Reader Case Study: Can We Buy Our Dream Home?

Welcome to this month’s Reader Case Study in which we’ll address Jack and Elizabeth’s question of whether or not to buy their dream home. Case studies are financial dilemmas that a reader of Frugalwoods sends to me requesting that Frugalwoods nation weigh in. Then, Frugalwoods nation (that’d be you), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study.

P.S. Another way to get support on your financial journey is to participate in my Uber Frugal Month Challenge! You can sign-up at any time to join the over 11,900 fellow frugal sojourners who’ve taken the Challenge and saved thousands of dollars.

I probably don’t even need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we all endeavor to help one another, not to condemn.

With that I’ll let Jack and Elizabeth, this month’s case study subjects, take it from here!

Jack and Elizabeth’s Story

Jack & Elizabeth

Hello, fellow Frugalwoods followers, we’re Jack and Elizabeth! We’re 28 and 29, we’ve been married since 2014, and we live in the Appalachia region with our mustached, polydactyl cat. Although we were both raised in the area, we didn’t bump into each other until we were at Miami University of Ohio studying architecture, and didn’t start dating until we both moved back home after graduation. A marathon first date in the summer of 2012 kicked off the best five years of our lives (so far!), including a four-week cross country road trip where Jack proposed in a hot air balloon over the Grand Tetons.

Through Jack’s passionate use of spreadsheets and budgeting, we’ve managed to eliminate all of our student debt, pay off two vehicles, and build up significant equity in our home, while taking several cross-country road trips.

We work at the same Architecture and Engineering firm, which allows us to carpool. While we both have a background in Architecture, I (Elizabeth) have transitioned into marketing, while Jack has shifted into a BIM (Building Information Modeling) coordinator role. We’re also both enrolled in a graduate program through Marshall University for a degree in Technology & Project Management, which we’re fortunate to have primarily funded through our employer. We’ll pay about $6,000 total for both of our Master’s degrees.

While we both love what we do and adore the company we work for, becoming financially independent in the near future is a major goal of ours. We hope to start a family in the next few years and love the idea of being able to spend as much time with our children as possible. This doesn’t necessarily mean we’ll both stop working – only that the need to work 40 hours a week will go away (or so we hope!).

Our Hobbies

Jack & Elizabeth’s cat

Both of us are heavily involved in activities outside of work and graduate school, which doesn’t leave us with much time at home. I (Elizabeth) run a local online magazine, which has evolved into a local lifestyle company. I also serve as President of the Board of Directors for a nonprofit focused on downtown revitalization, belong to our local Kiwanis club, and love helping my mom in her boutique store.

Jack is similarly involved with several nonprofits and an education-based business incubator and maker space. Additionally, he’s working with the founder of our company on a start-up solar energy operation.

As much as we love all these extra-curriculars, not being home has its drawbacks. We tend to eat out more than we’d like, we don’t make enough time for food prep and exercise, and we fall behind in housework. At the same time, we’ve adjusted our budget accordingly – cancelling our internet, not subscribing to cable television, not utilizing AC during the summer, etc. However, these small savings don’t quite make up for not being able to fully enjoy our home.

The House Dilemma

We bought our current home in June 2014 for $107,000. It’s a 1,500 square foot 1950’s mid-century modern ranch and we purchased it knowing we wanted to give it a complete makeover. However, we wanted to pay it off first to minimize the accrued interest and speed up our journey towards financial independence. To date, we’ve paid more than $40,000 in principal and only $8,000 in interest.

At this rate, we could have the home paid off by May 2019–when we graduate with our Master’s degrees–and then start funneling money towards renovations. Knowing that we also want to start a family in this time frame, the renovations are starting to seem overwhelming. We also recognize that this home could become too small as our family grows, although it could also serve as a motivator to accumulate less stuff, which is something we’re already working on.

But this was all before our dream home came on the market last month…

Front entrance of Jack & Elizabeth’s dream home

Perched on our all-time favorite downtown street, this beautiful mid-century modern house–which we could easily see becoming our “forever home”–is a whopping 3,000 square feet with a view overlooking the city. Sustainability is important to us and we love that this house was designed with that in mind, capitalizing on strategies such as daylighting, thermal mass, solar orientation, and more. Unlike our current home, this house has been updated with new appliances and finishes throughout, and the only renovations needed are the master bathroom and the roof.

The roof is a concern, and we estimate replacement would cost at least $65,000 and need to be done within the next decade. We spoke with a roofing estimator and this home has a commercial-style flat roof with lots of skylights, which–combined with a number of other factors–means it would be significantly more expensive to replace than a standard roof. This would be on top of the $279,000 list price, which we’ve always viewed as out of our price range. After crunching the numbers, we think it’s doable, but not without some significant trade-offs.

Dining room of Jack & Elizabeth’s dream home

We compared what it would cost to renovate our current home vs. buying our dream home and the numbers are pretty similar, given the right balance of mortgage terms.

Nevertheless, we’re having a difficult time weighing the options. We fear that signing up for an expensive mortgage will chain us to our desks for an additional decade and keep us from spending as much time with our family/community as we’d like. On the other hand, it would be wonderful to live in our dream home–a beautiful and inspiring place–where we wouldn’t need to worry about what to renovate next!

Current Home vs. Dream Home

  • Dream Home Asking Price: $279K
  • Dream Home Projected Purchase Price: Our initial offer would be $242K and we wouldn’t go higher than $251K
  • Current Home Projected Selling Price: We hope it’d sell for between $110K-$120K
  • Projected Downpayment: 20% of purchase price of $242K = $48,400; $251K = $50,200:
    • We’d pull this together by selling the Mustang; selling our current home; and using all of our savings (currently $2,360).
    • Another option: there’s a bank willing to give us a 15-year, no PMI mortgage with only only 10% down, but the interest rate is higher and the monthly payments would be $300 higher.
  • Projected Monthly Mortgage Payment (we’ve spoken with several banks already):
    • 15-yr Mortgage Monthly Payment (PITI) on $251k, 20% down @ 3.24% = $1,698
    • 15-yr Mortgage Monthly Payment (PITI) on $251k, 10% down @ 4.25% = $1,987

Where We Want to Be in 10 Years:

  • Finances: Ideally rapidly approaching Financial Independence–or–as an acceptable compromise, be able to support our family on one income.
  • Lifestyle: We enjoy being out in nature. We want to be healthier so that we can pass this passion onto our family. We’d love to live closer to downtown (which our dream home is) so that we could walk to amenities and be home more in order to cook for ourselves. We’d like to find a better work/life balance, which is something we’re actively working on. On the rare occasions we find time off, we plan road trips to visit family out west, see National Parks, hike, and cruise scenic byways. We hope to start trying to have children in the next five years, so hopefully in ten years, we’ve added two more members to our little family!
  • Career: We’d both like to develop our departments in our company and create a legacy towards a more profitable and sustainable future. However, in ten years, we’d also like to reach a point where working full-time is an option, at least for one of us but preferably both. That’ll allow us to pursue one or more of the many other passions we hold dear. For me, that’s investing more time into my nonprofit volunteer work and developing the magazine. For Jack, it might be growing the solar energy company or starting his own building energy analysis and consulting firm. Bottom line, in 10 years we either want to love our jobs so much that we cannot wait to get to work, or be financially independent.

Jack and Elizabeth’s Finances

Yearly Take Home (Net) Income

Net Income Amount Notes
Monthly Take-home $5,345 After taxes, insurance & 401k deductions
Annual Take-home $64,137 After taxes, insurance & 401k deductions

Monthly Expenses

Note: our cell phones are both covered by our employer

Item Amount Notes
Additional Mortgage Principal $2,100 On track to be paid off by May 2019 (aka 10 years early!!)
Mortgage, Taxes + Insurance $905 $107k 15yr mortgage @ 3.675% (current balance: $61,700)
Utilities (water + gas + electricity + trash) $300 Most expensive estimate of bills combined
Groceries and Household Supplies $250
Car Payment for Chevy Volt $210 $12K loan @ 1.49% thru 2020 (current balance: $9,623)
Graduate School Tuition $167 $2,000 annually
Dining Out + Coffee + Alcohol $135 We know…this is way too high
Tithe $100
Charity $90 To various local nonprofits and one national organization
Car Insurance (Volt) $51
Car Insurance (Mustang) $38  We’d sell this car (and hence this insurance cost would disappear) if we bought our dream home.
Clothing Allowance $35
Gifts $30 Average spent per month on birthdays, holidays, etc.
Gasoline for cars $20
Subscriptions $18 Hulu and Spotify subscriptions
TOTAL $4,449

Assets

Item Balance Notes
401ks (combined) $148,600 Since marrying, we’ve tried to max this out every year
Vanguard Brokerage Account / ETF Holdings $960 Just started this year
Misc. Savings Accounts (combined) $1,400 Usually just enough to cover a small unexpected event
TOTAL $150,960

