Today, MyBankTracker chats with young, married couple Julie and Josh, who recently purchased their first home in Los Angeles. They reveal what the process was like…
MBT: Tell us about your backgrounds, what you do for work, how long you’ve been married.
Julie: We’ve been together for 6 years and married for almost 3. We both work in television — I’m an editor and Josh is an associate producer.
I immigrated to the U.S. with my family in the 80s from the former Soviet Union. We came here with just one suitcase per person and maybe $200 cash for four people. I grew up in Hollywood and West Hollywood, only ever living in small apartments. I watched my parents learn English, go to school and start careers from scratch. Over time, with the drive and persistence typical of immigrants, they became established and comfortable.
Josh grew up in South New Jersey on a 200 acre family farm where his grandmother, uncles and mom all have homes on the property. He comes from a Quaker background, the underpinning ideology of which is to live simply. His experience in terms of finances while growing up is the opposite of mine. When he was a kid, his parents were well-off. However, in his preteens, an ugly divorce essentially bankrupted them and the successful business they owned.
When we met in L.A. in 2007, we never imagined owning a home here. Prices were so prohibitive that it didn’t much factor into the plans we began to build for our future. Then, as the housing market crashed and our needs changed, we began to consider our options.
MBT: What did your parents teach you about money? How did your upbringing help you manage your money as an adult?
Julie: Both my parents have a huge aversion to credit cards and debt of any kind. This is ironic since my dad works in the credit card industry. My family always had the attitude that paying interest is a ridiculous waste of money.
My family also taught me not to spend money frivolously. The only extravagant thing my parents ever spent money on when I was growing up was my education. Not caring about image was tough — my L.A. private school classmates made fun of the crappy used Toyotas my parents both drove. Now, I’m so proud of my little two-door Toyota Yaris which I bought new in 2007 for $12,500 and paid off less than a couple of years!
Josh: In my younger years, I was pretty spoiled. I would see a commercial for a toy, ask my Dad for it, he would in-turn say “ask your mother” and eventually I would get the toy.
Once I was older and my family’s financial status changed, my mother had to raise us on credit. She despised credit so much, and always told me to only use credit cards in an emergency. She didn’t believe in paying for things you can’t afford with money you don’t have. Even though she was not in a position to take her own advice, it really sunk in for me. There is only one time where I paid for something with money I didn’t have and couldn’t afford, and to this day it is still a small blemish on my credit report.
MBT: As a married couple, who is more conscious about money?
Julie: Josh and I are both extremely conscious about money, but in different ways. I like to buy lots of things, especially if they’re on sale! Coming from communism where it was hard to buy toilet paper, much less all the consumer options we have here today, I am easily tempted by things like clothes and home decor.
Unlike me, Josh could go for months without buying a single thing. He likes to shop around for months for major purchases or even a pair of shoes. I like to buy whatever I want first (if it’s not expensive), THEN I think about it and return what I don’t love or need. (Continued on page 2: find out what their biggest money mistakes were!)
MBT: What’s the biggest money mistake that you made?
Julie: The biggest money mistake that I’ve made was probably buying this house! Just kidding. Though that does remain to be seen.
It was also probably a mistake to have been in escrow on a short sale for, I don’t know, something like 8 months and missing the boat on cheaper properties we maybe could have bought, but who knows what would have happened!
Josh: One of my biggest mistakes happened in college, when I needed a computer for editing because I didn’t want to walk to use the school facility that was a staggering two blocks away! I decided to visit the Apple store, and since I was a student, they were more than happy to finance a refurbished Power Mac G4 with Final Cut Pro for me.
At that point I had never used credit in my life, and did not understand fully what an APR was. I had no business getting this machine with the measly salary I earned at my school jobs, nor did I understand the responsibility that came along with it. I missed some payments, and in the end I think I paid more than double for that computer, and it damaged my credit.
MBT: What’s the best money decision you made?
Julie: Paying off my credit cards the second I had my first full time job after moving back to L.A.! Buying a cheap car and living in a cheap apartment for 5 years… and buying Apple stock in 2002.
Josh: Marrying Julie. She is much more financially savvy than me.
Julie: That’s not true — I like the logistical aspects of dealing with money, but Josh is the one who taught me to not waste money, by being more patient with purchases.
MBT: As individuals, what is your approach when it comes to spending and saving?
From the moment we got married, we merged our finances we stopped having an individual approach to spending and saving. We discuss everything and make decisions as a unit. If we can’t come to a decision on a purchase, we wait.
That’s why we never changed apartments; we couldn’t find a better one that we thought would be a better value. We also try to never resent each other for spending money on a personal luxury. In the end, things usually even out anyway and even if they don’t, that’s okay. That allows us to discuss purchases and expenses objectively and make decisions together.
Julie: Josh’s attitude of researching and looking around until you find the exact right thing for a good price rubbed off on me! I’ve learned that if you are patient you will eventually find something that’s perfect and reasonably priced. At the very least you’ll have taken the time to figure out what you really want so that it can truly be a long-term purchase.
Regarding savings, I got used to saving money when I was a 1099 contractor for the majority of the time I worked at my old job. I would save money in a high interest account to be able to pay thousands of dollars in taxes at the end of every year. Since our living expenses were never beyond our means, the occasional splurge on a trip or really expensive restaurant didn’t throw us off. Now that we own a house I get to learn how hard it really is to save!
