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when do you buy a house?

on my way

How do you decide when it's the right time to buy a house? What is the criteria?

I'm annoyed by the fact that I don't own my apartment and I can't do anything to improve it other than paint the walls - but I don't know if I should clear out my savings to make a down payment...

From an investment standpoint, buying a house might be a good idea, but it also seems like prices are extremely high right now, so I don't feel confident that if I wanted to sell in 5 years that it's going to appreciate very much...

I remember someone telling me that there was some formula that told you whether you should buy, or if you should continue to rent... but I can't find it anywhere on the web.

Do you rent or own? Why? Why not?

 
Apr 19, 06 6:56 pm

When you know you'll keep the house long enough not to lose money. Even if you don't *make* money, you'll have had somewhere to live. But if you're going to end up selling it and moving on in a couple of years, the fees and improvements may put you in over your head.

Rent. 1)homes in my price range don't exist in my current market. 2)I don't know how long I'll stick around here.

Apr 19, 06 7:00 pm  · 
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pencrush

I think if you can afford to buy a house, it is always better to buy than rent. Putting money into something that you will own, that will be your investment is better than putting money into someone else's investment/pocket. I'm sure there are times when the value of your home will appreciate more than others, but it is pretty unlikely the value of your home will go down.

A lot of how much your home will appreciate depends on where you live, and your local market. I don't think there is a catch-all formula, and if there is, I doubt it's very accurate.

Just my .02.

Apr 19, 06 7:07 pm  · 
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SneakyPete

This view is common, but very few folks have any basis for it beyond it being something that many people believe. Helps realtors sell houses, tho.

Jun 28, 19 2:14 pm  · 
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chigurh

I remember seeing a study that looked at all of the costs associated with owning a home; improvements, repairs, maintenance, land taxes, vs. the cost of renting and typically it ended up being a wash. Americans expect to own homes/property, Europeans/Asians are perfectly content renting.

Jun 28, 19 4:15 pm  · 
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sameolddoctor

May be true for Europeans, not the bulk of Asia. We like to own shit.

Jun 28, 19 6:55 pm  · 
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bobross

From my understanding, you figure out how much you can borrow based on what you would be able to put down and how much you make a month/year. Then you figure out if there is anything you would think was worth buying in that price range. Also, consider what your mortgage payments would be...if this is less or equal to what you are paying in rent ...then buy.

Also you need to factor in an amount for fixing up the place, buying appliances and/or furniture and painting, etc. when you first move in. Figure out what your property taxes and homeowners insurance would be and make sure you have extra money in case your water heater explodes...roof caves in, etc.

If you STILL think you can afford all of that after buying a place that you would want to live in...then BUY!

There are several places on the web where you can calculate your mortgage payments and estimate property taxes...also you can go to a local lender, bank or finincial advisor.

Apr 19, 06 7:07 pm  · 
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on my way

I could make the down payment. I could buy a similar apartment to the one I live in now, albeit in a lesser (but still nice) neighborhood. I could make the mortgage payment + maintenance/taxes, which would be a few hundred more than my rent - so I would be saving less $ each month. I could even probably have a little $ in the bank to do the improvements...

But after that I'd have zero (and it would take me longer to save because I'd be paying more each month).

I'm comfortable having zero. I had zero only a couple of years ago. I live frugally and could build my savings back up again...

BUT, what about the FREEDOM? What if I get sick of NY and I want to drop everything and move to Sao Paulo? I don't even own a couch because I wouldn't want to deal with it if I wanted to move... Other than my books and my clothes, I don't really own anything... So it seems totally crazy to own an apartment...

But then again, buying seems like the smart thing to do. I feel like I'm throwing away money paying rent every month. And if I'm not saving money to buy a house, then what the hell am I saving money for? My kid's college fund? Retirement?

Apr 19, 06 7:19 pm  · 
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SneakyPete

A mortgage isn't "saving money" any more than rent is unless you can sell the house with gains to cover all improvements, maintenance , etc (everything over the mortgage). Since you can't know that, it's still a risk. Knowing your priorities is more important than trying to justify a mortgage as "savings" compared to rent.

Jun 28, 19 2:16 pm  · 
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on my way

Which brings another question to mind:

Why do architects complain so much about not making money? Do we really think the lawyers, investment bankers and hedge fund managers have better lives?