Cars

Car Estimated Value Notes
2014 Chevrolet Volt – It’s Electric! (4yr @ 1.49%) $9,120 A year ago, we purchased a used Chevy Volt, because the car payments were almost identical to our prior monthly gas budget. Plus, we have free charging at our office! We still owe $9,623, so we know we’re upside down on this one, but it’s cheaper per month than paying for gas and better for the environment (at least regarding emissions)
1994 Chevrolet S10 – kind of a beater $1,388 Parked/unlicensed/uninsured for now – on reserve for when we start working on our house – started once every other month to keep engine from freezing up
“Drivable Emergency Fund” – 2010 Mustang GT $15,887 Admittedly Jack’s guilty pleasure: paid off and tons of fun on road trips through the Appalachian Mountains
2007 Honda CRV (on the way out!) $6,645 Selling to Elizabeth’ parents (monthly-payment style) as soon as I can get the spark plugs changed and coolant flushed, maybe this coming week weather permitting?
TOTAL $33,040

Debts

Item Remaining Balance Notes
2014 Chevrolet Volt (4yr @ 1.49% – Orig. 5/2016) $9,623 Ouch. We know, but we get free charging at work!
Current home (15yr mortgage @ 3.675% – Orig. 6/2014) $61,700 Not too shabby
TOTAL $71,323

Jack and Elizabeth’s Questions For You

1) Is chasing a dream home wise at our age? We’ve worked hard to be able to raise a family debt-free and weren’t looking for new home, but just happened to come across this one and fall in love. It’s at the top of our “someday when we’re debt free we might consider a home like this” price range, but we can’t believe something this well-designed exists in our hometown! Mortgage interest rates are historically low in our area, but it feels a little bit like we’re at risk of falling for the old “ON SALE, BUY NOW!” trick, at the cost of significant interest ($53,000-$80,000 total depending on our down payment) over the next 15 years. Ultimately, we’re afraid we might be trading financial stability (read: freedom) for traditional American Dream convenience and flair, both of which are difficult to put a dollar value on.

Jack & Elizabeth’s kitty cat

2) Would we be stretching our monthly budget too tight if we bought our dream home? There’s a $900 – $1,200 increase (depending on our down payment) in mortgage (PITI) + utility costs with the dream home, which would now last for another 15 years instead of just two. This would require a number of changes from selling extra cars to lowering 401k and investment contributions. We’d love to put a solar array on the roof of the dream home too, but it takes a larger solar array to power the bigger house (and charge our electric car). This would only be viable if we go with the 10% down route, and is not the best ROI given current electricity prices in our area.

3) Should we renovate our existing home and save to buy a dream home later? Building sweat equity in our current home was always our intention. We daydream about how to improve this home, such as installing solar panels that would further reduce our electricity costs and provide free charging for our car. Getting so close to paying off the mortgage has us putting renovation estimates together and it’s remarkable how similar the price of renovation is compared to the asking price of the dream home. Another consideration is that our current home is smaller and thus has lower utilities, taxes, and insurance.

4) Are there glaring issues in our lifestyle? Admittedly, we spend too much on the convenience of prepared food, so we’re trying to make shifts in our life/work balance to make more time to cook. Tuition is only a temporary commitment, but we can’t help but think there are other ways to optimize our spending. We want to continue cutting frivolous expenses and avoid lifestyle inflation in preparation for having children.

Mrs. Frugalwoods’ Recommendations

Jack & Elizabeth

I want to start off with a huge round of applause for Jack and Elizabeth! They’ve accomplished a great many financial feats: paying off their student loans (hooray!), maxing out their 401ks (more on why that’s fabulous here), waiting to renovate their existing home (more on why I love that here), and they’re carefully considering the purchase of their dream home.

I love that they’ve already gamed out the downpayment and mortgage scenarios and spoken with several banks before putting in an offer! All worthy accomplishments and I commend them for putting themselves in such a strong financial position. We could call it a day right there, but this is a case study after all and they’ve asked for our help, so here goes!

Cash On Hand aka An Emergency Fund

Jack and Elizabeth need it and they don’t have it. This isn’t the heart of their question today, but the fact that they only have $2,360 in cash right now makes their decision tougher. Their plan to sell their Mustang, and convert that money into an emergency fund, is a great idea and one I endorse. 401ks and an absence of debt are two important components of a healthy financial portfolio, but they’re only half the equation. Jack and Elizabeth (and everyone else reading this) need to build up two other types of reserves:

  1. An emergency fund held in a checking or savings account that can be accessed immediately (like while you’re standing in the hospital) in the event of an emergency. The total amount should be somewhere between three and six months’ worth of living expenses–I prefer six months, but some folks are comfortable with less. An emergency fund is your insurance against disaster. It’s the difference between an unexpected job loss or car breakdown or health issue being a crisis that you have to take on debt to pay for, or, merely a question of withdrawing money from your emergency fund. An emergency fund is not to be spent on Christmas or vacations, it’s for emergencies, such as if you both lose your jobs tomorrow and can’t find new ones immediately. Anytime you need to use some of this cash, replenish it as quickly as possible.
  2. A portfolio of low-fee index funds. Jack and Elizabeth already have this through their Vanguard account, so they’re on the right track! However, they should contribute a great deal more to it each month because this is where wealth is created. Without investments, you’re not going to grow your wealth and early retirement/financial independence/living on one salary won’t be possible. 401ks are AWESOME, but they won’t help you in a classic early retirement scenario because prior to age 59.5 years, you’ll pay a penalty to withdraw the money (there is an exception to this rule, called the Roth Pipeline and my good friend The Mad Fientist has this excellent article on the topic). More on how to craft a frugal investment portfolio here.

Over the Grand Tetons: where Jack proposed to Elizabeth

How much money does a person need in order to retire early or declare financial independence? It depends on: 1) how much you spend every year; and 2) your tolerance for risk. Without going into all the math (which would be a whole post in itself), the general rule of thumb for early retirement–enshrined in the academic Trinity Study–is that you should be able to live off a 4% annual drawdown of your investments. This means you’re skimming 4% off your investments to cover all of your living expenses every year, which doesn’t harm the longterm health of your investments.

Since Jack and Elizabeth spend $53,388 per year at present, according to the 4% rule, they’d need roughly $1.34M in order to retire early. This sounds like a lot, but don’t be daunted! With extreme frugality and higher incomes, this could be possible for them. Additionally, since Jack and Elizabeth aren’t 100% set on early retirement, a smaller amount would enable them the flexibility they crave–to only have one person working, or to work at lower paying, but more fulfilling, jobs. The golden rule is that frugality–and the resulting money in the bank–gives you options.

Stop Paying Down Your Mortgage

Jack & Elizabeth’s wedding

Jack and Elizabeth are no slouches–it’s not like they’ve been frittering away their money–they’re judiciously funneling it into paying off their mortgage early. The only problem is that they’ve done this to the detriment of their emergency fund and their investments. A paid-off house is a wonderful thing, but you can’t use a paid-off house to buy groceries or pay for health insurance if you’ve lost your a job (you might be able to get a Home Equity Line Of Credit, but that’s not a guarantee and certainly not if you’ve lost your jobs).

In addition to the fact that a paid-off house is an illiquid asset (unless you’re able to sell it quickly, which is an unknown), there are opportunity costs to paying off a mortgage. Namely, you’re missing out on the potential investment returns you’d enjoy if your money was instead invested in the stock market.

Mr. FW and I choose to hold mortgages on both our primary residence and our rental property because, mathematically, our money is better deployed in the stock market thanks to the average annual rate of return (7%) that you can expect after many decades of remaining invested in low-fee index funds. Essentially, money is better leveraged in the stock market than in a paid-off house.

If you have a low fixed interest rate mortgage, like Jack and Elizabeth do, then from a mathematical standpoint, I wouldn’t pay it off early. I view holding a mortgage–and having money properly invested in diversified assets (aka low-fee index funds)–to be a much less risky decision.

Jack & Elizabeth ice skating

Why? Say you funnel all of your extra money into paying off your mortgage early. Then, a month later, you lose your job and your cars break down OR your dream home comes on the market… and all of your money is now tied up.

Additionally, a mortgage is an excellent hedge against inflation. Inflation is when money becomes less valuable and the neat thing about a mortgage is that it’s denominated in the dollars you originally paid for the house and so, over time, as inflation increases (which generally happens), the money you’re using to pay off your mortgage is “cheaper.” Essentially, it’s not bad to hold a mortgage and it’s actually a fine component of a diversified portfolio of assets. Paying off your mortgage to the detriment of investing is a lot like putting all of your eggs in one basket.

It’s not that it’s a bad thing to pay off a house–it’s just that it comes at the expense of other opportunities to grow wealth. Many of us who are early retired/financially independent choose to hold mortgages–even though we could afford to pay them off tomorrow–for the above reasons. Bottom line: financial independence can happen with a mortgage; but it absolutely cannot happen without cash on hand.

To Dream Home Or Not To Dream Home?

I am a big proponent of loving where you live. I think it’s an integral component of being a content, frugal person. The more you cherish your home and your town, the less likely you are to spend money going out to the movies or eating in restaurants. Jack and Elizabeth expressed that they’re interested in spending more time at home and I think that’s wonderful. I commend them heartily for analyzing and considering this purchase carefully. However, at the end of the day, there’s no right or wrong answer–rather, there are several different options.

Jack & Elizabeth’s wedding!

