Making Mistakes: Part 5

I wish you could see me right now. It's 8:30 am. I am in bed. My wrinkled pajamas and bed head clearly indicate I haven't traveled far in the few hours I have been awake. I got out of bed long enough to get the laptop out. The iPad is streaming a show next to me, and my 2 year old is watching a movie on my phone cuddled up to my side. I almost made a commercial for Apple with this image. All I need is a runny nose and cloudy weather outside and it would be justified. I think I am getting sick.

But I am stalling.

This is the mistake that really got the entire ball rolling on this series, and I don't know if I am ready to tackle it. Oh, I've been rolling it around in my head for months, but am I ready to make it public? In a way I already have long ago, under different circumstances, but here it is again.

Deep breath.

I hope you believe it when I say I do believe every situation is different and what may look like a mistake to one is exactly the right choice for another. It's up to each of us to decide what is right for us. I really do believe it. I hope you do to. Age and experience does that to a person. Lots of experience.

Now that all the appropriate disclosures have been made, read on.


Mistake #5: Buying a home.

There I said it. Before you disagree with me, keep reading. Buying a home is a mistake IF the timing is wrong. My history with housing has produced fairly strong feelings on the subject. Buying a house is always a big decisions, but now that we are at this junction in our lives it is huge. It's not something to rush into or take lightly.

What is the first thing that everybody wants the minute they graduate from school and move for residency, or pass from residency to the real-life? What you had before was real too, but you know what I mean.... that life that everyone told you was waiting around the corner and would be a shifting point in your experiences. Everybody wants a house. There isn't anything wrong with that. Or at least I hope there isn't. I have been carrying around a photograph of a house and floor plan that I saved from a magazine from the year 2007!

After fellowship we were completely unprepared to buy a house. Of course, we wanted one. By all accounts we deserved a house, and not just any regular house: we deserved a dream house. The word deserve drives me nuts. And we can certainly afford one. Can't we?

Yes our income skyrocketed, but most of the time you still need a down payment to buy a house. (Yes, there are some loan products available for doctors with zero down - but don't be fooled, there is always a catch, like higher interest). Unless you are going to buy a house identical to the one you lived in in residency - it is going to take time to get it together. More than a month. The more you put down the more favorable your rates, and the more leverage you have.

You may be wondering how this mistake is my mistake? Well I don't know if it is a mistake yet or not. We sort of bought a house - but that story is too long to tell today.

Here is a warning, given in love, from someone who was very, very recently there:

Nobody likes moving twice. So buying a house directly after residency/fellowship is tempting. Take your time. You have waited so long already, can you give it another 6 months?

Get a feel for your new city. Yes, you can research online but there is nothing that compares to being on the ground and getting a feel for a neighborhood. Listen to the sounds, watch the traffic. Notice the location of grocery stores and schools and power lines. It can't be replicated through online research.

Get a feel for your new income. There are going to be some shocks (taxes) and other expenses that you never dreamed of. You may not actually have as much to work with as you think you will. And even then you might be surprised to find out that what you have doesn't buy as much as what you thought it would. If you have deferred your student loans you will also be adjusting to that expense that wasn't previously a consideration. There is an adjustment period that will take place before you know what is really your disposable income to work with.

Do you plan on giving generously to worthy or unworthy causes? Do you plan on traveling extensively? Do you want to buy furniture one day? Will your children be attending private school? How do you image utilizing the money you earned?

If you buy a house before getting your other ducks in a row you will be working around a house, possibly at the expense of your retirement future, and the lifestyle you want for the present. If you put your plans for the future in place first you can confidently plan for a house that works for you not against you. 

Banks are eager for the business of a new doctor. They will always lend you more money than you need. They aren't interested in whether or not you are able to save 20% of your income after the house payment is made... they just want you to make the house payments. They don't work for you, they work for the bank. What's good for the bank may not be what is good for you.

Suggestions:

Retain the services of a financial planner that you trust and who understands the unique circumstances of your profession several months before you start the "job". 

Most of us are starting careers at least a decade, or more, after our counterparts in other professions. The majority of us have no speakable assets and an abundance of liabilities. The hole is really deep and we are significantly behind the curve. Not to mention we have a limited window of earning opportunity for savings before desired retirement.

Do not trust the bank who is lending you the money to tell you how much you can afford. You need a third party who knows your spending/saving goals to help set a realistic budget for a home.

Only a professional can help you make sense of what this means for you. You have stepped into a new world and need help. You DO need help. This is not the time to do it yourself.


P.S. Yes, I will write about our potential house experience soon.