Research shows that financial stress is among the top reasons couples get divorced. So why do we keep overspending on our homes?
In his new consumer education platform, TheMindfulBroker.com, Realosophy's John Pasalis extends the high quality, facts-based education we now benefit from in the areas of personal finance and relationship counselling to residential real estate so that we approach our basic need for a home successfully.
Research shows that financial stress is among the top reasons couples get divorced.
And for most people, housing costs are their single biggest expense.
Does this suggest that the home we buy today may be the first step towards financial stress in our relationship tomorrow?
Based on both the research and what I’ve seen in my practice as a real estate broker, I think it does.
So why does this happen?
One of the biggest risks for a couple buying a home together is overspending. Even though your bank has offered you a mortgage, many buyers quickly find out that what banks are willing to lend them doesn’t leave them with enough money to live a great life.
So Why Do We Overspend?
So the next question of course is, why do we overspend when we know that it will lead to stress down the road? Well, as it turns out, we don’t see things this way in the moment we are making decisions about which home to buy.
The way we buy homes is actually not that different from how we buy any other consumer product. Think about the last time you had to make a decision about stretching your budget on something you really wanted – a pair of shoes or a smartphone. Most us have a momentary internal struggle asking ourselves “should I, shouldn’t I?” We know we want the nicer shoes or phone but we know we can’t afford it.
Those with financial will power will go for the less expensive item while many of us will go for the more expensive one and keep that debt on our credit card until we can pay it off.
While we may not realize it, we actually buy homes in pretty much the same way. Many of us find ourselves in a situation where we find a home we love that is a bit over our budget and face the eternal “Should I, shouldn’t I”? struggle.
Should I buy the home I don’t love as much but feels more comfortable financially or should I stretch the budget and go for what I love?
It’s a valid question – but never a balanced one.
It’s important to know that whether we realize it or not, we are always biased towards the things we want more, the nicer shoes or the nicer house, so the ‘logical’ arguments we come up with will tend to skew towards why we should spend a bit more – as the experts would say: We tend to rationalize overspending.