Pay Dirt is Slate’s money advice column. Have a question? Send it to Lillian, Athena, and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
It seems to me like I bought a home at what was probably the peak of the market… Maybe even the same week it started to turn—when we didn’t realize it was turning from a seller’s to a buyer’s market. And, unfortunately, I don’t love the place (long story) and am not dying to be here for very long. The mortgage should be manageable if everything lines up but is higher than what would be truly comfortable.
What should I do, practically, to make sure it’s not a loss? And, more philosophically, how do I not obsess about the timing of this decision?
—Real Estate Ups and Downs
Dear Real Estate,
Last winter, there was a very special exclusive sweater I wanted. I set aside the not-insubstantial price in my budget, woke up at 4 a.m. on launch day, and managed to score the very last sweater in my size for $150. In July, I saw the same sweater selling on Poshmark for only $100. Should I have waited out the rush and bought it for 33 percent less in the heat of the summer? If it was strictly an investment, maybe. But it was a sweater. I got to wear it all winter. And let me tell you—I appreciated my purchase in December while standing in northern Finland in negative 22-degree weather.
Primary homes are the same way. While they can be part of your overall investment portfolio, they are, first and foremost, a place to live. Other investments don’t have such high transaction and maintenance costs. From an investment perspective, the best way to not stress about timing the market is to buy and hold. In the long run, the exact time you purchase in the real estate market cycle is less important than how long you hold onto your house. It isn’t the market peak that would make selling your home right now a loss; it is selling a home so quickly after you bought it. Even if you had bought when prices were low, it still takes time to make up the one-time expenses from buying: closing costs, recording fees, and agent commissions.
The purchase price of a home is not the only part of your mortgage, though. If you bought when the market was hot, you are likely paying a lower interest rate than the current average 6.33 percent 30-year mortgage rate. It’s worth running the numbers with current interest rates: Would you actually be able to get a similar house in your area now for a lower monthly mortgage?
If you sell the house, it’s vital not to get overly fixated on the purchase price. Sellers anchored to their purchase price can make homes stay on the market for much longer. Meanwhile, every extra month the house stays on the market, is an additional month of mortgage interest that you are paying.
Remember, when you buy a home with a mortgage, you aren’t paying the purchase price upfront; the bank is. You contribute a down payment and agree to pay the bank back the rest over time, with interest. When you sell the house, the bank gets paid back first before you see any of the money. If you sell quickly after purchase, you haven’t paid back the bank much of the purchase price yet because most of your early mortgage payments go toward interest due to amortization. The longer you wait to sell, the more of the sale price you get back.
While prices are dropping, home inventory is still historically low. Hopefully your agent can find a willing buyer, and you can move on from this house you don’t love.
Dear Pay Dirt,
When is a good time to start budgeting? I am a high school senior working a part-time job where I make $9.50 an hour (I am thinking of asking my boss for a raise, but I’m not sure this will happen, and I’m not in a position to bargain since I got lucky with a job I really like). Since I’m going to be starting college soon, I want to save more, but I’m also spending more than ever (gas, buying my own clothes, lunches out with friends, etc.). I want to budget my money to maximize my savings but I’m not sure when or how to do that. Should I do it monthly or every two weeks when I get paid? How much of my paychecks should I set aside for savings? A previous attempt at budgeting left me with enough spending money for one purchase and nothing else, which isn’t what I want.
Dear Senior Spending,
Now is the perfect time to start budgeting. If your last attempt at budgeting left you feeling deprived, then the problem was the budget wasn’t realistic.
A budget is simply a plan for your money. It doesn’t have to be super rigid or never include lunch with friends. A sustainable budget should consist of both wants and needs. Instead of saving everything and leaving nothing extra, try a slow method to ramp up your savings—save 1 percent of your earnings this month, then 2 percent next month. By the end of ten months, you’ll save 10 percent more than you are now.
