Heather lives and writes in Indiana, Pa., with her doctoral student husband and two ever-curious ferrets. She writes about life as a small-town journalist at her personal blog.

There were plenty of days when I resisted it, this making of budgets and accumulating of dollars in untouched bank accounts for “someday.” But standing outside the small, two-bedroom house we'd just bought on a hot August afternoon, everything I'd given up seemed small and unimportant.

I'm a reporter, complete with the legendary small salary and all. He's a doctoral student. And somehow, between good fortune and careful stewardship, we've found ourselves debt-free homeowners at age 25.

Our story begins years before either of us was born, long before we met.

Fortune and frugality
I had the good fortune of being the daughter of the son of an entrepreneur, and grew up seeing business opportunities around every corner. I also learned money management, watching my mother feed an ever-growing family on red beans and rice and potatoes and ground turkey.

By the time the man and I were engaged, I had received a sizable ($18,000) inheritance from my late great-grandmother's land investments — and an oft-repeated warning from my father to save every penny for a down payment on a house.

We started life together in the expensive Washington, D.C., area, and for several months struggled to live on his just-out-of-college income of about $35,000 while I looked for work. We had no health insurance, spent $25 a week on groceries, and loved visits from parents who always brought along canned goods and meat for the freezer.

We became pretty good at living on a little.

Homeward bound
I found my first reporting job four months later, one that came with health insurance, and we moved to a nicer apartment and raised our food budget by $10; it felt luxurious. But the rest of my salary was added to the savings account for a year and a half before being diverted to pay for my husband's master's degree.

We left the D.C. area in February of 2010, planning to live off my salary while he went after the doctorate. His assistantship would cover tuition, and the incredible drop in car insurance and rent in Western Pennsylvania made it easy to live on a smaller income.

We left D.C. about $50,000 worth of savings.

We didn't plan to buy a house in Pennsylvania. But when I saw the listing in the classifieds section of our local paper that summer — listed at around $49,000 — we had to check it out.

The kitchen was coated in old grease and hedges threatened to swallow the front porch. The house was old (1950s) and in need of serious cleaning and a lot of cosmetic repair:

  • Ancient, falling-apart and hideous carpets had to be pulled out immediately
  • The bathroom floor was cracked and cheap tiles were falling from the wall
  • The kitchen counters were probably original and haven't aged well

But structurally, it was sound. And grease and paint and hedges can all be taken care of with time and sweat and effort.

We bought the house for around $46,000 — just enough to cover what the seller still owed on his mortgage. And we immediately replaced the carpets with wood laminate flooring and attacked jungle hedges and mounds of drying vines.

Most of the work can be done in bits and pieces, and we can learn to do almost all of it ourselves. And there's a pride and a joy in looking around our home, with all its quirks and old paint, and knowing that it is all-the-way ours; and that every little update we've done is making it better.

We're still living carefully, though we're not adding much to our depleted savings account. But I'm more onboard with this budgeting idea now. Before it was my husband's motivation that designed (and kept) the budget; I tried to get away with splurging as often as I could, because I didn't see the long-term value over the short-term, stronger, desire.

Standing outside our home for the first time that August afternoon, I'm glad his long-term vision won out.

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Nicole
Nicole

Wow! Congratulations! I have a colleague who did something very similar with his first house and sold it at quite a large profit. That’s really amazing.

We, OTOH, were lured in by a bigger and more expensive house than we needed. I don’t think we could have found something for 50K (the housing market was still healthy and houses in that range didn’t have electricity), but we definitely could have gotten something closer to 100K than the more than 2.5x times that we paid.

Enjoy the firm footing you’re on and don’t forget to save for retirement!

Elizabeth
Elizabeth

I’m curious — how long was this purchase? I love hearing success stories like this, but found the context hard to imagine. (Currently, twice that purchase price buys you a trailer where I live!)

Congratulations!

Jen
Jen

I live in SW PA as well and I promise you that you can find *many* houses like this. You might not like the neighborhood (though many of them really are fine) and they will be in rough condition as described.

But they are here! We’re seeing a pretty big number of young 20s coming here or staying here for this reason. With sweat equity and some cash, they can own a house and even start a family on a relatively small income.

