Emotional Attachment

Today I read a post over at Zen Habits about Simplifying your Life with Balance and part of the post really resonated with me. In our lives we become emotionally attached to things regardless of what they are. I know that in the past I have kept little rocks from trips because of something that had happened as a reminder. But at the end of the day I still have the memory and now I’m just carting a rock around (they’ve been tossed out). Does that diminish the emotional value of the memento? No it doesn’t but having too many of these can become a very large rock collection.

This emotional attachment by itself is not a bad thing as long as there is balance (as the post says); the funny thing is when money comes into the picture that attachment becomes stronger. When you put your money behind something stupid you are more likely to stick with it no matter if it’s continuing to cost you money. Personally I’ve held onto things that i purchased long long after I stopped using them; mostly because I had paid a lot of money. I emotionally invested myself in that purchase and getting rid of it became hard for me (in my case it was an old laptop that i have since thrown out).

Why does money make the emotional attachment of our decisions so much harder to break?

Unfortunately I’m not a psychologist so I can’t fully answer this question but I can give some personal perspective. When we spend on on a purchase means we are trading our hard earned money and effort for that item. When we realize that the money has been spent in error or not been fully realized we carry a certain guilt with it especially if its a lot of money. We have trouble getting rid of something simply because of how much money we spent on it and personally I’ve seen the emotional attachment holding steady when logic has acknowledged the item was junk.

Since starting this blog a few years ago I have become much less materialistic in my ways (to the chagrin of my wife to can’t find me Christmas presents anymore). With that said I still feel the urge to spend on toys and gadgets that I won’t use. But what really helped me solidify the self control not to spend was experiencing this emotional attachment to that stupid laptop. I now understand that if I put money into something it is sunk money and it shouldn’t carry any additional weight. Does this mean it won’t ever happen again to me? No I might buy an iPad tomorrow and refuse to get rid of it for years even though I don’t use it. I am clearly aware that money I spend on something might mean my attachment to it is stronger so I try to really understand if the purchase is really an item I need.

Being emotionally attached to something in your life can make it incredibly hard to change; as long as you know where that attachment comes from it will make it easier for you to decide if you really want to keep that thing or activity in your life.

Net Worth Assessment (February)

Its now the middle of April and the grass is starting to show some signs of green and I am only now getting to posting my Net Worth Assessment from a couple months ago. No do not expect there to be any Enron like cover ups it was just a very busy period of time as my wife and I were looking for cottages and I am not playing a bit of catch up. I wanted to make sure these posts made it up and though they are late they are here.

The month of February was an interesting month because of the cottage hunting we ended up getting our house re-appraised. If you’ve ever done this and had the assessment go in your favor it has a huge impact to your bottom line. In other words if the house goes up in value you have more equity in the house. That is exactly what happened here. While the month over month differences were minimal the liabilities went down but which is good.

Here are the numbers:

Jan 31 Balance Feb 28 Balance
Liabilities
Consumer Credit $9,463.85
$10,692.64
Lines of Credit $30,086.17
$29,693.15
Mortgage $240,701.26
$240,022.21
Car Loan $20,484.30
$20,149.34
Total Liabilities $300,735.58
$300,556.94
Assets
House $360,000.00 $375,000.00
Investments $40,790.25
$43,636.63
Total Assets $400,790.25
$418,636.63
Net Worth $100,054.67

$118,079.69

Growth
$18,025.02
% Increase
18.02%

So Most of the important categories went down with the exception of consumer credit – I used some of this to pay for hotel rooms while we were running around looking for the cottage as well as a few other expenses (we went away for a weekend to treat ourselves). Other than this one splurge category everything seems to be in order. Even without the increase in the value of our house the increase would have been good.

Up next – the March numbers: this is where things get a bit wacky with two properties.

We Bought a Cottage!

