Knowing when to build up and when to take risks
When I was a child, I learned the parable of Joseph and the coat of many colors. The thing I took away from that tale was the seven fat years followed by 7 lean years. During the late 1990s to early 2000s, when my husband and I were both working full-time, I made sure to save a comfortable amount each year as an emergency/investment fund. Windfall income like bonuses and income tax refunds went right into savings.
During boom times, nobody ever thinks the party is going to end. Easy credit facilitated trying to match the Jones, with everyone buying homes, flat screen TVs, and new cars. It was psychologically hard during those years for me and my husband to live frugally, buying a home in an unfashionable part of Hoboken and wearing our clothes and shoes until they wore out, often mending them until they were beyond repair. But our thriftiness paid off. When the bubble burst in the fall of 2008, we had almost 50% equity in our home plus a large cash cushion.
During each of the last three recessions, the degree of economic insecurity has increased by 150% over the prior one, with minority groups disproportionately impacted. That was a huge factor in our decision to buy a large home in Hoboken. We felt that the highly educated population had a good chance of remaining employed, and that even those experiencing unemployment were likely to have financial resources to tide them through bad times, thus making foreclosure unlikely. It is also fairly easy to rent your home in Hoboken since the population is transient and we are so close to NYC, with 24-hour public transportation. We also liked the fact that Hoboken is only one square mile; that means there are limits to how much development can take place, thereby devaluing our property by dramatically increasing the supply of homes.
So, at a time when many people thought we were headed into a global depression, my husband and I took the plunge to make the biggest purchase of our lives. Our family now has the stability and space we need to flourish, and that was the gamble I made when we purchased our home. And our bet paid off. We are now in the process of rebuilding our finances as a hedge against the future, but we got exactly the home we wanted at a good price and excellent interest rate. I have also found Hoboken to be a hotbed of industry and innovation; I am collaborating with a bunch of other moms to provide professional consulting services to local businesses that work with our family responsibilities, and also talking to another mom about starting a Montessori co-op to get the best education for our toddlers at an affordable price. Only in a city that is a mile square and has so many educated, proactive residents would these kinds of opportunities be possible.