A big part of this decision for Jack and Elizabeth needs to be a consideration of how important it is to them to retire early/achieve financial independence. At their current rate of income and expenses, they can’t do both–at least not anytime soon. However, if they’re able to: 1) increase their incomes, 2) boost their savings, 3) not pay down this mortgage early, then in the future we could be looking at Jack and Elizabeth, early retirees in their dream home with kiddos running around.

One of the cons of their current home is their desire to renovate it. I agree wholeheartedly with Jack and Elizabeth that trying to tackle a full-house renovation while pregnant or with small child(ren) is not setting yourself up for success. Can you do it? Sure. But is it wise/fun/advisable? Probably not.

And so, I put this question to them: Could you live with your current home as is, un-renovated for the long haul?

If so, then I’d say early retirement becomes a very real proposition, provided they can funnel a lot more money into their index funds. But if not, then I think they might as well buy the dream home since they’ve cited it would cost the same amount to renovate the existing home.

Jack & Elizabeth watching the sun set over Black Canyon in Colorado

Renovations are stressful, time-consuming, and often end up costing more than expected. Plus, there’s no guarantee they’ll get a solid return on the renovations. Typically, except in super hot real estate markets, you don’t see that money again. Yes, they’ll probably be able to sell their house for more if it’s updated, but I’d want to get a realtor’s take on what’s possible. How fancy is the neighborhood? What are updated homes on their street selling for? Pull as many comparables (similar homes that’ve sold recently) as possible before touching so much as a paint brush. Often, there’s a cap to how much people are willing to pay in a given market–regardless of how snazzy the upgrades are. In my opinion, they should renovate their current home only if they want to live in that home for a long time.

Dream home, on the other hand, has a fixed price tag. The specter of replacing the roof is yet another reason to cease paying off mortgages early and instead start saving up and investing cold hard cash. Since the roof doesn’t need to be replaced immediately, I don’t see that as a reason not to buy the house, as long as they’re confident they can save up the cash to pay for it in ten years’ time. You do NOT want to take on debt (via a HELOC or a credit card) in order to pay for a renovation. As for the master bathroom that they mentioned needs renovating, if it’s not a health/safety concern, I’d say put that on the back burner and save up the cash to pay for it and DIY as much as possible. If they buy the dream home, they should do so knowing the master bathroom will remain un-renovated for many years.

Expenses

Since lowering expenses will help anyone reach a goal faster, I’ll take a quick pass at how Jack and Elizabeth could save more every month, although I will say, they are pretty darn frugal already!

  • Sell all the cars except for the Chevy Volt. Pay that off and then don’t ever get a car loan again. Once again, the beauty of having cash on hand is that you’ll be able to pay cash for your future (used) car and avoid the interest of a loan. Not paying insurance on the Mustang will save $456 per year.
  • Ditch the subscriptions. This isn’t a ton of money, but it’s $216 per year to funnel into investments. Here’s how we watch TV for free. And for music, I listen to free Pandora.
  • Tweak the groceries/household/eating out budgets to maximize cooking at home. That being said, they’re not spending all that much in these areas to begin with. However, there are certainly savings to be had, so let’s say $50 a month, or $600 per year.
  • Go on a clothes-buying ban (here’s how)! This’ll give them another $420 per year.

With all of these savings, I realize that the per month and per year amounts sound small. However, what I’m thinking about here is the opportunity cost of not investing this money. If Jack and Elizabeth followed these suggestions, they’d be on track to save $1,692 more this year. No big deal, you might think, but just wait…

If Jack and Elizabeth put this amount into their low-fee index funds this year and then added that amount every year? In 30 years, they’d have $172,707.59 (based on a 7% return, which is considered an average annual return over the longterm from the stock market). You do have to remain invested through recessions and downturns in order to reap these dividends and also decrease the risk in your portfolio as you near traditional retirement age (for more on investing, go here). This is why I say that every single expense merits consideration–it really and truly all adds up.

Earn More

Of course the other end of the frugality spectrum is to increase earnings. With their Master’s degrees, hopefully Jack and Elizabeth can both command higher salaries. Additionally, with all of their involvements outside of work, I wonder if they’ve considered turning one of those hobbies/vocations into a revenue-generating side hustle? This could then be leveraged into a post-early retirement side hustle that they enjoy doing and brings in some extra cash–win win!

Jack & Elizabeth exploring Smith Rock State Park in Oregon

Another thing that leapt out at me is that Jack and Elizabeth work for the same employer. While it’s fabulous they can carpool and wonderful that they both like working there, it also sets them up for a certain amount of risk. If their company were to experience a downturn, or go through lay-offs, they’d both be exposed to that threat.

If they instead worked for different companies, they’d be spreading out their risk a bit more. Again, it’s an all-the-eggs-in-one-basket scenario, which I’m not a fan of. Plus, the fact that they work in a somewhat boom/bust field–architecture–makes me worried for the next recession, since architecture is notorious for laying folks off during economic downturns. I don’t think it’s imperative they work for different employers, but it would mitigate some of their job security risk if they did.

Conclusion

Jack and Elizabeth are in a good position to make this major life decision and any route they choose is going to be just fine. As I see it, here are their priorities:

  1. Build up an emergency fund and investments.
  2. Reduce expenses.
  3. Look for ways to increase income, either through their formal jobs or through their other interests.
  4. Decide which is more important: retiring early/financial independence or buying dream home.
  5. If the answer to #4 is “both,” then double down on numbers 1, 2, and 3. I think both goals are possible for them!

Ok Frugalwoods nation, what advice would you give to Jack and Elizabeth? They will both reply to comments, so please feel free to ask any clarifying questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.

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174 Responses

  1. Carissa says:

    I agree that Jack and Elizabeth should stop paying down their mortgage early (even though as a debt averse person, I totally understand that desire), And should build up their cash reserves. I also think they should buy the dream home for two reasons: with the extra cash they’re paying on their current mortgage, they’ve already proven that they can make the higher monthly payment on the new mortgage. Secondly, they state that they don’t have much time in their home already, and I just don’t see how they’d have time to do a full renovation themselves unless they drastically cut back on their community involvement, which seems important to them. Overall, great job Jack and Elizabeth! I’m truly impressed with what you’ve accomplished in five years!

    • Alexandra says:

      Yes! Everything Carissa said. I also want to add that it’s 100% worth a slightly higher mortgage to live in a part of town where you can walk to everything. I live in an expensive neighborhood in Seattle, but I can walk to everything and in the summer I even bike to work. Fresh air does you good. 🙂

      • You mentioned a great point about distance and proximity to restaurants and amenities. However, I think sometimes we really have to ask ourselves if we need all of that convenience. For example, how often do we eat out or see the movies? If it’s once a week, I think you can definitely live farther out to cut costs. Also, sometimes driving or taking public transit is much cheaper than paying such a high mortgage for a house in the city.

        • Stephanie says:

          That is assuming they are able bodied and remain that way. We are wanting to to move closer because we have nothing within walking distance and l will eventually be unable to drive again. The kids are getting older and their ability to get around independently may become of utmost importance. Besides all of the environmental reasons to be car light.

  2. Matt says:

    Great start so far! I agree with most of what Mrs. FW recommends. I don’t see any mention of IRAs. This is another 5,500 each you can contribute per year to retirement accounts. The tax savings make this a better option than paying off your mortgage early.

    If I were in your shoes I would do all of the following before looking at a bigger house.

    1. Start maxing out a Roth IRA every year going forward in addition to your 401k’s
    2. Put away 6 months of expenses in cash
    3. Pay off car loan and save 10k in cash for your next car when volt dies
    4. Have your first baby and see if/how that changes your priorities around work. You might want to start staying at home immediately or take a few years off of work. This will be much easier to manage without a huge mortgage payment and looming 65k roof repair.

    Since you are young, I strongly recommend sticking as much as you can in index funds for now, your future self will thank you for the abundance of options later in life. You could always wait for the next housing crash and upgrade your house at that point when everything is on sale.

    • Jack says:

      Thanks Matt. The IRA route is actually what started our road down the Vanguard route to begin with back in April. After meeting with a local firm and researching thresholds online, we’re just dumping the extra ~$900/month into a mixture of low fee ETFs and savings until we build up enough to cross that IRA threshold – around $5,000 from what we’ve discovered so far. I guess this could also be considered the official start of an emergency fund as so many of you have suggested!

      • Andy says:

        $5000 is a pretty high threshold for opening an IRA. I just did a quick look at vanguard’s website and it seems to be only $1000 to get started with them. https://investor.vanguard.com/ira/how-to-open-an-ira

        I expect other companies (like Fidelity) are similar.

        Also, if you’re looking to use the IRA as a sort of emergency fund, you’d want to go with Roth probably because you can withdraw your contributions penalty free (after 5 years, I think?). With a traditional IRA, you’d have to pay taxes (and I think a penalty) if you withdrew from it early. Best bet though would probably be to have a separate emergency fund that’s just a savings account or something similar.

        • Jack says:

          Ah, thanks for the extra clarity Andy! It’s good to find out that the threshold is lower, that seems much more promising. Roth IRA sounds like the best option for us right now, though I’d want to build a tandem emergency fund elsewhere at the same time since the Roth money wouldn’t be available for the first five years as you noted. Thank you for helping us find additional info!

