Saturday, May 17, 2008

Renovation without debt

It's been a long time since I've had the chance to just read through other folks' houseblogs and catch up with the goings-on at I found it interesting to poke my head in there today and see that two of the featured topics are both related to building and renovating houses without debt.

I guess that technically we don't qualify to be considered in that category: After all, we do have a six-figure mortgage, and a small (think smaller most new car loans) second mortgage that we took out to consolidate (and make deductible) my student loans and pay for some medical bills. We also have about a year left on one of our car loans.

But we have zero credit card debt, and all house renovations are strictly on a cash basis, and it's going to stay that way except for any kind of serious emergency. This year we're completely renovating the upstairs bathroom, putting a new roof on the garden shed, painting the garage, and refinishing the dining room floor, though we're only doing maybe half that work and paying someone else to do the rest. And it will all be with cash, without touching our emergency money.

What's weird is that it doesn't seem to feel like we're making any big sacrifice to do that, though according to many folks reactions to our no-debt policy, we should be gnashing our teeth and wailing with the pain of having to hold back on spending. And it's not like I've always been good about staying away from debt: Just nine years ago I was told by my accountant that I had no choice but to declare bankruptcy because I had more credit card debt than I usually make in a year, but I managed to get it all paid off by simply doing without anything I didn't seriously need for the 7.5 years it took me to get from that point to being credit-card debt free.

But I think that going through that process made me a wee bit debt phobic, plus it taught me (through no real choice at the time) to do without unless I really needed it and could genuinely afford to pay for it. I'm glad that I'm to the point where it just feels totally normal to think in terms of waiting until we can pay for something before we do it. It doesn't feel like we're sacrificing or doing without, and it doesn't feel like we're doing anything special or difficult.

My only real emotional reaction to making this choice is exasperation when folks make a big deal over it: No, we haven't taken a real vacation in years. Yes, that sounds like a terrific price for a cruise but we'd rather put that money towards fixing up the house. Yes it gets frustrating to not have a dishwasher but we need to wait a couple of years until we save up enough to renovate the kitchen. Yes it would be great to do some major moving of walls and electric and plumbing in order to not have to live with a 7x7 main bathroom or a 9x10 kitchen but that would put those related renovations way beyond what we'd ever be able to pay for in cash and still do in our lifetimes so we'll renovate within the space we have. Yes it would look wonderful to have a professionally landscaped yard with a masonry patio but we can't afford it in the near future. Yes, we don't have the nicest furniture in the world, but we just have other priorities. Other folks seem to have a lot more need for instant gratification with regard to things around our house than we do, and it sometimes just gets on my nerves and feels rather judgmental (like there's something wrong with us if we're truly ok with not taking vacations or having a sofa that we got off freecycle). I honestly with they'd just freakin' deal with it and shut up!

But mostly I don't think of it as any big deal, and with all of this economic uncertainty surrounding us, I feel very blessed to be in this position.


fred@opc said...

You are to be congratulated. Kim and I talk about this frequently -- the propensity for folks to take on debt to do home projects. It's not to say that that's always a bad thing, but if you aren't doing it yourself, its VERY hard to net back a profit in the value of the house. Even when you are doing it yourself, it's not cake to make sure your design/upgrade decisions will outweigh the cost of the upgrades and the interest you'll pay.

As for student loan debt - that's an investment (as long as you use that degree). Almost every large business uses debt to leverage itself into a more profitable situation. Student loans are *good* debt. They leverage you into a higher earning bracket and therefore pay for themselves. Almost every kind of debt except business / student / home is bad (the worst being unsecured consumer debt).

We are on a no-debt policy for our house. In fact, we're working aggressively to pay down the mortgage - something our friends think isn't that wise because "you can invest the money and make more than the interest." But, there's an intangible benefit to getting out of debt early, and that should not be dismissed. To us, it's worth it not to be chained to a mortgage.

Anyhow, that was a really long comment, because I'm VERY passionate about this subject. Great post - and great job staying out of debt for home rennovations.

Leslie said...

Thanks, Fred! Yeah, the student loans were definitely justified, particularly since it was for a master's degree that led directly to a pretty significant raise - I teach, and pay is based on a grid based on level of education and number of years experience.

We're working on paying down the house, too. Not by huge amounts right now, but as soon as the car loan is paid off, that will go towards mortgage, and ditto for the 2nd mortgage. We want to be mortgage-free by the time we retire, which hopefully is less than the 28 years officially left on the note.

And I loved the long note because it's something I'm very passionate about as well. Someone recently compared me to an ex-smoker who talks incessantly about getting others to quit, since I'm an ex-extreme debtor who is now very passionate about avoiding consumer debt and living well within your means. said...

We are in the odd position of agreeing whole-heartedly with your position and looking like we're absolutely opposed.

We just managed to get our debt virtually eliminated, and then we bought a full gut rehab.

I've never had so much credit card debt in my life and I'm adding to it almost daily.


On the other hand, I bought the property right, it's what I want to live in, and when all is said and done, I'll have converted all that CC debt into a mortgage that is less than my current rent. Theoretically. :O

Fortunately, the CC debt is all 0%-3%, too, so it makes sense.

The bottom line, no matter what is that debt should be for things that appreciate in value or earn money or both. NEVER for consumer items.

That doesn't mean you shouldn't have credit. You should. You should use it and pay it off strategically, for the purpose of improving your credit rating so that when you SHOULD use credit you can.

In any case, congratulation on your sane and beneficial lifestyle.