My first major financial decision involved buying something I didn’t need, and at the wrong time. But it allowed me to save thousands of dollars and wound up being the smartest money move of my life.
While my story is unique in many ways, this decision taught me two important lessons that can apply to anyone. The first is to take a do-it-now attitude toward saving and your financial future in general. The other is the importance of persistence—even in the face of a financial setback.
The story begins when I was a news associate at CNBC. It was my first job, and I loved it. I was no longer a wannabe kid looking in at all the grownups going to their exciting jobs—I was finally an insider. Of course, I was also living at my parent’s home in suburban New Jersey. But because my living expenses were covered, I was able to sock away money I would have spent on all the incidentals that come with living on your own as a single person, or even with roommates: laundry, groceries and many of the daily living costs (like paper towels).
Naturally, I wanted out. But on my salary of $20,000 a year, who was I kidding? So I asked my parents to help me out. I found a tiny furnished studio sublet on the Upper West Side of Manhattan in the back of the building that was, to put it kindly, not in the best condition. The rent was $900, and I could only afford half. My parents agreed to temporarily subsidize the rent on a plan where their assistance phased out over time. Fortunately, I got a promotion that came with a substantial raise just after moving in, which allowed me to restart my savings plan.
Over time, though, that rent payment started to really bother me. While I was able to save money, it wasn’t as much as I wanted to be putting away.
I started talking to my neighbors in the building, which was a co-op. Even though I was a renter, almost everyone else owned. I began looking at the numbers. One apartment similar to the one I was subletting was going for $115,000. I did the calculations and realized I’d be making a monthly payment of around $600 (if I could get a mortgage, of course). At the same time, I’d be building equity with every payment, and the interest would be tax-deductible. It seemed like the right move. So I kept saving. And as I did, housing prices began to fall.
My friends didn’t understand my plans to buy an apartment. They said I should wait until I got married. They said I’d lose money because values were going down, and that what I could afford was too small. The apartment complex I was looking to buy in wasn’t upscale enough, some said. The neighborhood wasn’t a “cool” one, and no one would come to visit. I was told I was too young. I was told to wait.
But I didn’t want to wait to start building financial independence and security. I wanted to be saving now, and to create a clear path for reaching my financial goals. I knew the math and I knew that owning—even if I sold it after a few years—would cut my costs and allow me to save more money and build a stronger financial foundation.
In the end, with my parent’s encouragement and support, I bought an apartment for $90,000. The money I put toward it came from my savings: my pay from various jobs since the age of 15, my bat mitzvah money, birthday money, gifts from relatives and money my parents graciously gave me when I finished my college studies early. I was fully aware that my situation was unique, and I felt very fortunate. And I knew I was putting that good fortune—and my ability to save—at risk by buying the apartment.
That sense of risk became all too clear just months later, when I found out one of my dearest friends was in contract to buy a similar apartment—in better condition and on a higher floor—for two-thirds of what I paid! It looked like everyone was right that I had made a bad decision. Had one-third of my savings effectively vanished as the value of my apartment continued to drop.
Not necessarily. I reminded myself of the advice my grandfather Harry gave me when I was growing up: The only days a stock price really matters are the day you buy it and the day you sell it. The same applies to real estate.
And I had no intention of selling anytime soon. I loved my home and my overhead was low—lower than renting that same apartment would have been. I was on a continued path to savings that wouldn’t have happened if I had been paying rent.
Saving consistently and having equity in my home has allowed me to pursue my dream of being a journalist, despite the early years of low pay. Socking away money each month by keeping my spending low and by saving on taxes as an owner was a key strategy in allowing me to build savings in places like a 401(k), an IRA and other accounts.
When I sold the studio apartment seven years later, it had tripled in value, and I made enough profit to eventually buy a much nicer one-bedroom apartment. And when I met my husband, we sold that apartment for what became the down payment on our family-size New York City apartment, where we now live.
If I hadn’t been persistent in my savings, and if I hadn’t taken that first big, scary step toward the financial life I wanted, then we wouldn’t have been able to build the life we have today. That’s why I tell everyone that the time to start moving in the direction of their goals is always the same: right now.
Bobbi Rebell is the author of the best-selling personal finance book How to Be a Financial Grownup. She also hosts the Financial Grownup Podcast and is an award-winning TV anchor, podcaster, columnist and Certified Financial Planner.
Watch Bobbi talk about the best financial advice she ever received in this video.