          • Malcolm says:

            Jack, normal contributions to a Roth IRA (i.e. not a conversion from a traditional IRA) can be withdrawn without penalty, because those contributions are made after-tax. The five year period Andy is talking about is related to rolling over a traditional IRA into a Roth. That being said, withdrawing contributions from a Roth shouldn’t be done unless absolutely necessary, because you are missing out on the tax free growth offered by a Roth.

          • Jack says:

            Thanks Malcolm, even better!

          • Sarah says:

            Throwing my hat in the ring in favor of the Roth IRA as well. You can open one with $1,000 with Vanguard. The $5,500 figure is the limit you can contribute per tax year. You also have until 4/17/17 to contribute up to $5,500 for the 2016 tax year. Finally, you can invest your Roth IRA $ in Money Market funds for the time being, which can act as your emergency fund (you can withdraw contributions penalty-free anytime, no 5-year limit). My advice would be to place that $960 (+$40) in a newly-opened Roth IRA money market fund before 4/17, then continue your contributions for the 2017 tax year. That is tax-advantaged space you won’t be able to get back due to the annual max, but allows you to works towards the liquidity you need as well. Hope that helps!

        • Rebecca says:

          Being at the age of having to take required minimum withdrawals from my Traditional IRA, I wish I’d had the foresight or knowledge (or advice) to not even use a Traditional IRA. Even though it saved us some money on income taxes at the time, the payback to the government is exponentially larger (since the market has increased those funds) and it’s considered ordinary income. I wish I’d put favored putting more money in Roths IRA when they became available!

    • Sarah says:

      I completely support the suggestion to have a kid first, and then see how your priorities adjust.

  3. Jessica says:

    When it comes to having a family I would say look for your dream community/area not your dream home. We made many sacrifices in the housing area so that we could be in the best area for our daughter and we have no regrets. I can walk to our library, pool, arena, future daycare, and grocery store. Our daughter will be able to walk to school for her entire school career and she will be able to go to some great schools. We’ve found lots of families that are in a similar situation to us so we’re making lots of friends and our daughter will have no shortage herself in the future. On top of all of that our municipality is really good, the services they provide are fantastic, the infrastructure is always improving, and snow clearing is really good. Our house is functional at best and we have lots of work to do on it but we’re tackling it as we go along. You can change a house but you can’t change your community. Where would be best for you and your future children? Then make that work.

    • Ali Woodruff says:

      I agree with Jessica. I moved to a safer and nicer area for my kids, so they could ride bikes and walk to school, without worry. The downside was that I had a huge mortgage, it was very stressful. If I could go back I would have moved to that area with a smaller mortgage. I have renovated houses and its a nightmare unless you have someone who can do a lot of the work and has time to do it. I recently did a lot of work to my last house and the new owners moved in and changed it all. I think you need to be very strategic about renovations.

      My main concern for you both is that if you have children and a high mortgage it really limits your flexibility, in terms of life/ work balance. Having children is very expensive and wonderful, and so much better with the least amount of pressure and stress. Having a dream house is wonderful, but if you feel like you will be put under pressure with the mortgage, the initial joy of living in a dream house wears thin very fast. Bigger houses mean more money, if it is expensive there is more pressure to keep it that way.

      Well done on your amazing financial success so far. So in saying all of that I sold my dream house and bought a housebus and live very cheaply and I love it. Never thought in a million years that I would step off the mortgage merry-go-round. All my kids have left home so it is a very good financial option for me.

  4. I would recommend against the dream home. Although you’re doing well with your 401k’s thus far, the rest of your finances is not in good enough shape to be making a move at this point. My advice would be to decide what’s most important to you. Living in your dream home now, or reaching financial independence? Going with the dream home now would make you house poor and you have no other funds you can access outside of your 401k, which you don’t want to do.

    Stay in your current home and stop making extra mortgage payments. Take advantage of the historically low interest rates and shovel your extra money into investments rather than paying down the mortgage. Building an after-tax portfolio is important if you want to retire early, and it can also be used as an emergency fund.

    If you’re truly focused on FI, I would recommend forgoing the renovations on your current home and save any extra dollar you can. It sounds like you both have good jobs so I would also focus on your careers and maximize your earnings. The more you earn the more you can save.

    You guys are off to a great start. Good luck!

    • jay says:

      Agree with this comment.

      It’s hard because you’ve already fallen in love with the dream house, but it’s important to not make an emotional decision.
      There will be time for dream houses in the future – you just have to make sacrifices now.
      And to be honest, that house looks too big for a couple, even once you have small children.
      Stick with the small house as long as you can – later on you will be glad you did.

      Also, it looks like you might have too much extra-curricular activity going on in your lives.
      Might be worth looking at committing to less – especially as once children come onto the scene you’ll have to drop back anyway.

  5. The biggest concern is Cash on Hand. These two have their financial act together, but new homes come with unexpected expenses. I don’t think the 20 percent down payment is feasible.

    If you choose to purchase the new home, I think it needs to be with 10 percent down with a view to refinance when you’re more liquid. This is essentially a small insurance policy against catastrophe. If the monthly payment is an issue at 10 percent down, then you can’t afford you dream home yet.

    Here’s the good news, though: That train comes every hour. Nobody likes to hear this, but it’s a central tenet to stay on the FIRE track. It is easy to have something like this home feel like a once in a lifetime event. Still, ‘dream homes’ come up for sale all the time. If you let this train pass, a similar opportunity is sure to come around, and next time you can be sure you’re ready.

  6. I think everyone has given their great advice. I’m more of a risk-averse person, so I have a slightly different thought.

    I agree with Ms. Frugalwoods that you want to build up an emergency fund and invest in your retirement. However, I’d really think carefully whether the renovations to your current house are necessary. Is it function or cosmetic or both? The roof of your dream house is definitely a must fix. It is expensive to replace and, I bet, to maintain as well. It’s very tempting to equate cosmetic renovations of the current house with necessary fixes to the dream home to rationalize that buying a dream home might be a better option. It might not.

    If my husband and I were you, we’d either try to pay off the current house and then sell it to buy our dream house in the future. When you see a dream house that you like, you might think it’s the one, and that you have to have it. But things change. And I’m sure you will see other houses that you fall in love with in the future. I’m speaking from experience. Another option is for you guys to get 1-2 roommates/tenants to help with the current mortgage, save up more money to accelerate the mortgage payoff process, and then move up to your future dream home. I know it’s not fun to have roommates at this stage, but sometimes it takes sacrifice for us to reach our goal.

    Good luck with everything!

    • Jack says:

      Good morning Ms. Frugal Asian Finance, thanks for your input! Our current home is indeed functional for the two of us, for now. It’s not exactly child-friendly, but wouldn’t take too much to get to that point, it just might not be the prettiest. There are some significant “systems-related” items that we’d like to tackle if we stay there long term such as replacing the roof, updating the electrical wiring and adding insulation to lower energy bills. Most of the rest of the upgrades are, admittedly, cosmetic, but some may be updated as a side effect of the aforementioned wiring/insulation upgrades. It’s difficult to suppress that inner desire instilled in both of us in Architecture school and at work to “make beautiful places”.

      • Hi Jack, so glad to see your response! Thank you so much for the great explanation. I think ultimately I just want you both to be protected from a volatile market and to avoid paying a large amount of monthly mortgage interest without getting any significant financial return. Whatever decision you guys make, I wish you all the best and thanks for sharing your story! 🙂

  7. I agree that it’s a matter of whether they want the dream home more, or early retirement more. Based on my experience, I don’t think their home size is too small for raising kids, though it might become hard eventually if they want a very large family, or when the kids get older. But that’s so far away that they could be in a very different position financially, and with more invested and more cash on hand, they could certainly upgrade later. Ultimately, they face too great options–buying a dream home or retiring early. And any time you’re choosing between two good financial options, you’ve got a lot to be proud of and grateful for. So I commend them!

    • Jack says:

      We totally agree! Elizabeth and I had a very similar conversation on the way to work the other morning: “How blessed are we to be able to even think about these kinds of things!” Thank you so much for the kind comments.

  8. Cindy in the South says:

    Congratulations on your ability to handle finances at such a young age! I think y’all are fabulous! I think it is wonderful your employer is providing such reimbursements for your Masters. I would plan on one of you eventually getting a different job, though, so that you do not have all your income in one basket. As for as the house goes, is it in a good school district, or is it in as good a school district as your current house? I may have missed it, but I did not see that mentioned.School district location is critical in regards to future children and resale value. I personally think you are offering too much, since the house will have to have a very expensive roof. I would off $85, 0000 less than asking, and then negotiate to the replacement cost of the roof. If you are able to (1) sell your house at a profit, and (2) get a good price on the new house minus the replacement cost of the roof, I would do it. Also, please beef up your emergency fund and pause paying down the mortgage until you have a six month fund built up. I am so happy to see young folks doing well! Godspeed!