MBT: How long did it take to save for your first home, and what was the process like?
Julie: We put our savings toward a down payment in a high interest savings account. For our wedding we got a lot of cash gifts, and that got us started. First we used a Schwab checking, then we moved it to American Express Savings. The interest we earned was low, but it was better than nothing.
We had been used to cutting out certain luxuries on occasions when we had only one income. In general we’ve always cooked a lot instead of eating out and we really don’t like to spend a lot on clothing.
In the time that we’ve known each other we’ve only taken a few big trips, even though we love to travel, because it can be expensive and usually meant unpaid time off work. We never paid for a landline phone or Internet at our apartment. We exchanged our friend and neighbor’s WiFi password for our Netflix and Hulu passwords. That’s yet another thing that has had to change since we bought our house.
MBT: Finding a decently priced home in a decent neighborhood in L.A. can be a challenge. How long did it take to find your home, and explain what the process was like.
Julie: We started our home search about three years ago. We looked at lots of different things in different neighborhoods. At first we weren’t sure what we wanted, our incomes were lower and we hadn’t saved as much for a down payment. We made a couple of low-ball offers that happened to be in the Glendale neighborhood, where we ended up buying.
We had already looked at countless homes, and here was a condo in a prime neighborhood that would have been unfathomable for us to afford a few years before. The property needed a lot of renovations, but we considered it. With bank owned properties, “as is” means “as is.” We considered that the HOA was $500 for what seemed like no reason. And we ran screaming.
We searched for months and even put in an offer on a short sale. Long story short, the second lender rejected our offer.
When I landed my first four-month gig of the new year, I went on Redfin, and just on a lark upped the price range in my search by $30K and found our house!
It was the right size, great layout, right number of bathrooms and a great neighborhood. We knew we wanted it before we ever saw it. Our agent got our deal through — full price, no conditions. Then, already $1,500 into our home search, we paid for an inspection and of course found some problems.
Even though our terms had no conditions, we still presented a request for repairs. This is an old house, built in 1929, and the garage and chimney both essentially need to be completely rebuilt to be fully functional again. Also, we noticed that someone had gone around and broken the latches that lock all the windows and put nails in the drains, broke the drain stoppers, etc. (Someone was mad and wanted to create a nuisance for the owner.)
We know lots of people looking for homes right now, continually outbid by higher offers or cash buyers. To our surprise, the investor who owned our house came back with a $6,000 credit toward closing costs!
MBT: What’s the biggest challenge now that you guys are homeowners?
Julie: Since we had been in escrow twice before, we didn’t give our 30-day notice at our apartment until we had our keys. In the next 30 days, we proceeded to try to fix the little things that had been vandalized: the window latches, the drain stoppers, leaks here and there. Everything proved to be a lot harder than it seemed. Several trips to Home Depot and Lowes every weekend cost hundreds of dollars each time, since we didn’t have any tools, like shovels, rakes, ladders.
When we had the gas turned back on and moved in, we discovered that since our inspection, the water heater had been vandalized too! We had been too busy to notice. We lived without hot water for five days and then finally called a plumber. That first month after we got our keys was probably the hardest in our lives. On top of that, Josh started a new job at the same time, which meant we were spending early mornings and every weekend working at the house in Glendale, while packing up our lives in Hollywood.
Josh: The biggest challenge is not spending all of our money right away. It’s a constant struggle between need and want at this point. We can see the potential of this house and we want to make it happen as soon as humanly possible. But, everything costs so much money. A thousand for plumbing, $300 at Home Depot — it adds up very quickly. We have to make sure that we are careful with our spending at this point since we really haven’t seen the full financial impact of the mortgage, insurance, bills, on our monthly finances.
MBT: What do you love most about being a homeowner?
Josh: Being in a nicer neighborhood and not making rent payments.
Julie: Definitely having more space, inside and outside! And making our own choices on what things will look like.
MBT: How has owning a home changed your finances?
Josh: Our savings is not what it used to be, to put it lightly! That will take some time to rebuild. We certainly cannot go out to eat and drink as much as we used to, but that’s fine because now we have a house for that.
Julie: Our financial lives are completely opposite of what they were before. Instead of saving money we feel like we’re hemorrhaging money. We keep a spreadsheet of our expenses and now that we see just how quickly things have added up, it’s a sobering experience.
I’m trying to get the image of our money gushing out of our bank account out of my mind, because I have a feeling that as long as I see it that way it will stay that way. I’m also trying to be patient and take time buying things that aren’t an absolute necessity.
MBT: What’s most important to you when it comes to your finances and future?
Josh: It is very important to me that we are not “house poor.” I want to enjoy this property and not have it be a burden on our finances, and our lives. We would also like to start having children soon, and it’s important that we can afford to give them every opportunity they need to succeed.
Julie: It’s important to me that we make good decisions on expenditures for this house that add to it’s resale value. We also need to rebuild our safety net as soon as possible so that we don’t have to worry about not having our next job lined up when the current one ends, or choose our projects out of fear of being out of work instead of based on what we enjoy working on and what will build our careers.