My girlfriend's boss makes many millions a year in finance and complains every day about his 45-minute commute from his 9000sf McMansion in Jersey...

Apr 19, 06 7:23 pm  · 
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SneakyPete

There's a massive difference between complaining about being paid enough to be financially secure enough to easily survive a bi-dollar crisis (which is the default for many Architects) and complaining about life stuff when you can basically pay for whatever any time you want. I don't want to be rich as much as I want to be able to stop worrying about money.

Jun 28, 19 2:17 pm  · 
1  · 
pencrush

generally architects complain about money because they work long hours, have stressful jobs, require (a fair amount of) schooling, and are paid relatively little. generally architects enjoy their work, and put up with making very little because they enjoy their work. I don't think most architects think other professionals are better off, (although, i personally think they are...) they just envy the opportunities/choices that come with that sort of compensation.

your girlfriend's father could afford a smaller place closer to where he works, but chooses not to live there because of size, location, schools, whatever. He does however have the choice of where he wants to live because of his income. that's the difference.

Apr 19, 06 7:35 pm  · 
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SneakyPete

+++

Jun 28, 19 2:18 pm  · 
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pencrush

sorry, gf's boss...

Apr 19, 06 7:36 pm  · 
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David Cuthbert

I'm buying land - see that thread. I sat long and hard about buying a house, the one I'm in - but I realised that I'd be better off starting from scratch granted I won't have anywhere to live but where I am.. :(

Apr 20, 06 5:43 pm  · 
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Aluminate

One rule of thumb that some financial advisors will tell you is that if you buy a house that has mortgage payments equal to your current rent, your additional expenses to maintain the house (everything from property taxes to homeowner's insurance to having to replace a water heater or fix a roof every now and then) will be approximately another 40% on top of the mortgage. Obviously not every month will be that expensive because in some months (or years) you'll have no major repairs - but over years this is what it averages out to.
So, as a test of whether you're ready to buy, you're supposed to try for 6 months to pay all your regular bills but save an additional 40% of your rent. If at the end of the 6 months you've been able to save this without dipping into it then theoretically you can afford a house with the same monthly mortgage as your current rent.

There are also charts that will give you a general idea of whether it's better to buy or rent. You can usually find this at any bank's or credit union's page on homebuying. You look at the amount of time you expect to stay in the region, and how much you are paying in rent. The chart tells you at what point it makes more sense financially to buy or rent. Some of these charts are finetuned for particular cities, whereas others are more general.

Almost any bank or financial advisor will advise you that if you plan to stay in the house less than 4 to 5 years you'd be better off renting.
Remember that there are a whole bunch of extra expenses that you have to come up with when you buy a house - everything from the home inspector's fee to your real estate lawyer's fee, to your broker's fee (in theory you could dispense with any of these people, but advisors usually discourage that!) All of this stuff can add another 3% to 6% or more to the purchase price.
There are other things that can add to the price - for instance if you aren't able to put down a 20% downpayment you'll have to pay for mortgage insurance, which will cost you tens of thousands of dollars cumulatively over the life of a mortgage. If you're borrowing from your 401k or traditional IRA accounts for some of the downpayment remember that the 28% tax will be due.

In the end if you're not planning to stay for several years it is not always the best deal to buy.

Apr 20, 06 6:05 pm  · 
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ochona

if you want to up and move to sao paulo keep life simple. see if you can find an apt with a month-to-month lease. certainly do not sink time and money into buying a place.

save money just because...or invest it. or both. oh lord, if only i'd saved up a pile of money before i got married...that would have been dope. back when my apt cost $595 a month and i spent all my money on beer and books.

if you took what you would pay on a mortgage and invested it in a diversified portfolio of mutual funds and you were in it for the long haul (i.e., 5-10 years) i imagine you would make just as much if not more money than if you bought and sold a house. and the money in your mutual funds is liquid, whereas sometimes it's hard to sell that condo.

Apr 20, 06 6:19 pm  · 
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S

where are you? condos and townhouses are beginning to get cheaper in a few places b/c there's not enough demand for them. this is in addition to the real estate bubble deflating. sounds like a good first investment for you, though i would agree you should only invest if you're planning to stay for a few years.