    • Jack says:

      Good morning Cindy! We haven’t done a whole lot of research into school districts thus far. Both our current home and dream home would be in the same school district (the one that Elizabeth grew up in and very much enjoyed…she did turn out to be a pretty good kid after all!). What we do know is that this school district is, in our opinion, the best of the five or six local options around us right now. Thank you so much for your thoughtful suggestions and questions!

  9. Ms. Montana says:

    We faced a similar situation and opted to stay in the smaller home. It let us take a year+ away from the 9-5 to focus on our family and other projects. We might move in 3-5 years, but for now we are loving the financial freedom and flexibility more than more square footage that needs cleaning and upkeep. FYI our current home is 1650sf and we have 5 kids 1-9 years old. We all fit just fine (for now.) 🙂

  10. Kel says:

    If I were in your position I would wait– or at the very least add one more important piece of data to what you have collected so far. I was just chatting with a friend yesterday about how they would have bought a different house if they had anticipated having kids soon after buying it. And how our first apartment was perfect for a couple, but awful once we added a child to the mix. We just didn’t know what kinds of things we needed to look out for in a family house. I think your perspective on what makes a good house changes dramatically after having kids. For example, lots of people like the first-floor master/other bedrooms upstairs model. This was an absolute no for us– who wants to run upstairs several times a night when you have a sick kid? Split levels, also out. Double the baby gates for the stairs. Step down living room? Also out. Swimming pool? Pond? Stream? Deal-breaker. Basement laundry? No way, must be first floor or higher. Things like that. It does sound like this is a dream house– but go take another tour, and bring along some friends who have toddlers. And bring the toddlers. And see how the house “performs” as a house for kids before deciding that it is a good long-term design for you.
    Also, remember that a lot of the upgrades are things you can see. Most of our post-home-purchase fixes were not visible. New garage door opener, a replacement toilet, washing machine, air conditioner, rotted wood siding under paint, mold in the basement, some plumbing work (and the drywall ruined when those leaks happened), a leaky skylight, a portion of the five-year-old roof that had been improperly done and needed to be replaced… don’t let the cosmetic improvements of the dream house convince you that the house needs zero work.

    • Turia says:

      I was going to post exactly the same thing! We bought our house before we had children and there are a number of things I just didn’t know to think about or look for. It is a great house but we had thought we would move in 10 years or so and that won’t happen now because of our insane real estate prices. If we’d had kids already or had a kid-savvy friend to come with us, I don’t know that we would have bought it. The biggest regret I have is we have no easy access to the backyard so I still don’t feel I can let my son play out there unsupervised and he’s nearly 6!

      I would also wonder about schools and walking to child-friendly activities, etc. Our area is fantastic for families but that was more a fluke on our part than good research.

      You are doing really well and
      I commend you for having no student debt. But I really wouldn’t buy your forever home before you have your children and you know what they need.

    • Alison says:

      well said! Mrs. Frugalwoods has a post somewhere about a few things she wanted to change when they moved to VT and her opinion of what is important and what needed to be fixed/changed/renovated has changed, primarily due to having a baby. I live in 1500 sqft with my husband and 4 year old. It’s never been too small. Ever. And we have lots of friends and relatives who visit and stay from just a few days to a month at a time.

    • luytterlinde says:

      …Also, remember that a lot of the upgrades are things you can see. Most of our post-home-purchase fixes were not visible….

      Absolutely 100% agree. it’s all that stuff behind the walls and ceilings and floors (i.e. stuff you can’t see and most home inspections will miss), and the location that it’s in (the livability of the ‘hood), that make or break a good home. Everything else is cosmetic…and at most cosmetic stuff has a 5 year shelf life before you’ll start dreaming about upgrades again. Trust me on this – it’s a given. Lives change, kids grow up, technology changes how we live, so ‘dream homes’ will become dated. Best advice I ever received was buy the dated fixer-upper in the ‘hood you love, live in it for at least 2 yrs before touching it.

      As for kids and house size…it’s all relative. People have lived in 1 bed condos with a kid…others will say 3,000 sq ft is the minimum. My grandparents brought up 7 kids in housing that today generally holds 3-4, including the adults. I’ve seen micro-suites that look roomier (thanks to design) than the standard 2,000 sq ft cookie cutter suburban floor plan.

      My suggestion – recognize this for what it is…at least partially a consumer want. Do the math on the current utility, not the rosy dream. If the math works on current utility, fantastic. If not, just go into it with your eyes open…know that you’re indulging in a shopping spree.

      Good luck!

    • Lee says:

      I’d also recommend thinking about what happens if you, for one reason or another, don’t end up having kids. Will your ‘dream home’ still be perfect, or will you feel like you’re rattling around in a big house? It’s tough to think about, but life doesn’t always work out as planned.

  11. Michelle says:

    If Jack & Elizabeth have their goals, which is too be financially independent and not be “chained” to their desk – I would stay in their current home, why?
    Because if they pay their house off (like they planned in 2019) they will be able to save their mortgage payment every month. With the additional $1200 in savings they could save for 5 yrs. and have a larger down payment toward their dream home, which will allow them to live their dreams.

    The new house, will only keep you tied down more. You can’t increase your expenses and think that it will reduce your work hours unless you want to pay the mortgage for 15 yrs – 30 yrs. like a majority of Americans. And they said that’s not the goal.

    – First step is be 💯% consumer debt free – cars, credit car, student loans, etc.

    – Second step is a 3-6 month emergency fund

    – Then, I would buy a house with no less than a 20% down payment and a 15 yr mortgage.

    The mortgage payment should be no more than 25% of your weekly take home pay. And yours would be $1200/week.

    I would stay put until you get settled, a dream home is nice, but it will be expensive in the long -haul.

    Thanks for sharing your story! You guys are doing great…keep saving and pay off the mortgage early – save the mortgage payment every month and you will have the money to make whatever choices you want!

    • Jack says:

      Thank you so much Michelle! We realize we’re giving up some investment returns by opting to focus on paying off the mortgage in the next two years, but we’re hoping that eliminating the monthly mortgage + extra principal lowers our monthly expenses enough to allow us to slash that $1.34M early retirement number to the in the long run – perhaps even by half if one of us can stay home and avoid the costs of traditional childcare!

      • Michelle says:

        I think that’s a great goal! Please keep us posted, if you dedide to stay in your current residence or if you opted for the upgrade!

        You guys will be millionaires by the time you retire at the rate your going.

      • I’ll second Michelle’s advice – it’s sound.

        You don’t need that ‘dream house’, you’re never at home! Plus I agree with waiting until your needs change and what people have said about houses looking great. You find out everything that needs fixing when you move in (and believe me some people are really clever at covering this stuff up!)

        Stay where you are and pay off that mortgage as fast as you can! That is the only risk-free option to protect your future. Paying off the capital means that you are paying less and less interest over time. You may even be able to re-mortgage to a better deal (not that I think you’ll need that option). Theoretical stock market returns are all very well, but we are living in different times. There is no guarantee what will happen in the future and I’d very likely predict a stock market crash is on the horizon. As you say, you can invest those mortgage payments in just a couple of years. I don’t know about America, but here in the UK an interest rate rise is only months away. I’d say that’s likely to happen to the USA too- and soon. A small percentage rise makes a huge difference to your monthly payment. I’m very wary of all these so-called experts who reckon they’re worth a fortune when it’s all theoretical money they’ve invested. If the market crashes, they won’t get it back! You should only ever invest what you can afford to lose. I personally would keep 6 months income in an easy access account for emergencies. Then 2-3 years liquid in a penalty account, before even thinking about stocks and shares.

        For the future, never ever buy a car on finance. Although I appreciate that electric vehicles are more of an unknown (very brave of you to jump into an untested market). There will be different considerations for all of us in the future regarding leasing batteries and what happens when the technology improves. I probably would’ve stuck to a traditional vehicle for the next 10 years or so, to see whether the technology is all it’s cracked up to be. I suspect these early electric vehicles will not hold their re-sale value due to tiny batteries/ early technology.

  12. I agree with Mrs. Frugalwoods’ suggestions! Also, oh my goodness, your cat is SO cute. 🙂 Is renting out your current home an option at all? You could buy Dream House and use the rent to pay on your first home’s mortgage. Then you’d eventually have a stream of passive income. You would still own the house in case you decide Dream House is too big or doesn’t fit your needs. Just something to consider!

    • Jack says:

      Hello Mrs. Picky Pincher! As much as I would love to seek out a roommate, we don’t know that our current home is really set up for it. Unfortunately, given the current condition of our home – a single bathroom to share and mostly 61 year old finishes – we think it would be difficult to say the least. It seriously looks like somebody just stole all of the furniture out of a brand new home…in 1956…except for the questionable carpet choices chosen as an ‘upgrade’ in the 70’s (I’m sure it was quite trendy back then). Thank you so much for your help!

      • Abbie Burnham says:

        I think she meant you would buy the Dream Home and rent out your current home (owning two homes at the same time). Then your current home’s rent becomes entirely passive income when paid off in two years. Not a bad suggestion!

