Was I wrong to get a little mad?

[LaChatteNoire]

Sorry, this is a little bit of a long explanation...

 

For some background information:

 

I've been with my bf for a little over a year and a half and things are wonderful between us. We've known eachother for about 7 years. We don't argue and we're on the same page about almost everything. I'm 21 and he's 22.

 

So now, a few days ago while we were driving from a small function, he mentioned to me that he thought that me being $20,000 in debt at 21 is not a good idea. (Wait! Before you think I buy many unnecessary things, I need to let you know that I bought a house when I was 19 as an investment. It was a rent house and needed work. I got it for $25,000 less than its appraised value, and I thought that was a great deal. I also have an interest rate of about 4%, not too bad. I understand that being in debt is not something that anyone wants, but unless you are fortunate to have a well paying career or have funds coming in from other sources, it's almost inevitable.) I replied that I think that my decision to buy and fix up this house was a good idea, because I can sell the house later and come out with a profit. He responded by telling me that my house is not liquid and it isn't an investment. He said that I'm paying interest and I'd be better off living in an apartment where I wouldn't have any debt. I got mad then because I really think that it is an investment and that it was a good idea. I said that, and he responded by saying that -enter famous man's name who knows a lot about money and invesments here- would tell me that it was a bad idea and that I should get an apartment. I didn't really say much on the way back to his place.

 

So I don't really care if I'm right about it being an investment, but was it okay to be mad? We had a talk the next day and he told me that he hated that I got mad just because he had an opinion. But to me it seemed more like he was telling me that a decision that I made with the house was wrong and that I was stupid for doing that. I know he didn't say I was stupid or wrong, and I'm not putting words in his mouth, but that's the way I felt. I told him that I didn't get mad because he had an opinion, it was because of the way that he made me feel by what he was saying. I don't think he really feels he was wrong by anything he said, and that's okay. He's a very opinionated kind of guy. He did apologize that what he said made me feel that way.

 

So what do you think? Silly to get mad over it?

[Art_Critic]

Where did the debt come from ? Credit Cards ?

 

If the debt is sitting on Credit Cards then I would have to agree with your BF that 20k in debt at age 21 is a warning flag that you cannot manage your credit and this should be a sign of worse issue regarding credit/misspending to come.

Just because a company offers you credit doesn't mean you should take it if you are trying to be financially responsible.

 

If the 20k in debt comes from fixing the house up and repairing the disrepair then your BF is wrong and the debt isn't a warning flag of worse things to come.

 

So.. where did this 20k in debt come from ?

By the way.. the house is an investment.. that is a good thing you did at such a young age and you should be proud of that...You BF is wrong about the apartment conclusion that you would have more money by living in an apartment.

[LaChatteNoire]

No, I have no debt from credit cards. The house was purchased for about $50,000, $10 of which was paid with cash, and the rest was a $40,000 loan from the bank, and half has been paid off since 2005. That $20,000 is just part of the mortgage.

[Art_Critic]

Well then..

Your BF is speaking out of his azz.. he is dead wrong...

 

It isn't the same kind of debt.. there is such a thing as good debt.. and your house is good debt.

It is a good responsible way of spending your money..

[Art_Critic]

I think your BF is jealous and he is trying to make himself feel smarter than you by tearing down something good you have done in your life.

 

Props to you girl..

[Trimmer]

LCN:

 

Your boyfriend doesn't know what he is talking about. It may scare him, the idea of you taking on some significant financial responsibility when you are so young, but damn, girl... Good for you!

 

You need to understand an important distinction: you are NOT "in debt" in terms of owing more money than you are worth. You have "some debt" (the $20k mortgage) but here's how an accountant would look at it: Based on the appraisal when you bought it, you own what sounds like a $75k house, right? (we'll assume for the moment that it has stayed steady in value in the last couple years...) And you owe the $20k mortgage on it. In the financial world, that means you are sitting on $55,000 of "equity." Assuming you have no other debts of any size, you, as a 21-year-old have a positive "net worth" of over $50k, and there aren't many young adults who can say that.

