Why bring it up here? Because part of the process that often brings people from rags to riches to rags has to do with folks not thinking about the costs of keeping large assets. Its easy to think that if I end up with a million dollars on my doorstep, I could buy a $750,000 house for cash and still have a quarter mil lying around. A lot of people think this way, especially since those at the lower end of the economic ladder tend to pay cash for things out of necessity. Here's the problem though....That $750,000 house with no mortgage still costs a ton to hold onto. A house like that in a good neighborhood will be subject to some pretty hefty property taxes and will cost a fortune to insure. Then comes the electric and other utilities required to heat and cool it. There'll be yard maintenance and anything that breaks will cost an arm and a leg to replace. The ongoing expenses will rapidly eat up the remaining chunk of change in the bank. Multiply this scenario when there are cars, boats, and other expensive toys involved. It's not the stuff that's the problem, its the cost to keep the stuff.
Once the maintenance costs exhaust the remaining money, a downward spiral begins whereby items need to be sold to satisfy the costs on the remaining items and so on until everything is gone and we're back to the "economic default." Of course it doesn't always work that way. Some people are savvy enough to handle large sums of money even if they have never seen more than $500 in one place, but many aren't.
So what's my point? It's easy to get starry eyed about a boat or a larger home or perhaps a few personal watercraft...especially if there's a bunch of cash sitting around. It just happened to me. I had the opportunity to buy a great urban condo in a class A location. I figured since it was a condo, I wouldn't have to mess with maintenance...but someone has to do it and it costs money. Last I checked, that monthly cost was called "common area maintenance," and for condos downtown in historic buildings the charges can be steep and can increase without notice. There are still property taxes involved and since there's no street parking, I'd have to buy or rent a spot in the nearby parking deck. All fine and dandy until I come home with 10 bags of groceries in the pouring rain and need to walk a block and a half before I climb four flights of steps. Even at a bargain price, the place will cost more than my very cool apartment when I add in all expenses.
So why would I buy the place? Because somewhere in the recesses of my mind, it would be cool to own it. That's it. No numbers come into play. Not until I was uttering expletives at my silliness as I'm writing checks adding up to more than I was paying for something that was more convenient, cared for at no expense to me and had free repair service if something broke. Yup...I rained all over my own parade. My very cool apartment will have to do. And my advice to the lottery winners? Invest the after tax winnings and live off the interest. Go see the world and skip the big house and fancy car...Those things won't make you happy. Nor will a cool downtown condo.
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| So tempting. I want it. I just want it. I can afford it. Waaaaah. |