  13. Dak Gilinsky says:

    First, a little perspective. I live in Los Angeles, where a started home in an undesirable neighborhood costs $500k minimum, so first I want to point out the relative affordability of your area which is a huge benefit to you. You’re managing your finances well, so congrats on that. I think you should step back from this decision a bit. I have a couple key points of guidance as I have been in the same situation:

    1. The “dream home” is creating false urgency. There is no rush at all to make this decision. If you don’t get this one, there WILL BE ANOTHER, and if there’s not, you can build it. There is nothing non-fungible about this house. Don’t feel like you have to do this now – wait until the time is right for you.

    2. Get your car situation in order. I don’t agree that having a car loan matters (1.5% interest? who cares!) and I think your eating out/coffee/alc expenses are fine. But having more cars than people is a huge waste. Sell your beater truck and your mustang asap. Again, these items are fungible – you can always buy them or something similar again when you need it. Why sell the CRV? Keep it – a paid off and reliable car is a boon.

    3. Forever homes are BS. If you drop the paradigm of “we would stay there forever” then this is just another house. Don’t get emotional about it – a home is a wonderful thing, but the concept of a forever home is marketing, not reality. You seem like you have a lovely relationship, so I’m sure you will be equally happy in any house!

    4. Focus on increasing your income. Sounds like you are by working on masters degrees and having a few side gigs in the works. This is the biggest and most meaningful financial opportunity for you right now.

    That’s my two cents (or perhaps four cents). Best of luck to you!

    • Andy says:

      I completely agree with #1 here. It’s easy to assume this is a one time chance to take advantage and get this house, but most likely it’s not. The fear of missing out my be encouraging you to make a jump that just isn’t right for you at this point in your lives.

      I’m about the same age and often feel the need to have everything set up perfectly (house, finances, job, etc.) all at once, but the reality is that these things take time and will improve gradually over the years. If you can be at peace with that pace, you’ll likely end up in a better position overall.

  14. Karen says:

    One of the lessons as an adult is getting that you can’t have it all. I think you could go either way with your decision but if you get the big expensive house you have to realize that the fun/freedom/trips you have been enjoying will have to go. You home will be your pleasure going forward. I raised my kids in the trophy neighborhoods of Wash DC and I can tell you I saw plenty of people stretched to the max and house poor. If you want that no problem just understand that that is what you are getting into. You can’t keep your old flexibility/freedom/ lifestyle and move into a home 3 times as expensive.
    Also I would suggest that with the roof costing so much you look at your home as costing $300,000 instead of $250,000 because that is the real truth. I also wanted to remind you of the expense of child care. When you have children and both of you have to work full time, you will be paying out a lot in child care for many years unless you have grandma waiting in the wings to do this job for free. During those years of child care, you will have no extra money for anything so be careful there. You can go either way with this but don’t kid yourself you will give up something with each decision. If it were me personally, I would stay in the smaller home and look at ways of doing smaller renovations that will give me some treats in life slowly a little bit every year and be able to sleep at night not feeling over stretched. But that is just me, I never did the trophy house because I did not like feeling stretched. Great job being so young and clear headed about finances!

    • Jack says:

      Thank you Karen! Your notes are a great reminder for us to keep everything in perspective. Here’s hoping we can find a better balance, mentally and financially. The reader comments have certainly helped us with that so far this morning; thank you ALL so much!

    • Roberta says:

      My sentiments exactly, Karen. The dream home could become a nightmare if there are expensive, unforeseen repairs (aside from the roof). Original windows could be leaky, wiring substandard for modern conveniences, plumbing crumbling, foundation issues. None of these will be fun to fix. Just heating and cooling the larger home will cost much more. All this, combined with the larger mortgage will severely limit the couple’s ability to afford experiences, like their road trips. That’s what life is about, people! Don’t be distracted by something shiny. You’re a bright couple with bright futures and you’ve made many great decisions to date, please rethink this one. If your present home is an embarrassment in it’s present state, then spend a little money on rouge and lipstick. Paint is your cheapest friend. The only other advice I would give is to sell at least half of those vehicles. You don’t need a beater – even if it isn’t presently licensed/insured – for if and when you decide to update your home. You can rent a truck by the day.

  15. tolo says:

    Mrs. Frugalwoods has done an excellent job of outlining the issues and a plan for Jack and Elizabeth. I would emphasize that life can change very quickly especially as it relates to jobs/employment so while one might plan on staying in the same home/job for the long run things don’t always work out that way. Thus the purchase of the dream home, while doable is likely to be stressful and potentially risky. A great guide for maximum purchase price for a house is NOT what the banks say you can borrow! It is basically two times your annual salary. (This is taken from Thomas J. Stanley’s book the “The Millionaire Next Door”) This may seem rather austere but results in a mortgage that is much easier to manage as life throws its curve balls.

  16. ken says:

    We are a family of four living in a 1450sf house (3bd/3ba with an upstairs office). It’s all we need, and we’ve become grateful that we don’t have more square footage to clean. Friends of ours (married couple, no kids) live in 4000sf and I groan thinking of having to clean over twice the amount of space we currently have.

    You don’t need 3000sf for two people, or even two people with kids. Keep the smaller place!

    • Alison says:

      My family and I may have to move due to work soon and the new area is significantly cheaper. The first thing we did was rule out the 3,500 sqft homes – even though they cost so much less than our current home. The thought of furnishing and cleaning all that space makes me cringe!

    • Stephanie says:

      I agree! We are a family of 3 (plus a chocolate lab) living in a 1280 square foot home (2 bedrooms, 1 bath, 2 living spaces), and I think that is the perfect amount of space for a small family. It is easy to clean and keep clutter free, it is easy to say no to bringing things into our home knowing that there is nowhere to store them.

      Of course, there are times when I wish we has a little extra, like a second bath. Maybe we will add one in the future, but I am happy with our home.

      Since you don’t have children yet, I would recommend staying where you are. We lived in a 1 bedroom, 1 bath duplex before we purchased our home. We shared a room with our infant girl for 5 months. But I was happy to wait until the right home came along.

  17. Brit says:

    I sit here at 43, wishing I had your financial foresisght – congratulations! I would go for the dream home, stop paying so much extra on current mortgage, and grow your savings/investment accounts as per Mrs. Frugalwood’s suggestions. You’re doing well and your company is generously contributing towards your education. Mrs. FW makes a good point about working for the same employer and an employment change affecting both of you instead of one. My husband and I once worked for the same company, which sold and left us unemployed with a couple of one year olds – it wasn’t a fun three months and I’m glad we had savings. Whichever decision you choose, best wishes for a strong financial future!

  18. Lauren A says:

    It sounds like you guys are on the right track! I would caution against the forever homes, however. If you buy at the maximum you can afford, it won’t leave you as much ‘discretionary income’ left over to save or spend more time with family/children. And after having a baby, you might find that your priorities really shift and that you would rather have a lot less financial obligations. Also, sometimes more expensive houses are harder to sell, especially if your area has a lot of affordable real estate. If you buy the house you want and then decide later you want to sell it, it could be more difficult to get the price you want for it especially if you have to put a lot of money in for a new roof – you might not get that back. And I feel personally, that economic times are increasingly uncertain and it’s better to have cash in the bank and a modest mortgage payment. If you do have children and the house you’re in now no longer works for you, you can look for something then.

  19. Anna says:

    You guys are doing great! I wonder… if you’re never home, is having a dream home that much of a priority? It seems less important if you are always on the go, in which case investing just a little in making your current home more of a haven, while holding off on a dream house or dream renovations that may not see a return, might make you happier in the long run. I may be biased, as we are making some of those tradeoffs now to keep on track for paying off our debts for the possibility of an early retirement. Like you, I am a mid-century fan. However, our current home is a 100 year old tiny cottage in about the range of your current home price and I see the coolest ranches all the time that I would love in the range of your dream home price. But a home that feels like a home can be a small one or a large one, a compromise one or a dream one, depending on the outfitting and cleaning and maintenance that gets it there. So inside I have painted every room in “my colors,” outfitted it with used and new furniture that captures the mid-century aesthetic, and find it such a retreat from the world that I sigh with contentment every time I open the door to come home. I also love the lack of stress that comes from a mortgage that is less than rentals around here. So think about your actual time spent in your home, what you could do to make your current home a haven without major renovations, and what would most get you to your goals. Whatever you decide, I wish you the best and love your mid-century instincts!

    • Jack says:

      Thanks Anna! Elizabeth and I would love to have that same feeling of peace and contentment someday when we finally get home in the evenings. Luckily, even though Mid-Centuries tend to be a little conservative in the bedroom sizes, they more than make up for it in the common spaces such as living rooms, kitchens and reading rooms. This really helps most of our home feel bigger than it is, and could help us keep a cap on the “stuff” that tends to pile up in bedrooms.

  20. Mims says:

    Given the cost of health care today, the 4% rule no longer works for early retirement. We are in our early 50s, self employed, no debt, and a portfolio worth close to 2 million. But our high deductible bronze plan costs $24,000 a year and who knows what health insurance will cost going forward. We are over 10 years away from Medicaid eligibility. By far and away our biggest expense. We could afford to retire now if it were not for that. We never felt it was necessary to live in a dream house. For us it was about dream neighborhood: land for gardening, good schools, a reliable well and excellent supportive neighbors. In the long run that was more important than architecturally beautiful dwelling. I admit I still have house envy when I visit some friends who live in the “rich” zip codes, but they don’t know their neighbors, except to “keep up” with them. Meanwhile, with upgrades to physical structure (lots of insulation, thermal mass, new windows, solar) our house has super low energy bills…like 30 a month while our friends in the dream home pay ten times that or more.

