The 2 Big Differences Between Overspending on a House vs Anything Else

It turns out that it may be harder to justify spending $1,000 on a pair of shoes, especially if it’s a lot higher than what we’d normally pay.

But buying a home is a decision we don’t make as often so we have no baseline numbers to compare, and it is a far more important decision, so it’s easier, perhaps with the help of our real estate agent, partner or parents, to tell ourselves stories that justify a more expensive home.

We say things like:

It’s better to stretch ourselves for the right home than buy a home we don’t love as much.

This will be our “forever home” – if we buy the other home we’ll just have to move again in five to ten years.

This home is a better investment.

This home is safer for the kids because they don’t have to cross the street to get to school (or because the backyard is bigger for them to play in).

Our stories turn overspending from being irrational into the most rational thing in the world.

But when we overspend on pair of shoes or a phone, our worst case is that we have an extra $200 or $2,000 debt that we have to pay off. Once we pay it off, over the next few months or year, it stops impacting your life. It will have damaged our finances in the short-term, but not the long-term.

But when you overspend on a home, even just once, it impacts your life for a very long time. High debt payments take a big chunk of your income every month – whether you like it or not and whether you can afford it or not. You have less to spend on your kids, your trips and everything else that’s important to you.

And it’s this lasting impact that adds stress to relationships.

If you no longer have room in your budget for all the things that make you happy and find yourself arguing over money, what good is the ‘forever’ home?


How Do We Avoid Making the Mistake of Overspending on a Home?

The first step to avoid overspending is to just be aware of the risks that overspending on a home can have on our lives and on our relationships. How much you spend on a home is actually the single biggest decision that will impact whether you feel financially stressed in the years ahead or not – so it’s important to spend some time to ask the harder questions about our finances.

Then, we need to be mindful of the tricks our minds can play on us when we are trying to make a hard decision about a home. Even the most well organized and financially savvy person can fool themselves into overspending in the heat of the moment when looking at their dream home. So before spending way over your budget for your dream home, remember to step back to make sure that the decision you’re about to make is the right one.

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About the Mindful Broker


John Pasalis is President of Realosophy Realty, a Toronto real estate brokerage which uses data analysis to advise residential real estate buyers, sellers and investors.

A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market.  His research has been shared with the IMF and cited by the Bank of Canada and CMHC.

A frequent commentator on the Toronto housing market and real estate consumer and industry issues, John has contributed to the Globe and Mail, CBC, BNN Bloomberg, TVO’s The Agenda, Toronto Star and other media, government and industry organizations. He most recently advised the Government of Dubai on international best practices for the real estate sector.

John holds a B.Sc. in Economics from the University of Toronto and is a candidate in the Doctorate of Business Administration program at the University of Toronto and Henley Business School (UK).

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