 

There are lots of other financial subtleties about your situation that are good and solid: the loan-to-value ratio on your house is low ($20k loan on a $75k house: below 30%,) which means you are not highly "leveraged" and you look really good to lenders. You say you have been fixing up the place - I have assumed that the value has stayed at the $75k level, but is it possible that as a result of investing this "sweat equity" that the value of the house may actually be greater? If so, that's just more value on your balance sheet, your net worth.

 

Incidentally, a roughly 4% interest rate on the outstanding $20k mortgage translates to only about $800 of interest per year. The rest of the principal you pay in your mortgage payment effectively goes directly to your net worth - at this point your mortgage payment is a kind of a very effective savings plan.

 

Imagine moving to an apartment (which is just silly anyway) take your likely monthly rent and multiply it by 12. That money disappears forever. Compare that number to the $800 you are paying this year in interest, and tell me which one you would rather pay for the privilege of living with a roof over your head.

 

Plus, as you point out, the potential appreciation of your home value is a bonus on top of all that.

 

Here's what I would love to do, if I were in your position: look at the rental market in your area, and estimate what you could get for rent on this house if you rented it out. Once this house is fixed up, in a year or two, go buy another one and move into it, then rent this house out. You may well find that the rental income significantly helps make the payments on whatever debt you need to finance the next purchase. Then you are owner of two homes (both appreciating, you hope), and someone else's rent is helping pay your housing expense.

 

I think your friend doesn't understand real estate finance, and therefore it scares him. You "have debt", but you are not "in debt". Your net worth is over $50k, and you are doing great!

 

If you, yourself, are concerned at all, go spend an hour or two with an independent financial planner (one you pay by the hour; not one who gets commissions on stuff he sells you.) Educate yourself about real estate finance, about the market in your area, etc. Use him as a tool to become confident about what you are doing. I am really impressed that you are doing this at your age. That's a great start.

[BeautifulMusic]

I think the bigger question here, and the one she is asking, is whether her boyfriend was right to suggest that she shouldn't have feelings about him insulting the major decision she made. And he definitely wasn't. Idealistically, he'd like to think that now because he's not the one who's been insulted, but if the shoe was on the other foot, I think he'd have a different reaction.

 

At the same time, it's good that when you talked about it, he apologized that it made you feel that way and said it wasn't his intent- but don't ever let him, or any other guy, tell you how you should feel! Just something to keep in mind for the future.

[Trimmer]

I think the bigger question here, and the one she is asking, is whether her boyfriend was right to suggest that she shouldn't have feelings about him insulting the major decision she made. And he definitely wasn't. Idealistically, he'd like to think that now because he's not the one who's been insulted, but if the shoe was on the other foot, I think he'd have a different reaction.

 

At the same time, it's good that when you talked about it, he apologized that it made you feel that way and said it wasn't his intent- but don't ever let him, or any other guy, tell you how you should feel! Just something to keep in mind for the future.

A very good point. I hope they will be able to work it out, but I also hope it doesn't reveal a pattern where he thinks he is always right and defends his position even when he doesn't know what he's talking about.

 

And LCN, my point about educating yourself is that if you feel confident and totally in control of what you are doing, financially, etc. then if anyone tells you that kind of stuff ("it's not an investment because it isn't liquid?" what?), it won't shake your confidence, and you will be able to recognize it and write it off more easily as someone who is misinformed.

 

Also, I wanted to address this comment from your original post:

I understand that being in debt is not something that anyone wants, but unless you are fortunate to have a well paying career or have funds coming in from other sources, it's almost inevitable.