    I think you have done a fantastic job so far, but if you really want the freedom to be there for the kids (and save for their college education) don’t buy too much house.

    • Alison says:

      Thank you for sharing your health care costs. I’m 43 and trying to figure out when my FI can start and this has always been my biggest concern. That is a LOT of money. A lot. I pay $500 a month for a family of three and my employer pays the rest. It’s a big deal!

    • Linda says:

      Mims, I echo the thanks for the insight on healthcare costs. I’m 58 and single; have a similar portfolio and work for a multinational corporation. With the stress of work and nonstop demands for “more” and desire to live before I’m too old (!), I would retire in a minute — but the healthcare costs of non-employer subsidized insurance scare me and keep me at the M-F grind. Though very thankful for all I have saved, I envy every one of the younger writers getting started with a clear financial plan early. As I tell my younger colleagues, save as much as you can, as early as you can. The worst that happens is…you have money saved for when you need it! And the freedom money and choice bring.

  21. Tricia says:

    We recently bought our larger forever home dream house, and the larger property taxes (which go up every 3 years), unexpected major and minor emergency repairs ($28k worth in year 1!), and larger costs due to larger house size (everything from electric bill to plumbing repairs to gutter cleaning to heating costs) have been a heavy burden. We bought a few years earlier than planned due to dream house becoming availability, and used up all the money we could lay our hands on to make the 20% down and closing costs. Especially with the $28k in unexpected emergency repairs, the first 1.5 years of owning this home have been very stressful financially. Just some things to think about. Best wishes!!!

    • Jack says:

      Best of luck Tricia! It’s exciting to hear from someone who indeed chased a dream home. Those all sound like very real “what if scenario” conversations that Elizabeth and I have had along this journey so far. We’re glad to see your family pulling through! It certainly sounds like you’ve had a series of unfortunate events.

      • Walnut says:

        Also on Tricia’s note, definitely plan to spend 1-2% of the home’s value in the first year or two on unexpected random things. From plumbing and hvac to yard maintenance and furniture, it’ll just end up being expensive. Better to try budgeting it in from the start that figuring out your don’t have enough cash on hand and resort to a credit card when you discover that your main water line needs to be replaced.

  22. christina h. says:

    The thing about the dream home is that it sounds like it’s in the dream location. We bought the worst house in the neighborhood 11 years ago in order to be in our dream location – walking commute for me, bike commute for Mr., walk to school for kids, walk to 4 parks, 5 grocery stores, bakery, butcher, shoe stores, everything. When people hear what we spent for the house ($82K, but in really terrible shape – total gut job), they think we’re crazy. But we knew the property values were going to go way up (they quadrupled) and more importantly, this is the LIFESTYLE we wanted. We’re heathy, we save tons of money on commuting, and we now love our house. Personal Finance is so much more than numbers on paper, it’s lifestyle.

  23. KS says:

    no cash reserve also means few funds for sudden, unpleasant expenses (medical, personal/family emergencies, etc.) and the ones that need to be anticipated for car & home maintenance…HVA, roofs, hot water heaters and appliances don’t last forever. Renovations are usually cosmetic and therefore they can be postponed or completed piecemeal; maintenance issues often become more expensive the longer they’re postponed. All I see here with the dream house is lifestyle inflation….which may be unsustainable. Am I the only person’s who’s noticed the risk of both incomes coming from the same source? One half of this couple should seriously consider working elsewhere in order to minimize their exposure here. Nothing good lasts forever…and home ownership means never having to say “it’s done.”

  24. Kate says:

    I really don’t think you can buy this house. You have no cash on hand, which is a very dangerous place to be when you are making a big purchase. I also wouldn’t want to buy a house that needs a 65k dollar roof (assuming that is in today’s money) every 20 years. That is a huge expense! People often recommend saving 1% of your house’s value for maintenance, but for this dream home you would have to save more as the cost of the roof every 20 years would be over 1%. This could increase your FIRE number by quite a bit. I would stop paying extra on your mortgage and use that money to fund a Roth IRA and put the rest in your brokerage account. You really need to have cash on hand prior to making any large purchases. Maybe in a few years another nice home in the downtown area will come on the market and you will be in a better position to purchase the home.

  25. Cindy says:

    One of my biggest regrets is buying the “dream home”. Upkeep bled us dry and when the kids left it was like a mausoleum . We sold at a loss, and were very happy in a half-the-size townhome. The best part of the purchase was the resulting friendships we would have missed out on.

  26. I love reading these case studies! Jack and Elizabeth sound like their marriage is off to a really solid financial start. Their budget seems pretty reasonable. In fact, I’m very impressed with how little they spend on groceries. I would agree that they should slow down on prepaying the mortgage to get a cash cushion built up for an emergency fund, and get some other investments going. Also, I would get rid of the extra cars (especially since they commute together), pay off the electric car, and just share that. If they can wait on moving, and continue to live in their current house without renovating for a few more years, that would probably make the most financial sense. Good luck to Jack and Elizabeth with whatever they decide to do!

  27. wendy says:

    You are indeed on a great path towards FI! Congrats on having such a great start! And it’s great you’ve done the research on what it would take to get the dream home….
    I don’t think you should do it unless you have a very high tolerance for financial risk.

    The numbers you showed indicate that you’d have to put everything in (extra cars, emergency cash, etc.) in order to get the house at less than listing price. That leaves you zero financial flexibility that isn’t extremely costly (i.e. credit cards). That’s risky in general, let alone for FI. The nature of unexpected emergencies is that they are indeed unexpected.

    You may want to look hard at your priorities… is it having a child/children and having one or both of you home all or the majority of the time? living in a perfect/pretty/dream house? having the freedom and flexibility to do the extra activities and travel more?

    As others have mentioned, your emergency fund and maxing out pre-tax investments are pretty important. And then your investment fund to create the wealth you need for FI.

    I didn’t see mention of the side activities paying – it’s harsh, but you may want to consider them as entertainment expenses since you are paying to eat out/convenience in order to fit them in your schedule. If they are significantly important to your life, then it’s even more reason to consider staying put in your current home.
    Think about when you’d actually use that square footage in the dream house… it would be there to cleaned and maintained and potentially beg to filled with ‘things’ that you don’t really need (not to mention the heating/cooling/taxes for bigger square footage).

    And as Mrs F mentioned, there is indeed bit of potential risk with being in the same industry, same company, same town. If you financially stretch to add the dream house, you’re increasing your risk, with no cushion. You are, in effect, making a bet that will take years to pay off. And if there is a downturn that rattles your town, your illiquid house is in the same fix.

    Sell off ALL the extra cars; stop overpaying the current mortgage; build up the emergency fund; fund the pre-tax & investment accounts.
    THEN decide what works best for you both: renovations of existing home; buying a more ideal home; funding one or more of you to stay home with a small person.

    Best of luck!

  28. Walnut says:

    Hi, so I was in nearly your exact position at your exact ages about two years ago. We had an cheap, existing house with significant equity and were on pace for payoff in a couple years. When we finally pulled the trigger on a house in our dream neighborhood, we discovered that coordinating the sale of one house and purchase of the second in a manner that allowed us to use our equity was either a no go (contingency offers outside of home inspection in our prospective neighborhood are rejected) or expensive (bridge loan at 7% interest?? No thanks.) Due to our excellent credit scores and zero outstanding debt outside of our existing mortgage, we were able to get approved for a 5% down 15 year mortgage with some PMI and a market interest rate. This allowed us to convert all of the equity from the sale of our existing house into our instant emergency fund, which has been worth ALL of the piece of mind.

    Chat with a real estate agent and get a feel for how rare this dream home actually is. There is a lot of scarcity in our market and after two years of browsing and losing a couple of bidding wars, we knew we needed to be serious about what we wanted or we’d never move. At the same time, we were realistic about ensuring that our existing house was in a condition to sell quickly. A hot market on both sides of the transaction was helpful.

    We discovered that we were expecting our first child the week we moved into our new house and we refinanced our 5% down mortgage into a 20% down 15 year mortgage at 2.375% during the temporary rate crash post Brexit this past summer. We ultimately paid less than $1200 in PMI and have zero incentive to pay off the new mortgage due to the crazy low interest rate.

    This got a little lengthy, but chat with a real estate agent about the overall market and about how rare your dream house actually is. Then chat with the bank about your options that don’t use your existing equity (with the intention of turning those proceeds into your emergency fund). Also, STOP paying extra on your current mortgage and build your cash savings. Do whatever it takes to get 10k-20k into your checking account STAT. Cash is king when you’re looking to make real estate moves.

    • Jack says:

      Thanks Walnut, you’ve shared some great information here! It all sounds very familiar to the conversations we’ve had among several lenders so far (including the part about a bridge loan option and I agree: yikes!). We’ve got a real estate agent we’ve really enjoyed working with and trust very much. We did indeed have had that “so how often do things like this happen” conversation. Paraphrasing her comments here: “houses like these show up every once in a while, just not right downtown like this one.” Certainly something to consider while weighing options. Like Karen so wonderfully stated above, being an adult means accepting that we can’t have it all.

