With a new home comes lots of excitement. After all, home ownership has been deemed part of the American Dream. If you’re a recent homebuyer, congratulations on your new home! My financial message to new homeowners is Avoid the Debt Trap.
You may be asking yourself, what is a debt trap? Let’s take a closer look. According to Dictionary.com, here are the formal definitions of each:
- Debt – a liability or obligation to pay or render something
- Trap – any device, stratagem, trick, or the like for catching a person unawares
How do you Avoid the Debt Trap? Beware of going into debt to decorate, spruce up or beautify your new home. These home improvements/enhancements can really add up and before you know it you could find yourself in $15,000+ debt.
I remember walking into our first new home and picturing all of the things I wanted to do. You know like painting, landscaping, ceiling fans and more. Sound familiar?
We moved from a one bedroom apartment into a 3 bedroom and 2 bath single family home. By the time we moved in and unpacked, there was still an echo in the house when we talked. You know the kind of echoes you hear when the place is nearly empty. If you looked around, you’d see plenty of space and a lot of bare walls to do plenty of imagining.
This was fine for us because my husband and I are frugal and we decided to decorate our home — one room at a time. We agreed that we’d pay cash for anything that we needed to buy. Since we bought a new construction home, this required us to prioritize items such as appliances (e.g. washer, dryer) and window treatments first.
Although this was our plan, my friend had a different opinion. She suggested we furnish the entire home and take advantage of the two years to pay it off credit offer. She could not stand the fact that we had so little furniture in the home. We did not even have couches in the family room, because we donated our old set to the Salvation Army.
I respected my friend’s opinion, but we decided to stay with our original plan to pay cash and take it slow approach. Plus, we wanted to buy high quality furniture at the right price, which we knew would take a little longer.
My friend’s intentions were good and I must admit that her visits would have been more pleasant if we had listened. I learned one important lesson here, which was not to donate my furniture until I had new furniture on the way! 😀 Because it took us months to find the family room furniture we were looking for at the right price.
Thankfully, being comfortable with our decision to take it slow helped us Avoid the Debt Trap! If we decided to completely furnish our home, we may have found ourselves in $10,000+ debt.
Here are some tips for new homeowners to Avoid the Debt Trap:
- Evaluate Needs vs. Wants. Do you really need those new flat screen TVs in every room? Just because you’re moving into a new place does not mean you have to replace all of your old stuff.
- Prioritize. Prioritize needs over wants. Then, consider the level of importance prior to making purchases.
- Don’t give into peer pressure. Remember you are the one paying for it. Do what makes sense for your budget and be comfortable with your decision.
- Buy high quality items to minimize the need for repurchases. We all know the saying “you get what you pay for.” Sometimes you can find great deals on gently used high quality items.
- Save for large purchases. I have found that delaying gratification leads to more appreciation and better decision making.
- Shop around for the best price. Shopping around can really help you save big bucks. Sometimes competitors beat others prices plus 10%.
- Think of credit like money. Pay off your statement monthly or before accruing any finance charges.
- Resist the urge to “Keep up with the Joneses.” They bought a new car, so you have the urge to buy one too. Dare to be different. Besides, your last name is Lee (fill in your last name here – sorry if your last name really is Jones) for a reason.
Do you have any other tips to Avoid the Debt Trap? Would you like to share your personal experience? I’d love to hear from you on this one, please add using the comments. 8)