Setting aside mortgages for primary housing, and maybe car payments for a modest vehicle for transportation, having an occasional, small amount of credit card debt is a convenience. However, if you feel that it is inevitable, and that you can't manage without it (e.g. your debt continues to grow, and you can't bring it down steadily), then you are not managing your money correctly. You must spend less than you make; it really is that simple, or else your debt will increase, and an ever-increasing debt is not inevitable, it is dangerous.

 

LCN, it sounds like your financial situation is well under control, so I don't mean that as a lecture to you personally. It's just the idea that "being in debt is inevitable" is a slippery slope that gets a lot of people into trouble. If you aren't reducing your debt at some steady rate, you have two very clear options: make more money, or spend less money. You HAVE TO do one of those, or else your debt will continue to increase.

[LaChatteNoire]

And LCN, my point about educating yourself is that if you feel confident and totally in control of what you are doing, financially, etc. then if anyone tells you that kind of stuff ("it's not an investment because it isn't liquid?" what?), it won't shake your confidence, and you will be able to recognize it and write it off more easily as someone who is misinformed.

 

LOL, I too said "what?" to myself after the liquid statement. What he said did shake my confidence as you say, and I'm glad you said what you did. I don't think I really thought of him just being misinformed as much as I the thought that maybe I had done something that wasn't wise. I do need to have a bit more confidence in general though.

 

However, if you feel that it is inevitable, and that you can't manage without it (e.g. your debt continues to grow, and you can't bring it down steadily), then you are not managing your money correctly. You must spend less than you make; it really is that simple, or else your debt will increase, and an ever-increasing debt is not inevitable, it is dangerous.

 

 

I only meant that it is inevitable because I find that, at some point, you'll have debt for something like a new car or simply to keep a few credit cards handy to keep your credit in good standing for whatever you may need to purchase (such as a much nicer house) in the future. I've learned not to spend what I don't have and I find that to be a very helpful way to keep credit under control. I don't have any debt other than the mortgage, and I do plan to keep it that way for quite a long time. And I enjoyed your lecture and tips. Especially the tip regarding the rental market for this area... wonderful idea.

 

Thanks AC and Trimmer for making me feel better and reassuring me that the house is in fact beneficial. I really appreciate that.

 

And thanks BM for answering my initial question! I really wasn't sure if I had reacted correctly to what was being said... I usually don't get emotional about much and I'd hate to think that I was overreacting. Thanks everyone! =)

 

(Oh, and this place is really addictive to read... )

[jcster]

Wait! You can buy houses for $50,000? Where in tarnation do you live?

 

That being said, your boyfriend has a very simplistic view of the economics involved in home ownership vs. renting. Here in the San Francisco Bay Area, at this point in time, it makes more sense to rent. In the mythical land (sorry, just jealous) where 19 year olds can buy a house and have it half paid off by the age of 21 (!!!!)...you'd have to be a FOOL not to buy! He's just jealous - and he damn well better apologize.

 

And....4% interest is great! You're paying less interest than most people pay on their student loans.....(wow...I'm really jealous....)

[LaChatteNoire]

Where in tarnation do you live?

LOL, funny that you say it like that. I actually live in the mythical land of Texas. =) The house was in really sad condition when I bought it and I'm sure that's why it sold for what it did. I've (meaning physically) replaced the floors from gross yellow-stained green carpet to wood floors, and re-tiled the bathrooms... primed & painted the walls, etc. The only thing left really is the exterior of the house and finishing the cabinets in the kitchen. It's not a large place and it isn't in the best neighborhood, but yea, for $50,000 I jumped at the chance. It'll be sad the day I sell it though having worked so hard on it.

 

I'm happy he apologized, what a man. =)

[Darkzen]

Regardless of the topic, you shouldn't have gotten mad at his opinion. By doing so, you'll only create a feeling in him, that it's not ok to share his thoughts (this breaks down the communication process). Other people's opinions shouldn't dictate your feelings TBPH. Communication is a two way street... it's what is said and how you take it. A good rule of thumb is to control your initial emotional responses, until you can clarify intent. Otherwise you'll end up, flying off the handle, at the slightest miscommunication.