Elizabeth
Elizabeth

Nice 🙂 Prices definitely aren’t like that where I live (Ontario), but I know people who have moved in to “rough” neighbourhoods and fixed up places. A few “bad” neighbourhoods in my home town have been reclaimed as a result of people willing to buy fixer-uppers.

Cat
Cat

Hey Elizabeth – I understand where you’re coming from. I live in Ontario too (GTA!) and there’s no way you’d find anything that cheap. Maybe out in the Prairies..

Deborah+M
Deborah+M

I dunno guys, Ontario does have cheap housing too. Windsor comes to mind.

Brad Moore
Brad Moore

How does a couple live on $25-$35 a week for food? What were you guys eating?

Annelise
Annelise

Yeah, I found that weird, too. I suspect this couple would eat like paupers even if they had plenty of money. Some people just aren’t that interested in food, and will happily eat rice and beans their whole lives. I think that’s a little crazy, but to each his own, I suppose.

Tania
Tania

Dislike 🙁

Annelise
Annelise

No need for that, Tania. It was a legitimate question.

less
less

Eating for a small amount does NOT automatically mean that people don’t care about food — it could just mean they know what they’re doing and can cook good food for not much money.

Check out Thirty Bucks a Week (http://thirtyaweek.wordpress.com/), by a couple in NYC who have been eating for $30 a week for the past three years. I think it would be hard to say that they don’t care about food.

Jo
Jo

Annelise,
I think that your “legitimate” question is not a question at all. You are just assuming that this couple eat poorly, period. And not only that but you manage to do it in totally negative way, without even giving them the congrats they deserve for such an amazing accomplishment.

Becky
Becky

Brad,

Check out http://www.thestonesoup.com. This website can show you how to eat very well on $25-$35/week.

Heather
Heather

A LOT of beans and rice, potatoes, oats, pasta, making everything from scratch, and not a lot of meat.

Not fun, but not impossible either.

Joe
Joe

My family and I (wife, baby, myself) average about $25-$35 per person per week, and we do eat pretty well. A lot of it is by eating lots of fresh produce, buying meats in bulk and cooking from as scratch as possible. (e.g. cook from raw instead of packaged kits, passing on the pre-boned and skinned chicken packs)

indio
indio

Sweat equity makes the place feel as if it really is yours. Plus you get to customize it for your taste, not rip out what someone else did that you think is a horrendous color choice or can’t stand wallpapered rooms. I did a lot of work on my fixer upper too. Every appliance or tire the former owners ever changed was in this house when I looked at it. All this hard work helped the property value to increase significantly, even though home values are down over the past 3 years.

Deborah+M
Deborah+M

“every appliance or tire the former owner ever changed was in this house…”>.. that’s hilarious! Laugh or you’d cry for those folks.

20's Finances
20's Finances

Wow, congrats on the determination to save for your first house and also on the hard work it sounds like it took to revamp the house. Remodeling homes can be a lot of work and wear people out.

slug+|+sunkcostsareirrelevant.com
slug+|+sunkcostsareirrelevant.com

What an inspiring story! How fortunate that you grew up in such a savvy household AND learned to apply those same skills in your life.

siddhi
siddhi

Yeah husband! (and you too!)

Darren
Darren

Anytime I hear of financial success stories when someone inherited money I have to be suspect. While kudos go out to them for living a frugal lifestyle and living within their means, the fact is they would never have been debt free homeowners by 25 without outside help. If someone gave me 18k without me having to work a second job, living within my means or living a frugal lifestyle then I could declare myself debt free by 36! Inheritance is like winning the lottery, you came into money without earning it.

Elizabeth
Elizabeth

I’m sometimes feel that way when I read all this stories from couples — well duh! I could have saved more money if I’d managed to meet the love of my life early in life, but I didn’t.

I think we can all come up with lots of “shoulda, woulda, coulda” and “if only”s, but it’s important to remember the advantages we do have and make the most of them. I kind of like seeing how people do it, even if I can’t relate to their stories personally.

Nicole
Nicole

And not everybody with an inheritance actually saves it or puts it to good use.

Elizabeth
Elizabeth

Very true!

