We bought our dream home as home prices were reaching historical highs. I remember real estate experts at the time saying the housing bubble would never burst.
Even though we are living in our dream home now, we gave up a lot to get it. We still give up some things in order to keep it.
According to an article by The Street, a lot of people are tempted to make the wrong financial decisions because of the "buy now" and "interest rates are at historic lows" rhetoric they hear.
The article cited a survey by Century 21 Real Estate that showed renters say they would sock less money away in their 401(k) plans in order to have their dream home.
A fat retirement account
Without a doubt, my husband and I are contributing less to our retirement accounts in order to make our mortgage payment of $1,222.02 every month. Like the majority of people out there, I never used to max out my 401(k) plans, but I did save a higher percentage. Now I am just saving enough to get the company match. I used to think my dream home would be an automatic savings account for retirement. Even with the recent housing recovery, our home is still worth $65,000 less than we paid for it.
Before I became a homeowner I travelled a lot for enjoyment. Now I have to worry about paying for home owner's insurance, property taxes, home owner association fees, lawn maintenance and pest control. If we had purchased a less expensive home, we would be less inclined to buy more expensive furniture and appliances and more inclined to spend money on experiences. We can't take as many vacations because we need to pay for our dream home. I should have used a rent versus buy calculator to figure out if buying was my best financial move.
Although buying a home has affected my finances, it's also limited our flexibility. I no longer have the ability to pick up and move. If my younger son wanted to attend college in Colorado or another state, I wouldn't be able to move to establish residency for a year so he could receive in-state tuition. Obviously, we could sell my home, but it would be at a loss.
Money in the savings
In order to purchase our dream home, we had to come up with 20 percent to put down. That made it easier to qualify for the loan. But it also meant draining all of our cash in savings. In order to stay in our dream home, our emergency savings fund takes a major hit every month. I used to pay a monthly check of about $600 for rent. Now I'm spending twice that much on housing.
Although buying a home make look more attractive and rents are now soaring, I tell my friends to think carefully before buying. A dream home can become a nightmare if financial times get tough. Then again, if we could have purchased our dream home when prices were this low, we'd be set for life.
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