 

Everyone has an opinion, it's a part of life. Just because you're dating someone, doesn't invalidate their thoughts. If you honestly felt he was wrong, why does it bother you? Maybe instead of getting angry, you could have taken that effort to explain your reasoning.

 

As for the rest of it, real estate is a tricky field. It all depends on location and the market. The real estate bubble is crashing atm, pretty soon should be the optimal time to buy property. Then you hold onto it until the market goes back up and sell for profit. The economics behind what your BF was saying is kind of right. You could have put that money into a saving account and collected interest on it, rather than paying taxes and interest on it. Unless of course you're living there. Owning property is nice, but it costs money... money that could be invested elsewhere. Being in debt isn't a big deal either, as long as you earn enough to make the payments (not the minimum due).

 

You'll probably end up making a profit off of that house, because you put work into it. Although, you'll be earning from the labor, not so much the investment.

 

Overall, opinions vary, because people have different experiences. I don't particularly think either of you were wrong in the discussion, both sides had merit. It boils down to what's right for you.

[Star Gazer]

Regardless of the topic, you shouldn't have gotten mad at his opinion. By doing so, you'll only create a feeling in him, that it's not ok to share his thoughts (this breaks down the communication process). Other people's opinions shouldn't dictate your feelings TBPH.

 

He essentially called her a stupid fool. Are you seriously saying she didn't have the right to be upset about that?

[amaysngrace]

Renting is like throwing money out the window every month.

 

Paying a mortgage is like building a savings.

 

Maybe your BF is afraid you two will get married and he'll have no rights to that house. Or maybe your choices intimidate him because he isn't as together as you are. Maybe he's jealous because you put your time into fixing it up rather than spending your time with him. Maybe he just speaks without knowing what he's talking about?

 

In any case...good for you for making an investment.

[Trimmer]

Regardless of the topic, you shouldn't have gotten mad at his opinion. By doing so, you'll only create a feeling in him, that it's not ok to share his thoughts (this breaks down the communication process). Other people's opinions shouldn't dictate your feelings TBPH. Communication is a two way street... it's what is said and how you take it. A good rule of thumb is to control your initial emotional responses, until you can clarify intent. Otherwise you'll end up, flying off the handle, at the slightest miscommunication.

Dark, I know you like to distill everything to logic, and you don't like dealing with emotions, but emotional reactions are a part of life and a part of relationships.

 

I agree with your advice that communication is important - and the key to making this work - but to tell her "you shouldn't have gotten mad" is pointless. Our reactions are real, our emotions are real. I would argue that suppressing emotions within a relationship can cause at least as much damage as much as expressing them can. I know this from personal experience - part of the reason my own marriage didn't survive the long haul is that we avoided dealing with uncomfortable emotional situations, and just stuffed them down and ignored them, instead of getting them out and dealing with them. That eventually came back to bite us.

 

Now I agree with you that how you act on those feelings - both initial reaction and beyond - is just as important as good communication, but to say "don't have those feelings" is unrealistic.

 

So I don't think what you and I are saying is terribly far off from each other - communication is important, and getting it out there and discussing it honestly and safely, and with respect for the other person is absolutely key. But while I agree that she should endeavor to make it safe for him to voice an opinion, she should also be allowed to feel safe to voice feelings, even if they are uncomfortable.

 

Indeed, it's all in how you do it; she can be mad, and she can talk about being mad, and she can learn to explore it together with him ("I got mad at what you said, and I'm trying to figure out why it affected me that way...") in a way that is safe for him to participate in. And yes, he is entitled to voice his opinions, and he should feel safe in doing so, but like her, we hope he does it in a way that makes it safe for her to participate, too.

 

So I agree on the communication issue, and in being careful how you communicate your feelings, but I just don't go along with "you shouldn't have gotten mad..."

