WOMEN AND MONEY
Dream big, but keep it practical
If getting the house you long for requires the appearance of a fairy godmother, an inheritance from out of the blue, a winning lottery ticket, or stretching your finances to the point that the dream is destined to become a nightmare, then you need to reshape your dreams. What good are they if they have little chance of coming true or will lead you into a financial mess? The best are the kind we can make a reality. And I’m here to tell you that you can make them happen — if you learn how to dream the right dream, the one that makes sense for you. What I call practical dreaming.
• Be realistic: Sure, it’s fun to check out luscious magazine spreads, but don’t base your housing dreams on someone else’s. If what you can swing is a $1,500 monthly mortgage, there’s no point in setting your sights — for now, anyway — on the $5 million Malibu beachfront property or the 10,000-square-foot Central Park penthouse.
Create a dream you can achieve, the next step that works for you. If you’re renting a small studio, dream about a condo of your own. If your family has grown and your house hasn’t, dream about a place with one more bedroom and a backyard big enough for the jungle gym your kids want.
• Be patient: Even the most clear-eyed dream takes money. And money is typically what keeps us from converting dreams to reality. If you really want to change your housing situation, you need to commit to saving, and that demands patience as well as discipline. Depending on your current financial situation and the scope of what you want, saving enough for a down payment may take a few years.
But remember: Your dream starts coming true the minute you commit to socking away money. Every month you put something aside, spending less in order to save more, puts you a month closer to the dream.
• Be smart: Don’t go in over your head all the while praying that conditions you can’t control will adapt perfectly to your needs. Your mortgage or renovation budget should not be based on the hope that at some vague, blissful moment down the road you’ll have a higher income so you can pay off a loan. There is simply no guarantee that’s how things will work out. A scheme that requires holding your breath for the financial planets to align in your favor can become a disaster.
• Be creative: Most of us want more space than we have. We hit the listings in pursuit of our bigger and better place. I say slow down and take another look. How about dreaming of turning what you have into what you want — that is, renovating rather than moving? It can make great financial sense. Let’s say you bought a house or refinanced a mortgage in the past few years (assuming you had a strong FICO score at the time), and you’re paying about 5 percent on a fixed-rate mortgage.
Trading up now for a new home would push the interest rate on the loan to 6.2 percent. Add to that the commission to the broker who sells the old place and the closing costs on the new one, and you’re talking serious outlay. And don’t forget moving costs, or the fact that a more expensive house means higher property taxes and insurance. Not so dreamy after all, eh?
So before you make the open-house rounds, consider what you have. Do you really need a new house — or would the problem be solved by a beautifully redone bathroom or an extra bedroom for guests? Renovating rather than relocating can be the smarter financial move, with one caveat: Don’t go too far beyond the neighborhood’s basic level, upgrading to the point where you have a Taj Mahal bursting its boundaries on a block of ranch-house subdivisions.
The rule still applies. Go for what you want, but don’t go overboard. Find your practical dream.
Suze Orman is a best-selling author and Emmy award-winning TV host whose books include “Women and Money” and “The Road to Wealth: A Comprehensive Guide to Your Money.” For details, please visit www.suzeorman.com .
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