Apr 20, 06 6:41 pm  · 
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sheri25

If you are thinking of buying a house as an end user as opposed to an investor trying to make money on the short-term your concern should be whether you could handle the monthly mortgage and property taxes you have to pay. Buying a house and thinking whether it’s going to appreciate in 5 years is not that important because the idea here is to stop paying rent and creating equity in your home in the hopes of someday paying it off, the only reason to sell your house in 5 yrs is if u r buying another house. I’m not saying to go and buy a house at any price, make sure to get a good deal. Real estate whether the market has its ups and down will eventually go up in value and every month you make a payment you are building more equity in your home, instead of paying rent and having someone else get rich.

Apr 21, 06 5:46 am  · 
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sheri25

Make sure clearing out your savings doesn’t put u in a bind on a rainy day, because unlike your savings account you wont necessarily be able to get money out of your house over night

Apr 21, 06 5:53 am  · 
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trace™

one things with real estate is that it's really difficult to time things, so if you can afford to buy, I'd do it. Interest rates have already gone up (although they think they are stopping, maybe even getting cut), prices are increasing, etc. No one knows if there will be large corrections (although I think you'd be a fool to buy in trendy spots in LA or LV or Miami).

I've always heard that if you are planning to stay in that area for at least 5 years, then you should buy. Even if you move, you can rent the place and wait for the equity to grow.

20% down is the way to go

Apr 21, 06 8:33 am  · 
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WonderK

I had a similar line of thought a few weeks ago, and posted my dilemma as well. Some people on that thread made some outstanding points, check it out here.....

the buying/renting debate

Apr 21, 06 8:52 am  · 
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4arch

There is always the option of renting a property out if you decide not to stick around. Just do your homework beforehand to make sure you'll be able to at least break even on your expenses. Sometimes the rental market can be vastly different from the purchase market.

Apr 21, 06 9:01 am  · 
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4arch

There is always the option of renting a property out if you decide not to stick around. Just do your homework beforehand to make sure you'll be able to at least break even on your expenses. Sometimes the rental market can be vastly different from the purchase market.

Apr 21, 06 9:01 am  · 
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Rim Joist

I rented a for loooooooooong time.
Yes, there are a very few situations and some very specifically unique reasons and circumstances where buying a house is a bad idea.
However, you can look at it this way: how often have you heard a homeowner say, "Man I wish I were still RENTING...yeah, good times".
Can you skip the condo thing and buy a little fixer upper? How about a roommate to essentially pay the mortgage? Then ya also got your built-in Sao Paulo renter.

Personally, I LOVE driving to my own house on the wide open prairie at the end of the day.

Good luck --

Apr 21, 06 11:08 am  · 
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That's Chicago

A few things I didn't see mentioned...

1. One good thing about owning a house/condo is that it is an inflation hedge... That is, your mortgage payments never go up, while rents can and do go up (they are going up more than 11% this year in Chicago).

2. Several studies show that owning a home is the most effective wealth-building tool that most people can utilize. The earlier in life that you own your home, the more wealthy you will be in the long run.

3. DON'T use all of your savings to buy a house. You need to make sure you have a savings cushion stashed away if you are going to own property. If things go bad, like a job loss (which happens in architecture fairly often), you want to make sure you can s cover your mortgage. Nothing will destroy you more financially in the long run than a bankruptcy of forclosure!

4. Check out the "Rent vs. Buy" calculator on Lendingtree.com. It's in the "Knowledge Center" under the "Calculators" menu. You will need to enter in a lot of specific information about interest rates, tax rates, insurance rates, etc., but it will calculate your "break even" point--that is, how long you need to live in a property to break even with renting and investing the difference in cost.

Apr 22, 06 12:13 pm  · 
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S

Apparently, the amount banks lend depends on your monthly mortgage payment not exceeding 33% of your gross income.

Apr 23, 06 10:27 am  · 
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Bloopox

Well, that's one factor. Your total monthly debt ratio is also taken into account (things like the minimums due on any credit card balances, your student loan payments, your utility bills, etc.) can't exceed a certain maximum either. And of course your credit score is a big factor.

Also your bank account balances are taken into account. So if your down payment would in fact wipe your accounts to zero then you may not get approval, because ideally you're supposed to have in the bank 6 months of your salary in ADDITION to the money for the downpayment and other related homebuying expenses.