 

In fact, in the end, it sounds like she - and they - did, in fact, communicate, and they dealt with it reasonably well, revisiting it later and coming to a resolution:

We had a talk the next day and he told me that he hated that I got mad just because he had an opinion.... I told him that I didn't get mad because he had an opinion, it was because of the way that he made me feel by what he was saying. I don't think he really feels he was wrong by anything he said, and that's okay. He's a very opinionated kind of guy. He did apologize that what he said made me feel that way.

We weren't there, but it sounds like maybe they both got some of what they needed in the end...

 

The ideal outcome, in my mind, would be if their resolution leaves him still feeling safe voicing opinions in the future, and maybe more sensitive to how she might hear them, and also leaves her feeling safe sharing her feelings in the future, but maybe more sensitive to bringing them out in a way that he can hear and work with...

 

Now, to the economics:

 

The economics behind what your BF was saying is kind of right. You could have put that money into a saving account and collected interest on it, rather than paying taxes and interest on it....

 

Owning property is nice, but it costs money... money that could be invested elsewhere.

Remember that the principal part of her mortgage payment each month flows directly to her net worth, as a byproduct of reducing her debt by that amount. So in the long run, her "housing cost" to be compared against renting includes the interest ($800/year) - plus taxes as you correctly pointed out - but not the principal.

 

So, in the scenario where she would be "living elsewhere", that very money she would "save" by not paying the interest and taxes you are talking about goes straight down the drain into someone else's pocket as rent. And as I pointed out, a realistic rent would be significantly higher than her current interest plus taxes for the year; if so, then she's coming out ahead living in the house.

 

And your idea of a savings account is quaint, but have you checked savings account interest rates lately? Get a money market account - still not much better - or if you are willing to risk a little more, get a brokerage account and put it into some index funds. Higher potential return, but then, they certainly aren't lower risk than a house...

 

Unless of course you're living there.

I agree, and my assumption that she is using this house as her primary residence has been a foundation of my financial point all along. I thought it a safe inference that she is living there from the following statement:

He said that I'm paying interest and I'd be better off living in an apartment where I wouldn't have any debt.

You've got to live somewhere; if you can do it and stay within your means, owning a house usually (yes, I'll allow that qualification; substitute "often" if you must...) works out to be a smart deal financially in the long run.

 

Now the idea of buying houses to fix up and "flip" in the short term is a very different thing...

 

Bottom line: I'll reiterate my earlier advice: If you are unsure at all, don't take advice from an internet board. Don't take my advice as gospel. Go find a financial planner - one who doesn't have a commission stake in selling you invesment instruments - and sit down and get educated by a professional. You become the expert on your life.

[LaChatteNoire]

By doing so, you'll only create a feeling in him, that it's not ok to share his thoughts (this breaks down the communication process). Other people's opinions shouldn't dictate your feelings TBPH.

 

I completely understand what you're saying about making him feel that it's not okay to share his thoughts. That isn't something that I want in our relationship and I made a point to tell him that when we talked about it. I told him that I didn't want him to feel that he couldn't share or needed to hold back his opinions. When he gives his opinion and I have another view, as in this situation, we both try to support our different views. It almost always ends with enlightenment for both sides, but this time he really seemed to defend his side until he was sure that I knew that my opinion was wrong. However, I can't really help the way I felt. I did think about the whole situation critically before I spoke but I still felt mad about it.

 

Maybe your BF is afraid you two will get married and he'll have no rights to that house.

 

We actually had this discussion a long time ago. My ex-boyfriend of 5 years had a huge problem with this and added that to one of the reasons he left. (We lived together in the house when I first got it.) When I told my current boyfriend that detail of the breakup, he said that he was insane and that it didn't matter who's name the house was in or who owned it because it was a place to live. I'm glad he feels that way because I don't want that problem again.