Another way to build a savings habit is to follow an “if X, then Y” savings plan. For example, “If I buy a coffee, then I transfer $5 to savings.” Apps like Digit and banks like Chime will do this automatically for you.
I recommend that beginning budgeters track their expenses on paper or using cash envelopes for at least a month before using an app or website. Otherwise, it’s easy to get lost searching for the perfect app. Once you’ve gotten used to tracking your expenses on paper, some of my favorite budgeting apps are Simplifi, YNAB, and Mint. The first one you try might not be the right fit for your brain, so be open to doing some experimentation.
I want to address the idea that you’re not in a position to bargain on your wages because you really like your job. Whether or not you like your job is less relevant to your raise than if it makes business sense for your boss. If you are good at your job, punctual and reliable, and a valued employee, then the current labor shortage and rising wages are in your favor when asking for a raise. It won’t make sense to ask for a raise if every other job you are qualified for pays $9.50/hr. But many retail positions are now starting teenage workers at $15/hr. When you ask for a raise, come prepared with research about how much similar jobs are offering per hour. You want your boss to recognize that replacing you would cost more than giving you a raise.
Dear Pay Dirt,
I’m finding it hard to be happy for all these people getting loan forgiveness. I’m generally in favor of student loan forgiveness, but I’m finding this particular bout of loan forgiveness difficult. I think all of Biden’s plans are wasting more money than if he just did a blanket loan forgiveness amount for everybody. Regardless of that, he seems to be trying to provide relief to the most vulnerable, but somehow, I am getting left out. Almost all of my student loan debt is graduate student loans none of which are subsidized because Obama/Biden canceled subsidized loans for graduate students only. On top of that, this new round of loan forgiveness reduces income-based repayments to 5 percent ONLY for undergraduates.
I am currently low-income due to a chronic illness I gained from the stress of my graduate advisor trying to sabotage my chances of getting a PhD my last semester. There seems to be this assumption that people with graduate degrees make a ton of money, but that assumption is costing low-income people with graduate degrees more money than their peers. I know there are others like me—people are not uncommonly paid very low wages to teach college classes. On top of all this, I don’t have undergraduate loans and I know there are a lot of people with more undergraduate loans that went to elite colleges with more student loan debt than I have. I know there is a possibility that I will get my student loans canceled for having a significant disability, but the government doesn’t have a great track record of acknowledging invisible illnesses. I know I should be happy about this, but the more I see people getting help who are less needy than me, the more angry I am. I’m hoping this is just a short spell of me being upset and I will get over it, but it’s taking me longer than I thought it would. Can you give me some perspective?
—Student Loan Anger
Dear Student Loan Anger,
Your anger at the system is absolutely understandable. I also know many teachers, adjunct professors, and social workers struggling under the weight of graduate loans they had to get to work in their professions. Biden’s loan forgiveness wasn’t the structural change we need in education. But being angry at individuals helped by it won’t change the policy design; it will just leave you feeling resentful.
If some statistics will help you feel better, Biden’s one-time forgiveness helps those that need it the most: low-income borrowers who took out loans but didn’t graduate. Up to 40 percent of borrowers are hampered by debt but have no diploma to boost their earnings. The doubled forgiveness for Pell Grant recipients will help even more—nearly all come from families making under $60,000 a year. Two-thirds come from families with a household income below $30,000 a year.
Unfortunately, deserving individuals were definitely left out (especially those with private student loans), as with any sweeping government policy. The good news is that now that we have more information, you should be helped by the policy too. The official debt relief description includes all government-held student loans, including unsubsidized graduate loans and some FFEL loans.
Getting student loans canceled for having a disability in the past few years has gotten much easier. You do not need to receive SSDI or SSI to get your loans discharged, only provide a doctor’s note explaining you are “totally and permanently disabled.” I recommend consulting with a lawyer specializing in student loan discharges to get your paperwork in order. If you are teaching college classes, look into the expanded Public Service Loan Forgiveness, too—you may qualify for working in higher education.
