It was 2003. I had a job doing development work for a non-profit, and my wife was in charge of an operations department of a trust-company. In an effort to focus on debt-reduction, we had lived in an apartment since getting married. But our son was getting older, the apartment seemed to be getting smaller, and we were getting anxious to become first-time home owners. And since we had made significant progress on our debts, we felt we were ready.

While my job didn't pay a ton, it could help us afford the essentials. My wife made decent wages, and we had good insurance through her job. So between the two of us, we were doing all right. Our apartment was in a good school district, so we wanted to stay in the area. We both had been in apartments since around 1993, so having our own space and a yard were important to us (and the thought of a garage was sheer bliss). Other than that, there were many questions still to answer.

Should we get brick or vinyl? Ranch or 2-story? Quantity of space or quality? These, among other factors, are always a consideration. But there was a bigger factor at play here: cost. And this is where home buyers can get in trouble, buying too much house.

You see, at the time, lenders were asking, "How much house can you afford?" with the implication being, however much you can afford is what you should buy. And that becomes the dominant factor in the buyer's mind, "How much can we afford?" This was and still is the WRONG question to ask.

I'm not sure why this mindset doesn't permeate most all of our other spending decisions. I mean I'm glad it doesn't, but why not? When you're at a restaurant, do you order based on what you can afford or on what meets your goals of taste, appetite, value, smell, nutrition, and so on? You don't likely open a menu and say, "Because I can afford the lobster, that's what I'm getting. Yes, I'm allergic and I'm gonna swell up like a tick. And no, I don't like eating giant, wet bugs that reek of salt and death. But I can afford it so by golly, I'm getting it." While cost may somewhat dictate which restaurant you visit, my point is that it's not your primary basis for what you order... or at least it shouldn't be. You should base it on your goals.

So when it came to our first house purchase, we asked not what could we afford, but what could we spend and still be in line with accomplishing our goals. What were our goals?

  • Eliminate remaining debt.
  • Continue to increase our giving each year.
  • Send our son to a Christian school.
  • Allow my wife to stay at home if she desired.
  • Getting a house big enough to allow for more children but not so big so as to be too much to manage.

So we turned down bigger and nicer houses in bigger and nicer neighborhoods. Instead, we found a great little house in a great little neighborhood that allowed us to work toward our stated goals. We bought a house that we could afford on just my income because that was the single biggest factor in allowing us to work towards ALL of our stated goals.

And why was that the best spending decision we've ever made? Because literally two hours before the closing on our house, I lost my job. Two hours and totally out of the blue! Just like that, our income was cut by about 40%. And it would stay that way for the next nine months, until I came back to work for Sound Mind Investing in 2004. But we would be okay on just my wife's salary because we bought the right amount of house.

Why else was it good that we bought what we did? Because it allowed Kim to become a full-time stay at home mom in the summer of 2006.

Why else was it good? Because we were able to get Jordan into the school we wanted.

Why else was it good? Because we eliminated all of our debt (minus the house itself) while in that home.