I think people have this ideal in their head of inheriting lots of cash from some relative they don’t know, but that’s not the reality. Most people I know who are my age (30ish) who have inherited money would tell you that they’d rather have their loved ones still with them instead.

Leam
Leam

Well, they “came in” to about a third of the money so I’m still highly impressed! Had I applied their discipline and wisdom my life would have been a lot better too, I think.

Clint
Clint

Suspect? Are you kidding? It’s just someone’s true story. And the inheritance was disclosed! Even if they had purchased the house with 50% free money it’s impressive. I’d say this would even be a success story without an inheritance and an $18,000 mortgage instead.

Jaime+B
Jaime+B

True. However, don’t forget that this couple also committed to preserving and growing that inheritance. They went from $18,000 to $50,000 – saving an additional $32,000 is quite an achievement. They did so by continuing to live below their means and making frugal choices. Just because an inheritance helped to kick start their down payment savings goal, doesn’t negate all of their other hard work. It’s not as if this was a story about them inheriting the whole $50,000 and using that money to pay down debt and use as a down payment. This was a story about a couple… Read more »

Beth
Beth

These guys had the right idea and would have been debt free only a couple of years later without the inheritance.

We purchased a house for $30K with $15 down last December, all earned by us (I’m 26, he’s 28). It will be paid off by May 2012.

Don’t get down on their accomplishment just because they used their resources to their advantage.

Dogs or Dollars
Dogs or Dollars

Our first home was similar; a small, fixer upper with a seemingly never ending list of projects. By the time we sold it 5 years later, the Husband was so sick of his honey-do list, and I was done with spending Saturday morning at the hardware store.

We moved on, perhaps to our own detriment.

My word of advice: Don’t burn yourself out.

Its amazing that its all signed, sealed, and delivered though. Congrats!

Holly
Holly

Amen. And may I add that once the kids come along, the progress on fixer-uppers will grind to a screeching halt. If ever you have time and energy simultaneously, you’d much rather spend it with your kid than wallpapering or planting shrubs.

I spent ten child-free years fixing up my first house. My husband and I sold it, bought another fixer upper that never got fixed up after our kids arrived.

Deborah+M
Deborah+M

Good for you, Holly… those are good priorities. Though I do hear an undercurrent of ruefulness too. Never mind… you’re so smart to be focusing on where it counts… your kids.

Tracey+H
Tracey+H

Wow, good for you! My daughter would love to guy a house like that here. Unfortunately, our city has only 1 property for sale under $150,000 and it’s a small apartment in a bad area. And she works retail so she’s looking farther away, but she’s willing (and able) to work on a fixer-upper. I just wish the prices here were like they are where you are.

Diane
Diane

Tracey+H – I’m going to tread very carefully here…Your daughter is an adult and it’s time for her to accept responsibility for her own decisions. She can get a better job, find a roommate, develop additional income streams, learn to live on pennies while saving her tail off. Your attitude: Is. Not. Helpful. I clearly hear your negative reinforcement here, when you could choose to be positive. Do you really wish the prices where you are would dip so low? What would that do to your home value ~ your local economy ~ your job security? Your daughter is in… Read more »

mrs bkwrm
mrs bkwrm

How did you get all those negative things about this parent and daughter from that one simple post? I’m trying to figure out if I missed a lot of stuff or if you just added a bunch of stuff from something a lot like prejudice.

Andrea
Andrea

Treading lightly? Her daughter can get a better job? Really, how do you know that? Do you know her daughter? I love people who have all the answers for other people. Now me, not treading lightly- I have found frequently that people who “have all the answers” and are negative about others- generally need to work on their own life- a lot. And these are people I know. That’s not you?- well, I don’t know you and you don’t know the young woman in question.

Becka
Becka

Whoa. What in the world just happened here?

El Nerdo
El Nerdo
Laura
Laura

I got the same impression Diane did. It sounds like the mom just accepted defeat due to the high housing prices alone. Most people can get a better job, a roomie, movie to a cheaper area, etc. there are, of course, exceptions; but the exceptions aren’t most people. I think Diane was just trying to empower mom n daughter, setting the bar a little higher because she has faith it can be done. At least, that’s the impression I got.

