To attain a large sum of money in a relatively short amount of time it is necessary to prepare, work hard, budget (even if you don’t create a formal spreadsheet), and restrain yourself from fruitlessly spending money. It also helps to be well educated and to pick a career that yields a high paycheck.
But as I peek over my assets I must admit that timing also played a large role in my finances. Just after graduation I moved in to a group house in the city. If you want to save a ton of money on a small salary I highly suggest finding some roommates.
Around that same time my boyfriend, now husband, began thinking about purchasing a home. Unlike me, he made a decent salary out of college, and felt that he was throwing money out the window by continuing to rent.
Since my husband and I weren’t married at the time, he proposed buying the house himself. He would put his name on the mortgage and the deed and I would pay him rent. I didn’t like the idea of letting my rent money fly out the window while he earned equity so I offered to purchase the property jointly. We created and signed a whole series of private agreements including how much we would each pay, (I couldn’t pay nearly as much as he could), how we would split bills, and how we would split equity if one of us decided to leave.
In 2001, my husband and I stretched our finances to purchase a home. We put a 12% down payment on the house and unhappily paid PMI (Private Mortgage Insurance) to secure the loan. A year or so after we purchased our home housing prices began to skyrocket and interest rates began to plummet. The boost in home prices provided us with over 20% equity in our home. The additional equity allowed us to say goodbye to PMI. Rather than signing up for another 30 year fixed mortgage, we refinanced into a 15 year fixed. We now pay roughly the same for a 15 year as we previously did for a 30 year with a higher interest rate and PMI.
Purchasing the house in 2001 was one of the smartest decisions we’ve ever made. Our house is currently estimated at over $600,000. Had we purchased a home after 2001 we would have a much larger mortgage and a higher interest rate. Would I call it luck? Possibly. Timing definitely? Of course, it took a lot of work, savings and discipline to purchase the house in 2001. We had to tightened our purse strings and wallets a lot in those first few years. But the fact that home prices were so much lower than today definitely helped. In fact, due to the low mortgage payment on our home we were able to purchase a beach home just four years later. (Again that wouldn’t have been possible without saving, penny-pinching, and discipline.)
In thinking about timing I am now looking to the stock market. Although I hate to see my brokerage accounts fall in value, I am hopeful that bi-weekly 401(k) contributions will provide the opportunity to purchase deeply discounted stocks.