Over the years there have been a few goals that both my wife and I have wanted to accomplish and one of these was to own a cottage. We nearly accomplished this a few years back but the deal fell through and rather than finding a new deal we decided to get married instead. I think this was the better choice personally. But the idea of owning a cottage for our own never really left and we’ve been keeping an eye on the market to see if anything was out there.

In February I was looking around on MLS and discovered that there were in fact cottages that could potentially be in our price range. We have been trying to get our finances in order and as part of that we were very clear on what we could and what we could not afford. To see cottages within that range was exciting and we started doing more investigation.

Where we live cottages are often extremely expensive so to find affordable cottages meant that the housing market had gone soft (which it did in 2008/2009) and the prices would be rebounding. It also meant that the cottages we would be looking at were more than likely going to be out of the way pieces of crap. Out of all of the cottages that we looked few of them were uninhabitable in my opinion and at only a small handful were worth considering. We ended up finding one that was perfect for us and our little girl.

Why buy a cottage?

One of the first questions that came to mind when we saw cottages in our price range was why buy a cottage now? We would be making our financial situation that much tighter by doing this. The answer is pretty simple: rental income! Cottages seem to be pretty easy to rent and this rental income can easily cover the mortgage on the place. In our case we would be able to use the cottage most of the time and rent it out a couple weeks during the summer months to offset our costs.

If we were to rent this cottage out all summer we could have a year round property paid for by our renters. Our goal is not to do this but to supplement the cost of carrying the property with the rental income. We want to enjoy the place too.

How we did it

If you look back to my January financial statement post you’re probably wondering where we invented the money for this cottage as we did not have a massive down-payment just laying around to be used. We are fortunate enough to have purchased our house at a great price and the renovations we’ve completed over the past couple years have dramatically increased our property value. Very simply we had enough equity in our home to be able to pull money out as a down-payment without putting ourselves at risk from an equity in the house point of view.

The net result is that we now have two properties that we have more than 20% down on and mortgages that we will be able to handle without any difficulty. The best part is that one of these properties has the potential to become a self sustaining income property.

What we considered

A cottage is still a property so a lot of factors needed to be considered before the purchase. Here’s a list of things that we covered during our search:

  • Physical property (a house inspection was completed as part of the sale)
  • Insurance was factored in (including additional insurance for renting the property)
  • Location (how much are we going to spend to get there regularly)
  • Utility and Tax costs
  • Resale value
  • Potential Income
  • Required renovations
  • Expected Maintenance costs

The net result was that not only did the above criteria work with the property we got but we were sure that we wouldn’t be overextending ourselves when it came to actually carrying costs.

At the end of the day we’re both very excited and we can’t wait to start using it (we get the keys in a month)! Our financials will change as a result of this but I believe that this will be for only for the better.

Update – Spring Silence

While this is not a very prolific blog like many of those out there; all too often it is because of everything else going on in my life and this latest round of silence was another one of these times. It was a combination of a few things that kept me away from the computer and from posting, while most of these are not exciting there are a few that were. 

In this case I ended up absolutely bogged down with work to the point of working at home 3+ hours each night. Now some of this work does fall into the interesting and exciting camp but at the end of the day it is work. I am expecting things to lighten up starting in April and the goal will be to keep them this way. I don’t mind putting in a bit of extra time at work but working 11 hour days and weekends is a bit much and takes away from family.

The second and more exciting thing was that in February my wife and i started looking at cottages to buy. This was a very long process because by their nature cottages are not a 10 minute drive away. I will post about this in a separate entrybut the net result is that we were able to find a cottage and we take possession in May.

Finally, and most recently, I’ve been dealing with a few health issues – probably related to working myself too hard for the better part of the last year. I’m OK and the issues were minor but they did illustrate to me the fact that health has to come first which it hasn’t. Again I will post about this separately.

Overall its just been a very busy couple months and I’m looking forward to some down time which will start to happen with the cottage and some planning on the work front. Stay tuned – I’ve got lots of stuff to share now.