Becka
Becka

Be that as it may, she didn’t start the conversation off very well by lying about treading carefully. Her comment came off as judgmental, and it came out of nowhere.

Elizabeth
Elizabeth

What I got from Tracey’s comment was “Gee, I wish this story was possible for my daughter too.”

If my mother was reading this, she would probably say the same thing about me 🙂 It’s wishful thinking. Try not to read too much in to it.

JMV
JMV

Awesome! I also live carefully and have a goal of paying off my $51,000 mortgage in 6 years. I’m halfway there and it feels great! Wish I could have thought a little more long term in my twenties. I’m on track now and am excited about the opportunities I will be able to take advantage of with my big savings account someday!

Rozann
Rozann

Congrats on wisely saving your inheritance to use on a long term purchase. You are way ahead of the game.

Jacq
Jacq

Wonderful story Heather! I’ve had a few fixer uppers, it’s a great way to save on housing that many don’t want to take on. All I can recommend is to work on one room at a time. And take breaks in the process, it can seem like an overwhelming job at times.

Hannibal
Hannibal

A great story! Well done. Now you can think about saving and investing to provide you both (and family?) with an income for an early retirement
http://www.the-diy-income-investor.com/

Adam P
Adam P

The parking spots in my building cost more than this house.

Hurry up and crash, Toronto housing market. Please?

Elizabeth
Elizabeth

I hear you there! I love how people say “move some where less expensive” when they don’t really understand just how far away that is 🙂

Adam P
Adam P

It really is a totally different world, when housing prices (the largest chunk of my budget) can vary from $46k for a 2 bedroom house where this story is from to $350k for a small 1 bedroom condo where I live. Obviously, the difference in salary has to be taken into account between the places but even if salaries are double or triple in a place like Toronto; housing prices are 10 times more expensive…it seems personal finance formulas and advice have to be regionally adjusted (other than the universal spend less than you earn). This story just drives that… Read more »

Susie
Susie

Why can’t you move? People who care move to where what they want is possible.

Frances
Frances

“People who care move to where what they want is possible”?

Hmmm. Some of us who care live where our loved ones are. Even if that means we’re stuck with higher real estate prices.

In Calgary, $50K won’t buy the smallest lot in the worst neighborhood, let alone a house. These folks had a generous dose of luck and family help, too. Even their insanely low grocery budget — at least for here, land of expensive food — was padded with donations from parents. Good on them for using their windfall wisely.

Elizabeth
Elizabeth

@Susie — If I really wanted a cheap house, I could probably do it. It would mean giving up my career, my friends, family, community, etc. Heck, it would probably mean leaving the country. I could also give up my free time fixing up a house on my own and not network or date. (A friend of mine did that — not a good idea!) I also like having retirement savings and an emergency fund. (I’m several years older than this couple, so my priorities are a little different). A house just doesn’t mean that much to me that I’m… Read more »

Vanessa
Vanessa

Are you saying that you put almost your entire life savings into this home? Were there more savings you could use as an emergency fund? It makes me nervous to think you bought a home and had nothing left to fall back on in case of the unexpected. You were living on one income and bought a very old home, that’s a lot of risk!

Congratulations and I hope your risk pays off.

El Nerdo
El Nerdo

If you think in the further long term, researchers and academics often live nomadic lifestyles– particularly academics who need to move from place to place until they get tenure.

I”m curious– how did this enter into your long-term calculations? Does it look like you’ll make money in the house after you move?

Nicole
Nicole

Doctorates are generally at least 5 years which is the heuristic at which buying makes more sense than renting. (Though obviously people should examine their particular situation.) 🙂

El Nerdo
El Nerdo

Hey, it’s good to see you back in GRS. Did you go on hiatus?

Anyway, so are you saying that if you’re going to live at least for 5 years in a place it’s cheaper to buy than it is to rent? That is cool to know– do you have any references I could read online? (I’d like to see the math).

Thanks for this.

Nicole
Nicole

It’s just a heuristic– although housing prices go up and down, the trend is generally upward over a 5 year period. (I imagine JD talks about it in his book.) The NYTimes has a good calculator for your individual rent vs buy situation.

Re: haitus: still on that. Work is busy.

El Nerdo
El Nerdo

I don’t know the contents of JD’s book. Is it in there?

