You Should NOT Build a New House if… (Part 1) You Are Tight On Money

Recently, my wife and I completed the building of a new house after having lived in our previous house for almost 31 years. After many months of slinging a hammer, plumbing, and electrifying, we are tired…very tired. Just kidding. We didn’t actually build the house, we hired other people to build it for us. We took an existing floor plan and modified it to fit our needs. The whole process of designing a layout and then having it built was, to say the least, an interesting experience. Actually, some parts of the process were fun while other parts were frustrating. We ultimately came to the conclusion that building a new house is not for everyone. However, we survived and have now been in our new house for about three months. I decided to put finger to keyboard and create a series of posts entitled “You Should NOT Build a New House if…” Here’s the first one.

You should NOT build a new house if…

 ...you are tight on money.

You’ve probably heard it before from people who were suckered into, uh, I mean convinced that they should build a new house rather than buy an existing one or just stay put. Yes, I’m talking about these dreaded words: “It’s going to cost more than what you estimate. Budget accordingly.” I know, those are not the words anyone wants to hear. I kept talking to people who had built in the past and was waiting to hear, “Oh, our contractor greatly overestimated what our new house would cost. It ended up costing $50,000 less than we anticipated. We bought a Lexus with our savings.” But guess what. No one ever said that. I suspect that no one has ever said that in the history of mankind. I can hear the cliff dweller now. “Yeah, we thought it would cost 10 wild boars to have a living space carved out of that rock face, but it turned out that the rock was so hard they had to design different carving tools and it took several months longer to complete. It ended up costing us 15 boars.” And indeed, one friend told me to plan on our house costing 1.5 times more than the contract estimated. I began to sweat since I had already signed the contract at that point.

Because of the stories we had heard from experienced house builders, we started our planning early. We actually began talking to the builders about a year before we thought we’d be ready to build. We knew that we would need some of our retirement money, and it was going to be a year before it would be available without a penalty for early withdrawal. We settled on a house plan and then picked out a lot that would accommodate it. The builders said they would put the lot on hold with no money down. The only caveat was that if someone else came along wanting to build on that lot, we would only have a couple of days to commit else we’d lose the lot. Fortunately, during that following year no one else wanted the lot. And as it turned out, neither did we. As we neared the date for signing a contract, we realized that there were a few downsides to the lot we had chosen, so ended up switching to another one.

During that year of waiting, we did not remain idle. We actually began picking out, or at least estimating the cost of, various items. Things such as hardwoods, tiles, cabinets, countertops, appliances, and the ever important front door. By the time we signed the contract in October 2014, we had been able to revise the cost estimate the builders had given us so we were pretty sure the cost would not rise much during the construction phase. Nevertheless, we still built in a 10% contingency just in case we got a wild hair and decided to put in 18 karat gold bathroom fixtures or the like. We hoped that this contingency would not be needed for the actual house since we had some new furniture we wanted to buy also.

Well, the good news is that the actual cost of the house came in only about 4% over budget. Most of that was due to buying more expensive appliances and front door as well as wanting customized cabinets in our closets rather than the standard shelves and hanging racks. This left us some budgeted money for buying the new furniture we wanted.

So, I was happy that the house was only 4% over budget, but still it was over budget. I missed my goal of being the first man in the history of mankind to be able to say that we came in under budget. Oh, well. Perhaps it’ll happen for the next house we build. Yeah, like we’re going to go through that again.

The lesson for you, the reader, is “don’t build a house if you must stay on budget.” It’s not going to happen! And if for some reason you build and it does happen, be sure to contact the Guinness Book of World Records. They will be very interested in you.

The Perfect Health Care Plan

The national health care debate at the US Congressional level and across the United States of America has reached fever pitch. People are surrounding this issue from all directions just like a tribe of Native Americans circling a wagon train of pioneers. Well, I don't know about you, but I like the plan outlined by several Representatives and Senators that has these features:

No denials based on preexisting conditions
No cap on medical expenditures each year
No rationing of care
Patients get to pick their providers
A cap on cost of premiums

What I'm hoping for is a really low cap on the premiums, say no more than $5.00 per month. But, if it's more than this I will probably not take any insurance and just jump in whenever I develop a condition expensive enough to justify having the insurance. After all, if I can't be denied coverage based on any preexisting conditions, I should be able to do this. But wait, perhaps there will be some sort of waiting period after signup before the benefits kick in. Oh, it doesn't matter anyway. I just remembered that President Obama said that everyone would be required to have health insurance whether or not they want it or can afford it. I suppose there will be help for those who can't afford it. Although if they can keep the premiums down to $5.00 a month, there shouldn't be too many needing the help.

But wait just a minute! I just had an epiphany. How can the government possibly provide or expect insurance companies to provide unlimited health care with no preexisting conditions exemptions and no rationing using premiums that are capped. I am having a hard time seeing how that will work without changing the laws of mathematics. If Congress could just make $2 plus $2 equal $1,000,000, I believe their plan just might work. But I don't know how to make those numbers work. I know they don't work at the casinos. But perhaps our noble politicians have a trick up their sleeves.

One trick I've heard is to fund some of the health care plan by cutting fraud out of Medicare. Nice! But if it is possible to cut X number of dollars of fraud from the Medicare system at a cost of less than X number of dollars, why haven't they already done this? Is cutting wasteful spending out of the budget only important when we're in an economic crisis or we're wanting to start another spending plan? Also, I have heard that Medicare is drowning in debt, having trillions of dollars in unfunded future obligations. Won't all the fraud savings have to be put towards those obligations to help keep Medicare afloat? And won't that still not be enough to salvage it?

It's beginning to look like the only way to make ends meet with the proposed health care plan is to simply limit the payout to doctors and drug companies to the amount that is taken in from premiums. But if the premiums are too low, the payouts will be too low, and there will not be much incentive for these people, especially the doctors, to put themselves through 8-10 years of college and intern hell and accumulate hundreds of thousands of dollars of debt. That means fewer doctors, which means more patients per doctor, which means the average visit time will have to drop from about 10 minutes per patient to perhaps 5 minutes. There's already people complaining that 10 minutes is insufficient time to consult with a doctor. They'll be yelling if it drops to 5. Oh well, I guess we can always get the government to force the doctors to work 24/7 under threat of imprisonment. I'm not sure who will treat them when they keel over from exhaustion.

I don't think there is any decent person who wants to see another human being go without needed health care. I certainly don't. But the harsh reality of this cold, uncaring Universe is that some things are just impossible. This may be one of those things. One thing seems certain to me. The only way we have any hope of paying for unlimited health care for everyone is to unfetter economic activity and allow productivity to increase tremendously. The increase in wealth, and the resulting increase in tax revenue may just be able to fund unlimited health care, although I am still skeptical. Feel free to comment if you believe I am missing something.