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Home Safe and Sound

Look at the Big Picture of Buying and Owning a Home

Your home needs to fit into your total financial puzzle. It should be only one piece—and not the only piece—of that puzzle. You still need an emergency cash fund that can cover you for eight months. You still need to be saving for retirement. You also need to pay off student loans, get out of credit-card debt and make sure you have all the right insurance in place. And with that broad list of financial goals, you can't afford to let your housing expenses overwhelm your cash flow.

If I just struck a raw nerve, then it's time to reassess where you are financially. Maybe it's time to downsize to a more affordable home. That could mean moving to a less expensive neighborhood or part of the country or, perhaps, curbing your appetite for square footage. I find it interesting that the typical U.S. home has increased from about 1,500 square feet in the late 1970s to more than 2,400 square feet today. Also, the average number of people living in a home has shrunk. Bigger definitely isn't better when it comes with a price tag that makes you feel as if you were gasping for financial oxygen.

If you are in house hunting mode, another option could be to lower your price range so that you end up with a mortgage and a property tax that are manageable. This will require plenty of fortitude. Be prepared to stand firm with mortgage lenders and your real estate agent, who will no doubt egg you on to buy more home. Remember, they make more money when you spend more money. But your loan officer and your real-estate agent won't be any help when that mortgage makes a mess of your financial life.