There may come a point in your life when you start to think about upgrading to a nicer home. That could happen when your income increases, or when you reach a certain savings milestone.
In this Reddit post, we have a 35-year-old with a $425,000 house who’s looking for something nicer. They have a household income of $380,000, and they have a nice amount of assets — $450,000 in a 401(k), $700,000 in IRAs, and $1.7 million in a taxable brokerage account.
They’re wondering if they can afford a $1.4 million home. And while I think they can, I also think they need to consider what owning that home might force them to give up.
It’s all about priorities
Spending more than 30% of your income on housing can be a dangerous thing. I don’t know exactly what a $1.4 million home will cost the poster every month. That depends on their down payment, mortgage rate, and so forth.
But based on everything I’m seeing here, it seems like this poster can afford the more expensive home. They earn a nice income and have a lot of savings for their age.
Even if they were to cut back on funding their retirement accounts and taxable brokerage account due to having higher housing costs, if they’re planning a retirement at a traditional age, they have a really nice cushion. And even an early retirement could be more than doable for them.
But just because you can afford to do something in life doesn’t automatically mean you should. So one thing this poster should consider is that buying the bigger home might mean having to give up on something else. That something might mean a nicer vacation, a better car, or more money toward other long-term goals.
Another thing I like to remind people of in the context of upgrading a home is that a larger space tends to require more work. So it’s important for the poster to think about the time commitment as well as the financial commitment.
As just one example, say you’re buying a bigger house that comes with a pool, whereas you don’t have one now. Even if you can afford that new house, you’re going to spend time maintaining that pool. And this holds true even if you outsource your maintenance — you still need to find a company to service your pool, and you still need to make sure they’re coming to do the work when they’re supposed to. So make sure you’re willing to make that effort.
Outside advice would probably help
I’m not a financial advisor, but I think the poster here could benefit from meeting with one. A financial advisor can help the poster, and anyone else in a similar situation, understand the pros and cons of upgrading.
But the poster should also do some soul searching. They probably know deep down that they can afford the home, so that may not be the issue.
The issue might be that they feel guilty about buying a more upgraded property, or they’re anxious about the bigger commitment. Those are feelings they can address with a therapist alongside a financial advisor so they’re able to work through the decision with more guidance and confidence.
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