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Wednesday, June 12, 2024

What is House Poor? What it Means + How to Fix It (Expert Tips)


When two incomes turn to just one

“I’m done. I’m not working anymore.”

That’s what David’s wife told him in March 2015. The two were sitting in their car after just seeing the first ultrasound images of their unborn son.

By this time, his wife switched careers and worked in real estate. She was pulling in a lucrative $175,000 a year while David made $80,000, allowing the two to live comfortably.

But when she saw the first images of her son, she made the decision to stay at home to support her child.

“I just told her, ‘Okay.’ I fully supported my wife being a stay-at-home mom,” David says recalling that fateful moment. “Looking back now, it was definitely the right decision because my son is one of the happiest kids you’ve ever seen. But at the time, it put us in a bind.”

Part of that bind included roughly $30,000 in credit card debt. With a child on the way and the family turning to a single income, there was no way they were going to be able to pay it down anytime soon.

And then there was the mortgage payment for their home. What was once a marker that the couple had “made it” soon became a painful weight on their shoulders.

“We had the credit card debt on top of the $2,200 a month we were paying [for the mortgage],” David says. “I was making only about $80,000 a year. So it was probably close to half our income with just me working.”

Determined to keep the home, the couple began to look for solutions. His wife’s real estate business still had a few deals left, so they were able to take advantage of the extra income. They also refinanced the home twice but the payment was still sitting at $2,200 a month.

“For some people, [$2,200 a month] isn’t a big deal. But for us, it just wasn’t going to work,” he says. “We lived in such an expensive area. It was a place where you have to have two incomes or I had to get a higher paying job that required me to travel to New York every day. And that’s something I just didn’t want to do.”

He adds, “I value the time I have with my family much more than making the ‘big bucks.’”

Unless they did something soon, the young family faced insurmountable debt and even foreclosure.

“I cried.”

David and his wife began to discuss their options — including the possibility of selling their house.

“There were a lot of late nights,” he says. “A lot of car rides where we just discussed it. We knew our situation meant making decisions we didn’t want to make. And we ran the numbers every way you can think of too. We tried every way to keep us in that home and it just wasn’t going to work.”

The two looked at areas where they could cut their spending. They made their budget a priority. They considered cutting luxuries like cable and selling their car.

Meanwhile, the couple ran the numbers constantly, trying to untangle the Gordian knot of their financial debt. It went on this way for months.

His son was eventually born before they came to the only logical conclusion: They had to sell their dream home.

“There was no way we could do it,” David says. “So we kicked off the process of moving out.”

The family put their house on the market and began the search for a new home on the weekends. Throughout it all, the feeling of despair and the ever-present pang of nostalgia were always close by.

“When I realized we had to do this, and I put in for the transfer [at work], and we had the house we loved on the market, I cried,” David recalls. “We loved that house.”

He continues, “On our last night in the house, my wife and I walked to each room and we said all the memories we had for that specific room. It meant that much to us.”

What “adulting” looks like

So the family moved out and stayed with David’s in-laws until they found another home two hours away in Gettysburg, Pennsylvania.

While it isn’t exactly like their former house, the home and neighborhood did provide a number of benefits, including:

  • Lower cost of living. The house they bought ended up being roughly $100,000 less than their old house. The monthly payment is almost $1,000 less as well.
  • Close proximity to his in-laws. David’s wife’s parents live a short drive away from the home, which is fantastic in case of emergencies. “Fortunately, we were able to move to an area where my wife’s parents are just 45 minutes away and we have their help,” he says.
  • Great job benefits. With his job transfer, David was also able to negotiate a pay raise including telecommute days and the occasional Friday off — which means even more time to spend with his son.

After moving into the new home, the couple began to pay down their debt. With his wife taking on a consulting gig and David building out his side hustle in Run the Money, they were able to finally take control of their finances again.

“That’s what ‘adulting’ looks like,” he says. “It’s making decisions and sacrifices like this — and I would do it again.”

The family is almost two years into their new home, and while they miss their old house, they wouldn’t trade their current situation for the world.

“It’s amazing how it all worked out,” he says. “We’ve been really blessed. It was a difficult situation but it goes to show you that sometimes those situations you go through in life are all about taking that leap of faith. We all want things to go well. Sometimes it doesn’t, but for us, it couldn’t have worked out better.”

David adds, “I get to be home with my son and daughter. They get to grow up in a beautiful neighborhood, and it’s all because Mom and Dad made an #adulting decision.”

What to do if you’re house poor

If you’re house poor too, you’re not alone. 44% of Americans are “liquid-asset poor,” according to a study by Prosperity Now Scorecard, a nonprofit dedicated to affecting economic policy change to “rebuild prosperity in America.”

But, as evidenced by Shaun and David, there is hope. While these two homeowners are separated by over 2,000 miles and make different salaries, they both made one key decision to help them stop being house poor: They found ways to earn more money. 

And if you’re house poor, there’s a wealth of systems you can employ to help you earn more today. That’s why I want to offer something to help you out:

 

 

The Ultimate Guide to Making Money

 

In it, I’ve included my best systems to:

  • Create multiple income streams so you always have a consistent source of revenue.
  • Start your own business and escape your dire financial situation.
  • Increase your income by thousands of dollars a year through side hustles like freelancing.



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