“Mommy are we poor?”
My husband and I told our three children last night that we need to downsize to a smaller home and are selling our home. My younger child asked, “Mommy, are we poor?” Looking around the family room at our large screen HDTV, Wii, X-Box, healthy collection of video games, movies, music and oversized L-shape couch, one would think not. The truth is, we are living beyond our means. We are house poor and broke every month with a $2,500 monthly mortgage payment. We are late on every loan payment. Our CPA has advised us to short sell our home.
Downsizing is the best solution for us. We are moving to an affordable rental and plan to file bankruptcy once the short sale is complete. We are still young, our children are still young and we feel certain that a fresh financial start is in the near future.
A dream come true?
An ambitious, self-employed techno geek, I moved here from California to avoid state income tax. The local chamber of commerce soon provided me with the information I needed to introduce myself to every new business in town. Soon, I had to hire a staff to keep up with customer demands.
In 2005, I drove by a builder sales office and saw a huge line of people wrapped around the building. Curious, I stopped and went inside to check out the sales model. I couldn’t believe the large price tag! Nevertheless, what attracted me most was the floor plan, which offered a large walk-out basement, meaning I could work out of the basement and avoid office rent. I got excited about the idea and put my name on a long waiting list for the very expensive home.
A few short months later, the builder drew my name in the weekly lottery. I drove as fast as I could to the sales office to pick out colors, elevation plan, etc. I could not believe my good luck — a beautiful new home with a low, interest-only payment for the next two years.
The dream only lasted from 2005 to 2007. Starting in the summer of 2008, one by one mys clients started to need my services less and less, telling me, that budget cuts were coming by December of 2008, I had laid off most of my employees. My interest-only mortgage had gone up substantially and it became harder and harder to stay afloat financially. By December 2010, with barely a handful of paying business clients, I could no longer make the high mortgage payment.
Downsizing is no longer an option. I had to make a choice between keeping my home or keeping my business. I have since short sold my home and personal vehicle, but kept the business. I now live in a small apartment and look forward to owning a home again, but this time a smaller more affordable one.
Empty nest, free birds
After 35 years of home ownership, our children have long since left to attend college, found great jobs and started families of their own. We’ve started to talk about getting rid of this big house and using the profit to get something cozier. We’d like to be able to travel to see our children and grandchildren without being tied down. But the question is, in this economy, can we sell our big empty nest?
Yes we can! Downsizing was definitely the answer. We found a luxury assisted-living apartment closer to downtown and things started rolling — square dancing, ice cream socials and vanpool trips to Lake Tahoe. We have no regrets. In fact, we have booked roundtrip tickets to visit all our children in the next 12 months. This downsizing decision has turned out great and we are free birds.