I wish you could guest-write the analysis for GRS when you have time again. If I had money, I’d hire you.

Nicole
Nicole

Haha, I’m pretty expensive. But thanks! If you want my writing for free, check out our blog, especially on Mondays. There’s a fascinating analysis of why flat taxes aren’t “fair” a couple of weeks ago. (If you’re into that sort of thing.)

MC
MC

7 years in, my house is worth about half what I paid… don’t use rule of thumbs to make personal decisions. Do the analysis and own it based on your own personal understanding. I recall my understanding 7 years ago, prices are inflating at rates greater than personal income. Thus buying sooner than later, given there was nothing out there about price declining precipitously, buying was what I needed to do. If I had extrapolated my logic a bit I may have drawn the conclusion that prices are inflating at rates greater than personal income, meaning, this is unsustainable and… Read more »

Ann
Ann

I’m still trying to wrap my head around the purchase price. Where I live, that might get you a parking stall outside of the downtown core. (And, please, don’t anyone tell me to move to another location to save on costs. A higher cost location is how I have my higher-paying job so my outrageously priced apartment condo is fully mine and not the bank’s.)

Nonetheless, congrats. I’m thoroughly impressed by the food budget because that’s my budget for one person.

Ru
Ru

I’m with you on this one, I jokingly tell people “oh, you can buy a house in the USA for 50K”. I didn’t realise it was actually true! While I think it’s great that this couple saved diligently to buy their home outright, I think they are very lucky in several respects- finding each other, inheriting the cash, and being able to get a home for $50K. Living in London has totally distorted my view of how much a place to live should cost (although to be honest, I don’t think you could find a functioning home anywhere in England… Read more »

Andrew
Andrew

Ah, the “downtown core!”. I’ll bet you’re in Canada.

Now that I’m back in the States I have to get my Toronto fix from Sandra Rinomato, Mike Holmes, and Gail Vaz-Oxlade. And the real estate prices are no cheaper in Boston.

Tyler Karaszewski
Tyler Karaszewski

I appreciate that saving $50k is no easy task, even if $18k of it was given to you, but I’m not sure the title really applies. What is the “pay off” in this article? You’ve traded $46k for $46k worth of property. Unless the house is actually worth much more, this is the same as buying anything else at a fair price in terms of “paying off”. Sure, you have no debt, but interest rates are historically low right now. You could have purchased this home with 20% down and had a mortgage payment of probably under $200/month. That’s ridiculously… Read more »

megan
megan

I was thinking the same way. It would have been neat if the OP had ended the story with some kind of reason as to why being debt-free really helped (besides the obvious point that being debt-free lightens the load on a young couple). It would have been neat if, for example, she’d ended the story with how they’ve got a substantial nest egg to their names.

babysteps
babysteps

One reason debt-free makes more sense the less a home costs: many (but not all) banks have minimum mortgage amounts (often $60,000-80,000 or so), since the bank has to do a similar amount of work to originate any mortgage, so the profit from a small mortgage doesn’t look so enticing to the bank after subtracting its costs. Also, a home with a lot of needed repairs may not qualify for a mortgage at many banks, or at least not a ‘regular’ mortgage (might have to do as an “investment” property, or the bank might require you to borrow enough to… Read more »

imelda
imelda

See that “rent” or “mortgage” line in your budget? They no longer have to worry about that.

That’s their payoff.

Elizabeth
Elizabeth

I think the real pay off is not having to pay interest on a mortgage. They’re always going to be paying maintenance and repairs whether they had continued renting, paid a mortgage or paid it off outright.

Jane
Jane

Great read. You bought a house at the bottom of the market (or pretty close) and are living there. Your sweat is going into making it a place to live. You could be making 1% in the bank–or losing and gaining money in the market –depending on the day. Instead you chose to make sure you have a roof over your head while hubby gets a degree that he desires. I am betting you can sell it for what you paid for it in a few years- or maybe slightly more. It isn’t a huge money maker- but few tangible… Read more »

KM
KM

Congratulations on the savings…but am I the only one who cringed when thinking of the amount of work and money fixing up this house will require? Even if you bring the sweat equity, building supplies needed to do the repairs are not cheap. Also, I have a doctorate myself—it’s hard to imagine her husband will have any time to help her work on the house while he is getting that degree. Hopefully it will give them a cheap place to live for 5 years and then they can sell it for at least what they bought it for. Hope it… Read more »

Cea+Wall
Cea+Wall

well done you two !! you made the right decisions early in your lives, and you can breathe easier now that the major asset in your lives has been purchased and paid for.