 

And as I pointed out, a realistic rent would be significantly higher than her current interest plus taxes for the year; if so, then she's coming out ahead living in the house.

 

I lived in an apartment for a year before I bought the house and by all of my calculations it does come out to be a little cheaper, taxes and interest included.

 

I plan on talking to a financial planner by the middle of next year and see what I'll be able to do as far as the house goes and also setting up some sort of (hopefully) high interest savings account so that I can be ahead of the game and save for retirement and travel. I know it seems like I'm doing things rather quickly for my age, but better safe than sorry, I say.

[amaysngrace]

Wow aren't you a little computer whiz? I still screw up trying to quote more than one person in my replies and I've been here A YEAR AND A HALF!!!

 

You only been here five posts.

[Darkzen]

Trimmer: I understand that not everyone looks at life the way I do. An initial response can be any range of emotions, I prefer to suppress emotions until I can let logic weigh-in on the issue. Not to say that I'm emotionally devoid or anything, but I prefer to let logic guide my emotions. Rather than emotions guide my logic.

 

So if someone says something and my initial response is to get mad, I will attempt to control it. If after my logic weighs-in on the matter and I'm still mad, I'll respond with anger. That's what I meant by "shouldn't have gotten mad". Obviously, anger was the initial reaction, but we don't have to be ruled by our impulses. All it takes is a little control.

 

By all means communicate your feelings, but make sure it's justified and not just impulsive. That's all I was getting at. Words are words after all, intent is what's important. That comes down to the communication process... statement, interpretation and clarification. No need to jump to conclusions until after the clarification stage.

 

As for the financial advice... I wasn't sure that she lived there (the bad neighborhood and shoddy conditions threw me off), so I just threw out some general concepts. Buying property is an investment, all investments are a risk. I personally think it's a good thing, but it doesn't always turn out well... there's a lot of hidden costs that can occur. If those costs hit an unprepared person, they can easily get upside down in their investment. Owing more than the property is worth and in-fact lose money.

 

It sounds like the OP is doing well, but her BF could've been offering advice... it's what you do for people you care about. He also doesn't seem very savvy when it comes to economics and might be a bit of a know-it-all, but I highly doubt his intent was to cut her down.

 

People look at things differently, you can't expect someone to read your mind. If I say something that offends someone, all they have to do is tell me and I'll probably be respectful... if they catch an attitude it just perpetuates the misunderstanding. From my PoV, maybe I didn't find what I said to be offensive. So now, I'm like "WTF do they have an attitude?". When asking for clarification, before reacting on emotions, would have prevented the entire situation.

 

LaChatteNoire: I can understand that. I was just offering advice, it didn't seem like that big of a deal... it's a disagreement, sometimes you have to agree to disagree and leave it at that. Getting mad seemed like a impulse reaction to me, so I didn't think you were justified. Getting mad yes, taking it out on him no. At least until you talked things over further. It's all about restraint and control to me. It's like a two-headed dragon, logic and emotion, either they work in concert or they pull in opposite directions.

[Darkzen]

Wow aren't you a little computer whiz? I still screw up trying to quote more than one person in my replies and I've been here A YEAR AND A HALF!!!

 

You only been here five posts.

 

Hit quote and look at the beginning and end of the quoted text... you should see bookends... begin quote = {quote}, end quote = {/quote} (replace {'s with ['s ). Just cut and paste the stuff you want to quote and slap the bookend on it. All that info in the front bookend is pretty much unnecessary, just adds the name of the person you're quoting and their post number.

 

It's pretty much the same set-up on the majority of message boards, so once you learn how to use them, it should carry over.

[bish]

LaChatte

 

Was it right to get mad that he mentioned you being in debt? No...because he clearly doesn't understand that it IS an investment.

 

So no need to get mad at someone who clearly doesn't understand that its rare that anyone pays cash up front for a home unless they are filthy rich. And you invested in that home. Now when the market is right you can sell it for a bundle.