Apr 23, 06 8:45 pm  · 
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on my way

I accidentally came across this old thread and thought it would be interesting (maybe only to me) to note that I did end up buying an apartment in Brooklyn one year after originally posting.

I still don't know if it was a good financial decision, and the closing costs and other fees were ridiculous, but it does feel damn good to own something. It was a big step toward feeling like I'm living a real life, rather than just sliding by in a never ending architecture studio...

The building was newly renovated by a developer, so I'm the first residential tenant. I was torn between buying something old and renovating, but in the end I just wanted live somewhere nice without having to deal with all the hassles. I get my fill of contractors and construction projects at work.

it's such a refreshing change to have new wood floors, new appliances, new countertops, a beautifully tiled shower, etc. rather than the disgusting stuff that was packed into my 270sf west village apartment. I've been happy with the decision since I moved in and I still have no regrets...

Nov 22, 07 3:53 am  · 
 · 

congrats, on my way! good to hear a follow-up.

i have to believe that anything bought a year ago in the brooklyn is already worth more than before - even in this market (though i wouldn't suggest selling in this market). even better after the go-go development that brooklyn's been seeing starts to come on line.

happy thanksgiving.

Nov 22, 07 7:54 am  · 
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brut

my brother in law - who is a cpa - just told me that if your rent is 65% of what your mortgage payment would be, it is economically wiser to rent. hmmm.....I still feel like it's throwing money away to rent but since it's all I can do at the moment...

Nov 22, 07 8:40 am  · 
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trace™

Nice being the first owner, eh? I love new, makes it feel like it was a better investment too.


Just curious, what's the cost to live in Manhattan?

Nov 22, 07 9:48 am  · 
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whistler

Buying your home and planning the first little renos ( even just paint ) was probably the most satisfying time in my life. Security in the form of a roof over my head for me and my family, it wasn't big but could accommodate a growing family and the mortage was cheaper than what I had paid in rent on a monthly basis by several hundred dollars. We took a little loan from the parents to get a bigger down payment and took in a renter for a few years. I rarely see a bad reason to own or at least be in the market ( I know people that buy homes to just rent out while they rent in a much smaller apartment because the big mortage of a larger home and investment of the home is always better paid by somebody else, think about that when you write your next rent check.

Nov 22, 07 12:35 pm  · 
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midlander

Thanks for bringing back this thread! Old day, good memories.


I still don't own a house. Too much work for lazy people like me.

Jun 27, 19 9:00 am  · 
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bowling_ball

I just finished cleaning the gutters. Oddly satisfying but gross and dirty.

Jun 27, 19 9:06 pm  · 
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curtkram

I just replaced all the old iron/lead sanitary lines with pvc in my house.  It was fun to throw away a 70 year product and replace it with a 20 year product. 

Jun 27, 19 9:49 pm  · 
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randomised

20 year product ;) https://theplumber.com/early-history-of-pvc-pipe/

Jun 28, 19 3:18 pm  · 
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Non Sequitur

So, you're saying I should replace the original 8" diameter copper stack in my 50+ year old house with pvc?

Jun 28, 19 3:32 pm  · 
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curtkram

I think I've only seen copper as supply. It will have to be replaced eventually. In your case, maybe not for another 50 years or so

Jun 28, 19 5:40 pm  · 
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Non Sequitur

Oh, it’s definatively waste. Plenty of 4” dia feeding into it too. That’ll be someone else’s problem in 50y.

Jun 28, 19 5:47 pm  · 
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bowling_ball

I just ripped out a bunch of iron waste pipe from my basement. Totally corroded and plugged up. ABS might not last as long (70 years) but it's SO MUCH EASIER to replace. Even more so with supply lines and Shark Bite fittings.

Jun 28, 19 7:45 pm  · 
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sameolddoctor

To the OP, always buy your house if you can, do not listen to the detractors who didn't buy theirs in time.

That said, if you can afford a house in NYC, you must be doing well!

Jun 28, 19 9:40 pm  · 
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tduds

Seeing as how the majority of this thread is from  before the recession, I'm super curious how people's opinions have changed.

