Amounts of money can be relative to the person who is handling them. To some, $100,000 might not sound like that much money. To others, it can sound like a fortune. To me, $100,000 is a lot of money. Therefore, when I lost that amount -- and more in fact -- it was a significant financial blow; however, I didn't let this setback destroy me or my family. In fact, I think suffering through and coming back from this loss has made us even stronger.
Understanding Why I Lost That Money
A crucial aspect to learning from my loss was being able to reflect and better understand why I lost that money. My loss came largely from the demise of the real estate market immediately after buying our first home. We put a significant downpayment upon the home, meaning that we had quite a substantial cash position in the property. While in many cases this would have been a good thing, as the real estate market tanked around us, we found the equity in our home dwindling along with it. It wasn't the mortgage that was declining with a falling market but the value of our home.
Some people have mentioned that we should have just stayed put in our home in an effort to rebuild our equity over time. However, due to this neighborhood's continued decline, poor school system, and higher property taxes, this would not have been a feasible or reasonable proposition unless we planned to stay put for at least another 30 or 40 years or more, and that was never our intention in the first place. Therefore, it was several items that hit me as mistakes we made in our home search. It wasn't necessarily the fact that we put a large downpayment on a home, because in just about any other market that would have been a good thing. However, we didn't review the neighborhood or schools closely enough. We also didn't consider resale or the timeframe upon which we planned to stay in the home closely enough either. And finally, I lost that first $100,000 because I wasn't willing to sacrifice the well being of our family for money.
Learning from My Mistakes and Looking for Opportunity
Now I could have languished in self-pity about my loss, moaning about how I was never going to recover or it was too much of a financial blow to take; however, there are often opportunities in mistakes -- even $100,000 ones! I realized that while our home had taken a significant hit to its value, so had most other homes in our area, and really nationwide. Therefore, why sit in a home located in an area that wasn't beneficial to us and wait for its value to go back up over the next several decades, when we could do the same thing in a location that we loved? But this time we closely reviewed things like overall home values in the area and trends over time, quality of schools, property tax rates, transportation routes and area amenities, and similar aspects within our home buying areas of interest before making a decision.
Not Letting My Loss Hold Me Back
Forging ahead, and after much greater research this time, we sold our home at a substantial loss and purchased another home a year after we sold our first. This home had also dropped significantly in value since several years prior, and therefore we were able to get quite a deal on it, allowing us the possible opportunity to eventually recoup some of our initial losses. And this time we were able to purchase outright, eliminating the mortgage interest and mortgage-related expenses that proved so costly on our first home. In fact, it appears that without a mortgage, and with much lower property taxes and utilities than our last home, our new property will actually be less costly over time than renting an apartment and about a quarter the monthly cost of our previous home.
Had I let our first home experience scare us out of home ownership completely though, that $100,000 would have been a complete write-off. However, by learning from the experience, moving forward, and looking at that event as a learning experience rather than just a loss, we will at least provide ourselves with the chance to earn some of that money back over time and have learned some valuable lessons in the process.
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