Dear Pay Dirt,
I’ve recently accepted a new role that will require moving my family from the PNW to England. Our plan is to sell our home which has well over $700,000 in equity and live in a vacation rental as we get to know the new city and where we’d like to settle.
Part of what prompted this change is my growing discomfort at living on land that was stolen from our indigenous neighbors. The repercussions of colonization have been weighing heavy on my, and part of what prompted this move.
With that, I want to know if there is a way to basically offer a discount on my home to a native homebuyer, if it’s legal to offer a lower price, if I should simply make a donation to the tribe, how best I can provide some sort of reparations for the privileges I’ve had as a white person on stolen land. Any thoughts or guidance here?
—De-Colonizer in Cascadia
I’m glad you’ve recognized the role you’ve played on stolen indigenous lands. The United States and Canada have broken every treaty made with Indigenous peoples, and land reparations are owed. There are many ways to approach this.
What I don’t read in your question is an involvement with your local Indigenous organizations or a specific Native homebuyer you would like to sell to. Have you asked the Indigenous owners of your land if your particular house is something a Native individual wants to buy? If you reach out to your local tribes and lenders or realtors that work with Section 184 Indian Home Loan Guarantee Program, you may find a buyer that is a perfect fit. The Sustainable Economies Law Institute’s resource on different ways to transfer land is a good starting point if you own a particular property that interests a tribe. But don’t assume that buying your specific house at a discount is the best way to help land repatriation activism.
You can sell your home for whatever price both parties find agreeable, including accepting a lower offer price. However, it is important to not run afoul of the Fair Housing Act, which does not let you discriminate based on race or national origin. For example, you could face issues if you only advertise your home to Native buyers or offer a discount only for Alaska Natives. While a private transaction without a broker could be exempt from the federal Fair Housing Act, it may not be exempt under your state’s laws.
It’s important to remember that if you still hold a mortgage, your mortgage holder has an interest in the sale price. If you owe $300,000 on your mortgage and sell your house for $250,000, you will owe the bank that $50,000 difference out of your pocket.
The cleanest option, from both a tax and legal perspective, would be to sell your house at market price and donate the proceeds of the sale (or at least, part of it) to a Pacific Northwest indigenous group’s efforts to buy back their land. Examples are the Seattle area’s Duwamish tribe’s Real Rent, the united Klamath tribes of Modoc, Klamath, and Paiute’s Land Back fund, and the Confederated Villages of Lisjan’s Shuumi Land Tax in the Bay Area. This gives decision-making power to the tribes to use funds where most needed—buying historically significant land, supporting their members, or fighting for federal recognition.
Suppose you want to support an individual Native first-time homebuyer instead. In that case, you could contribute to an Individual Development Account (IDA) fund, which provides matched down payment savings opportunities for low-income prospective homebuyers (among other needs). Many tribes facilitate IDA programs in the Pacific Northwest. Nine years ago, I was an IDA program participant, and it was crucial assistance for me. I’m glad now that I can pay that help forward by donating to the program (and receive a state tax deduction).
If your home has significantly appreciated in value, you may owe capital gains taxes on any profits above the capital gains exclusion. Since you are moving abroad, you cannot take advantage of a 1031 exchange. Donating your profits could offset any capital gains. Make sure to work with an experienced tax attorney because international taxes and home sales are complicated.
When you move to England, do not stop your solidarity with Indigenous peoples. Get involved in land back campaigns in the Commonwealth. The British Empire’s settlers are responsible for colonizing indigenous lands and genocide of Indigenous people across the world, including the Pacific Northwest.
My on again/off again boyfriend of 15 years wants me to leave my husband and be with him. But he refuses to divorce his wife even though they are $50,000 in debt because of her. He refuses to help her until she helps herself. Now he’s allowing his children to make the same spending mistakes by letting his oldest go into debt for college out of state instead of making a better financial decision with an in-state college. I told him why should I leave my husband who provides for me and isn’t in debt for a person who complains about his wife all the time but never does anything about it?