Jul 1, 19 12:30 pm  · 
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bowling_ball

Was thinking the same thing

Jul 1, 19 12:43 pm  · 
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Volunteer

Article in today's Wall Street Journal about millennials bailing out of the cities to go to the 'burbs for affordable housing, good schools, and  crime avoidance. Same as always. The kicker this time is that millennials are moving to places like the 'burbs of Raleigh and Charlotte, NC, and other areas of the sunbelt. Apparently having to live in a camper on the street in some Cali high tech-town even though the millennnial makes a good salary at Google (or wherever) has lost its charm. Totally. 

Jul 1, 19 3:43 pm  · 
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tduds

The dearth of missing middle housing in desirable urban areas is driving this. It's a supply failure. The building industry has given us limited options: A nice house in the city that 90% of us can't afford, a 100+ unit apartment building with no private outdoor space, or an oversized underbuilt spec home in an auto-centric mundane 'burb.

Jul 1, 19 5:44 pm  · 
1  · 
tduds

Just bought our first house in October. My sticking point was the ability to walk to at least a few stores + restaurants. My fiance's sticking point was a back yard. You'd be amazed how difficult it was to find something that met both those criteria and was within our (higher than average for Millennials) budget.

Jul 1, 19 5:45 pm  · 
1  · 
tduds

This is not the thread I was looking for but here is a great twitter thread about this trend: https://twitter.com/justupthepike/status/1127288494475186176

Jul 1, 19 5:48 pm  · 
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tduds

Free market choice only applies so much to the housing market because, for almost everyone, the desired choice is financially out of reach, and the choice to buy nothing is not an option.

Jul 1, 19 5:49 pm  · 
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kjdt

This thread was from right around the time that I bought my first house - 2007, so here's what happened.  Naturally it turned out to be a
scary time to buy, when the recession came so soon after.  That
house didn't appreciate much at all because of the real estate bust - but it didn't go upside down.  So it turned out I couldn't make a killing flipping it (which I might have if I'd been enough of a psychic to buy a few years earlier and sell it around the time that I ended up buying it...) but I was lucky and stayed employed more or less full time through the recession so I could pay the mortgage with no more difficulty than I would have had paying rent, and by 2012 (and again more recently in 2016) interest rates were so crazily low that even though I'd gotten a great rate by 2007 standards, when I went looking for at houses again when the rate was 2.6%, and with the little bit of equity I'd built in those few years in the first house, I could literally afford twice as much house for slightly less per month than what I'd been paying on the first one, so I upgraded (not really to a twice-as-big house, just to a somewhat more functional one in a better location.)

I would guess that a lot of on-the-fence renters might have finally been willing to take the leap to home ownership when the economy started to warm back up and the interest rates got so low.  I don't regret doing it - I didn't become a real estate tycoon, but I like being able to make my own decisions about what to do with my own place - what architect wouldn't?

Jul 1, 19 5:10 pm  · 
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whistler

Buy when you have a thick enough skill to test your design and building skills and are prepared to live in it with your family. Buy low ... sell high first though, take your designer hat off and think like a developer.  My first few houses were designed with a future buyer in mind ( not overly designed for my own personal needs but well crafted and well built with high quality materials ) made great returns. Slowly started to design more for my own family and got to try a few unique design features to try out that I couldn't convince clients to do (ie Green roof, exposed steel beams etc ) now I just design what I want to do and get to explore ideas I have wanted to try, somethings work out better than others, but at least I have no client  I have to answer to ( well my wife has some say ) with a budget that isn't as restricted as it once was. 

Jul 2, 19 8:35 pm  · 
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kevross

Thanks for the update, on my way! That's certainly nice to hear.

As for the question, I honestly don't know when the exact time it is good to buy a property. Some people really analyze the market and the economy before buying to make sure that they won't be on the losing end or lose more money than they ought to be. But as for a philosophical or holistic approach, I think it's good to buy when you are mentally, physically, and financially stable. I learned this the hard way when I first bought my first property from this page. I only had one of the three (financially stable), and let me tell you it did not feel good. I was going through a family crisis at that time so I was juggling work, family, and myself at that time which is tiring and mentally challenging. Others would talk about the financial side of buying a house or whatever property you have your eyes on, but not many people talk about the non-financial parts of it. I'm not saying that it's bad to just talk about finances but just make sure that you're including all possible aspects in life before making a decision or move.

Apr 23, 21 1:31 am  · 
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