My wife told me recently that she has a master plan for our house. This news wasn’t shocking to me. My wife has a master plan for everything. Her mind thinks in terms of plans: weekly plans, monthly plans, five-year plans. She is a teacher and former scientist, two jobs that require structure and precision. Oh, and planning.
We decided recently that we were actually, definitely (for real this time!) staying in our house. We’re not going to sell; we’re not going to move. We’re going to stay where we are and make our house the exact house we want it to be. In my wife’s master plan, this involves a good amount of work: a few walls knocked down, a couple of new walls erected. Full baths created en suite (whatever that means), and some kind of shrubbery with magical sound-blocking properties. The best thing about my wife’s intense planning is that it makes our financial goals very simple. She figures out exactly how much things will cost and we make a plan to save. We’ve never started a project until we had the cash to pay for it.
This time, as we looked at all of the projects laid out ahead of us, my wife asked a very reasonable question that put my stomach into knots.
“Couldn’t we take out a second mortgage to pay for this stuff?”
I quickly shouted a response that came deep from within the primitive caveman region of my brain: “No! Debt bad!”
My wife went on to explain what she meant. We’re always talking about how we’re not paying our mortgage early because, in general, it makes more sense to invest our extra cash. Our mortgage rate is under 4%, making the stock market a good long-term bet. Even if we saved up the money for our house projects, she asked, wouldn’t it make more sense to invest that lump sum and take out a second mortgage to pay for our projects? Wouldn’t we come out ahead?
As always, my wife’s logic was thorough. It was mathematically sound. It was using one of my own arguments against my logic (always a great tactic). So I probably went right along with it, right?
This would be a good time to laugh. The fact is the idea of another mortgage still puts my stomach into knots. I can’t foresee a time when I would choose to take out a second mortgage, even if it were the better decision. Does this mean that I’m allowing my emotions to stop me from making the “right” decision? Or is my stomach communicating a truth deeper than simple math?
To me, this is what makes personal finance worth writing about. Anyone can explain why compound interest is good and why debt is bad. No one is going to argue that 8% is higher than 4%. Most financial concepts are mathematically very simple. But personal finance isn’t just math. It sits teetering on a fence, with math on one side and psychology on the other. It gets blown around by outside forces: the economy, personal experiences, and emergencies. In personal finance, there are real limits to what math can tell us.
In my case, I know that having another debt source would make my life feel worse. I’d always be thinking about it, and I’d be trying to think of ways to wipe it out. The fact that taking on debt was objectively the “right” decision would be small comfort. This is something I should fix about myself; it’s probably tied up in my thrifty New England upbringing. But I can’t snap my fingers and change it. As long as I’m this version of myself, I have to make realistic decisions that line up with my personality. Part of that is avoiding unnecessary debt.
So we’ll save up a little bit of money, like we always have. We’ll amass it slowly, and dole it out bit by bit as we complete projects. When it’s all done, we’ll have the house we’ve always wanted. It won’t be the right decision, but it’ll be a good decision for me. I’ll sleep soundly at night. And what’s that worth?
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