When you continue your lives with as much attention to your budgets and your expenditures (and emergency fund and investments) you will have a prudently-run life that will have living well, well into your post-retirement years.

My kudos to you!

margot
margot

I love stories like this that show it’s possible to live frugally – while being happy – and save money on any salary. Your grocery budget is awesome and impressive! And very doable, though most people seem to think it’s impossible and won’t reconsider groceries and cooking enough to help them save. It’s great how much money you saved (aside from the inheritance) on a low salary in an expensive city. I wish everyone realized how feasible this is if they’d just make different choices and reprioritize.

Marcia
Marcia

Thank you for an encouraging story. I’m not in the market for a house just yet, but I appreciated your encouragement to think long term. Seeing beyond the day to day needs/wants and into the future helps me to take into account not just the needs I have now, but also the needs I will have in the future.
Enjoy making your home beautiful!

AnnW
AnnW

Congratulations Heather! It is amazing to me that most of the commenters have negative things to say. You obviously saved $32,000 in a few years despite a wedding. Fix up your house and make a big profit when you sell at the end of your husband’s education.

Vince Thorne
Vince Thorne

Congratulations! This is tghe kind of inspiring story that needs to be told more often.

Lucille
Lucille

Great story but for most couples this is unrealistic. These people are well matched; I’ve had a bumpy financial ride on the relationship front and am steering clear of men, egos and money!!
I’ve found that once you add a few children into the budget that’s when all hell breaks loose!

Becky
Becky

Thanks for sharing such a great story! You are proving that “today you can live like no one else so that later in life you can live like no one else” as quoted by Dave Ramsey. I am proud of you!

Lane
Lane

I think it’s great you don’t have a mortgage and something tells me you will not have a problem saving for other investments either. I’ve not had a mortgage in 11 yrs and it is the best feeling.

Alcie
Alcie

What a fabulous story. We did something similar when my husband was getting his doctorate, only we lived in a slightly more expensive area so did the down payment + mortgage thing rather than buying outright. My only suggestion is to remember to take breaks; don’t work on the house all the time, or you will burn out. But also don’t pay too much attention to folks who tell you that it’s too much work for the payoff. We made back 160% of the money we put in, after subtracting real estate, interest, and materials costs, when we sold toward… Read more »

Leslie
Leslie

Congratulations. It is not easy to stay the course when mass marketing and societal wants keep trying to pull us of track. Budgeting isn’t always easy but as you saw first hand, it pays off if you stick to it!

Robin
Robin

I absolutely love this story. So inspiring! Congratulations! It was very smart of you to leave the DC area. When we sold our house back there (with nearly $100K left on the mortgage), we were able to pay off the mortgage and purchase a home outright, with cash, when we moved to the SW. Oh, and our DC house? Built in the 1950s, great bones but definitely outdated. We made all of the improvements ourselves (saved a bundle, as you can imagine), and it made all the difference when the time came to market our home. It got snapped up… Read more »

Trina
Trina

I’m very surprised by all of the negative comments about how what this couple did just can’t be done. Or how they only did it because they got an inheritance (a pretty small one, IMHO), or because they moved to SW PA, or, or, or, select the excuse of your choice. Many of us out here are doing these things, with children to boot! I only bought my home a year ago, and I am one year away from paying off my mortgage due to agressive payments. Having no debt gives you choices!!

kathrynd
kathrynd

What a great story!! We are also frugal people and never feel deprived. Some people like buying shoes, I like buying rental properties. They are usually simple and basic.Makes them easy to rent.
When i want a new pair of shoes, well, the last pair I bought were $1.12 at a thrift store 🙂 They looked brand new. It’s your mindset, and the thrill of the bargain for me.
We travel for 8 months of the year in Australia, and housesit..so living is basically free.
You just need to think outside the box, people.

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