How Can So Many People Afford To Do Construction?

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July 11, 2024, 6 AM ET

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Now that the weather is nice my wife and I try to take walks around the neighborhood a few times a week. We can’t get over how much construction is taking place in our neighborhood (we live in a popular and heavily Jewish suburb of New York). Old houses are being purchased for an astronomical amount of money, being torn down, and much larger homes are being built in their place. Others are adding second floors or doing other types of major renovations. My wife and I are both professionals and have a relatively high household income and it was a struggle for us to save enough to buy our home. My question is how can so many people afford to do construction?

This question is timely given the unfavorable real estate climate (i.e. high prices and high mortgage rates) coupled with the seemingly endless amount of construction taking place in many frum communities around the country. I believe that there are four main explanations for how people can pay for expensive home construction. These thoughts are equally applicable whenever you see folks in your social circle spending money on nice things and wonder how on earth they make it work, given all the expenses associated with living a frum lifestyle.

They make more money than you: While you may be doing well, there is always someone that is doing a lot better. At all levels of wealth, there will always be someone with more. They may go on more luxurious vacations or give more money to charity. The reason is they make more money so they can afford to do so!

I have clients who are relatively young and make millions of dollars a year. They don’t get any handouts; they simply chose to work in a very lucrative area, they put in the effort to succeed, and were blessed with a tremendous level of financial success. Others work less hard and just got lucky! Either way, the financial outlay for them to build a brand new mansion may be immaterial to their overall financial picture.

This may be a humbling experience, but it’s a good reminder why materialism shouldn’t define who you are. In all aspects of life, there will always be someone who has achieved more than you.

They can’t afford it and are living way beyond their means: Many people in the frum community live beyond their means. This is generally due to the social pressures of wanting to keep up certain appearances. Readers may think this only applies to those with a low income, however, that is far from the truth. Oftentimes I see folks with high incomes living paycheck to paycheck. They are on the hedonistic treadmill of always needing more to satiate their appetite. Once they go down this dangerous path, it is very hard to stop spending. These individuals typically afford their lifestyle at the expense of saving and investing for their future and may even be taking on debt.

It’s always worth reminding yourself that wealth is what you don’t see. Houses, cars, fancy clothes, and the like are all visible things on which people spend money. What’s actually in their bank account is not advertised to the public.

Their parents are helping them financially: Some people get financial support from their family to help with a home purchase or remodel. Baruch Hashem, there are wealthy families who have the financial means to help their children.

Unfortunately, I also know parents who are too generous with their children at the expense of their own financial health. In these situations, instead of saving for their own future, they give their kids money to afford their lifestyle. They may liquidate investment accounts, not save, or even refinance their home to help their kids. Keep in mind that this approach is ill-advised. It will not only jeopardize the parents’ personal financial future, but it will also cause their kids to live a financially inflated lifestyle that they will not be able to maintain over the long-term. It may ultimately leave parents in the uncomfortable situation of needing to rely on the charity of others for financial support in retirement. That is a precarious situation to be in, especially knowing they wouldn’t be able to rely on their children, who certainly wouldn’t be able to support their parents in retirement when they need their own help financially to afford their current lifestyle.

They were serious about tradeoffs and delayed gratification: The cornerstone of financial planning is understanding tradeoffs and delaying gratification. It is also the concept with which the most people struggle. For example, if it’s important to someone to send their kids to yeshiva on a tight budget, this may require forgoing traveling for vacation, buying a second car, eating at restaurants, and subscribing to various streaming services. These activities may be prevalent in their social circle, but they will need to skip out given budget constraints. It is not easy.

I’m aware of families who rented tiny apartments that were too small for their family for many years (Read: 10+ years), while they ate pasta and cereal for dinner many nights, in order to be able to afford a down payment on a home.

Some of the houses you see being built are due to folks being financially prudent. They may not have a high income or receive gifts from family. Rather, they were just intentional with where every dollar went and made the sacrifices required to achieve their bigger goals.

Every family has a hierarchy of priorities. It’s important for each family to list them and minimize or eliminate the spending in less important areas. This will allow folks to spend more money on high priority items. This is an admirable way to handle your finances.

In conclusion, everybody has their own situation, and each construction project has its own story. The important thing for readers to understand as they see all the building taking place in their own community is: Run your own race. Don’t let the material success, missteps, or overall circumstances of others impact your own financial decisions.