    • Elizabeth says:

      Good morning! Thank you so much for sharing your experience – it is so helpful to hear from others who have been in a similar position before. Homes of this type very rarely go on sale in our community – and for that particular neighborhood, it’s even more rare. This is the first time a home has been for sale on that street in ten years. That said, the community might be reaching a point where more of them come up on the market within the next 5 years, but it’s hard for us to tell.

      Thank you so much for sharing your thoughts, your advice is very much appreciated!

  29. What a great position to be in, in your late 20s! Just to add to my cent’s worth into the mix and along the lines of what Mrs. Frugalwoods was saying, I’d definitely look at building up that cash reserve. And I’d also just say to really ponder the dream home – at this stage, although it seems doable, it also feels like a stretch. And that stretch could have a real psychological impact on the perception of it as your ‘dream home’ when it’s your day to day.

    I was in a similar position to you when I was 26 – recently married and we were looking to move into our dream home (or what we believed was our dream home). We were going to be super stretched to achieve it, we could only put down 10% and that 10% just happened to be all our savings in the world apart from pensions. Our mortgage payment would’ve really stretched us and hindered our ability to build our savings back up. But we kept telling ourselves it was the right thing, no matter the financial burden. Life turned out differently when an unexpected work opportunity arose to move country. That opportunity has had such a positive impact on our financial situation that we are able to now consider financial independence as a viable lifestyle. Had we bought that house, I’m not sure we’d be in the same position. But, then you never can really predict life! As much as you try and plan to.

    Best of luck to you both!

  30. Lauren says:

    We are in the process of buying our “dream” home and selling our current house. With our eldest a year away from starting school we wanted to move into a better school district, we have three girls and currently only one bathroom, and no backyard for the kids to play in. I stay home with our girls and have since my eldest was born. When we bought our first house we weren’t thinking about kids at all, just what we could afford and would be in walking distance from my husband’s work. Just the fixes needed on our current home and the inspections are quickly depleting our emergency fund. I don’t think you have enough liquid funds to purchase the house unless you can borrow from a parent or can sell the mustang quickly. That new house looks awesome and I totally get why you would want to jump on it! I’d try to sell the car and then go from there.

  31. Honestly, while I almost did this myself at their age, looking back, I’d recommend no. If its meant to be their dream house will be available again in 4-5 years when they have more money and the kid. For now I’d be working on raising the emergency fund.
    To put it in perspective, they both work for the same company. Imagine we have a down turn and the company has trouble. They would be whipped out in a mater of a month. Now yes they have a car emergency fund. That being said in a down turn I can attest that selling a car is not an easy proposition.
    Couple that with the added hidden cost of any other home maintenance that comes in. Their new mortgage would be cutting things close with their income. You never know what else might come up that they’d have to be able to pay. Their funds, despite the 401k that I applaud them for, are not liquid enough to cover a 200+ K house. Also their needs right this moment (today) are not there. The house can wait, liquidity cannot.

  32. Lauren says:

    I agree with the comments about the size of the house. We have three young children in nearly 2700 square feet and there are rooms we don’t even use! And it is a struggle to keep up with cleaning — we’re actually planning on downsizing soon. On the other hand, we bought this home as a foreclosure in 2012 and have steadily been making repairs over the last five years – little by little as we can afford things. Undergoing constant renovations with three kids 5 and under is difficult. My husband and I both freelance from home and take turns with the kids during the day and we’ve spent a lot of late nights working on renovation projects after the kids’ bedtimes. It’s not fun, but it’s been a final push to get the house on the market and (hopefully) find a “dream” home in the mountains. So my advice would be to not underestimate the amount of work it is to do renovations while simultaneously adjusting to life with a child — both are exhausting! (but totally awesome 😉 Just know that whatever timeline you anticipate for improvements (especially if you DIY a lot of it), it’ll take way longer than expected. I’d also have to add in how great it is to have a flexible work schedule with young kids. Obviously, everyone is different but if you even think one or both of you might feel the pull to either stay at home full time or have a flexible work-from-home gig, I’d start to prepare for that now, however you see fit. We’re lucky we managed to pull it off by the time our second child turned one, but my husband regrets the time he lost with our oldest while he worked full time. Again, everyone’s child care needs and wants are different, this is just how it worked out for us. Best of luck!

    • Jack says:

      Wow Lauren, thank you so much for sharing your experiences! These are exactly the kinds of things we’re trying to talk through right now (often during the carpool to and from the office, so I guess that’s one advantage to the same employer to enjoy for now). We’re so glad to hear from all of the growing families on here discussing how smaller home square footage isn’t a hindrance to raising a young family. We can’t thank all of you enough – and especially Mrs. Frugalwoods – for all of your thoughtful responses!

      • Kate says:

        We raised 2 kids in an approximately 1300 s.f. home. Is it big enough? Not really, but it kept me from acquiring clutter (and spending money). The other thing I’d like to say is, *how* are you paying down your mortgage? Are you making double payments every month? I certainly wouldn’t do that, not if you don’t have an emergency fund. What we did at first was, we took the $25 or $30 late fee and added *that* to the principal every month. Then, when we got a little more “solvent,” I divided a monthly principal payment by 12, and added that amount to the principal every month. Again, it wasn’t a ton of money, but we are building up equity quicker than we would otherwise.

        Many times we wanted to move from that little house on the busy street. But then we ran the numbers. A bigger house means more to heat and cool, furnish, insure, and pay taxes on. Plus we are already in a good school district, with convenient access to stores, restaurants, and the local highway. So we decided to renovate what we had. We did it over time, and now we have a lovely little home that will be paid for in 3 years. As other posters have said, take the emotion out of the equation and run the financial numbers. Then run what I call the “emotional numbers.” How much pleasure will this dream house really give you? Can you see yourselves in it at my age (61) and will it be paid for by the time you want to retire? Will you be able to afford it if one of you wants to stay home with the kids? if one of you loses her/his job?

        I wish you peace, whatever you decide!

        • Jack says:

          Good afternoon Kate! Regarding *how* we’re paying additional principal on our mortgage, we just have a surplus of cash every month and try to basically triple the original payment.. The rest of your comments are all great points! Hard to put a finger on how much pleasure the dream house could really give us. It’s fun to daydream about either home at this point in our lives! Flexibility to stay home with kids, even part time, is definitely something we want to consider very carefully before making any offers. Thanks for your help!

          • Steven says:

            Let me just add a little bit of European perspective here. I currently live in a not particularly small 700 sq foot $110,000 city apartment. Typically this is enough for a couple raising 1 kid, and cramped but manageable for 2 kids. Quite frankly, you don’t “need” more space. 1500 sq foot is plenty to raise 2-3 kids. Living in an oversized 3000 sq foot house will be a massive, unnecessary, drain on your resources and will set back your potential FIRE date by quite a few years. There will be many more dream homes you could move to after you no longer need a job to put food on the table.

            I’d say stay put. Also consider which renovations on your current the house are structural and which are cosmetic. Stick to the structural renovations and limit cosmetic ones to those achievable with a paintbrush.

            Any other points I would make are mostly a repeat of what others have said. Keep the Volt, along with the 1.5% loan, sell all the other vehicles since you carpool to work. The revenue from these sales instantly gives you your cash emergency fund. Stop paying down the mortgage at an accelerated rate and put the surplus money into a roth IRA and in low cost index funds.

  33. Alison says:

    Everyone who has already posted has made a lot of great points. The only thing I’d like to add is this: See if you can remove the emotional part that you love about that new home and think about only the numbers. When you look at that – the purchase price, the price of the roof, monthly PITI, see if makes you see the purchase differently. Also, put a financial annual or monthly cost on your trips etc and see how you feel about giving up some of those things in order to buy the house. I bought my dream fixer upper at the market’s peak in 2004 and put on an addition. It was under water until last year – we do have tenants upstairs who pay our entire 15 year mortgage, but mostly what my husband and I gave up was TIME. There were so many other things we could have been doing rather than fixing up our house. As much as in the end it was a good financial choice for me, I would not miss my house at all. I’ve always looked at is as an investment. The more you value your FI and financial security, as well as possible time at home with a future baby, the less important your dream house might be. Everything is just a trade off – and if you know what you are trading off and you are good with it then you will not have any regrets. Best of luck with your choices and a happy life! It sounds great!

  34. Melissa says:

    My daughter and her husband are facing this dilemma currently. They are both under 30, have three children, and have a small completely paid-for home. They are looking at larger homes with more space and more land, but deciding to take on a big mortgage is difficult when they currently have so few expenses. My advice to them has been to stay where they are, save as much money as possible, be completely debt-free, and eventually they might be able to buy their dream home without a mortgage. Peace of mind is worth something…

  35. Erin says:

    For emergencies, what do you think about taking out a home equity line? That way you can put a lot of money into the house and pull out some if something unexpected comes up?

    • Jack says:

      Good morning Erin! Thank you for posing the idea of a Home Equity Line of Credit. If this comment is directed right at us: We’ve heard it’s an option, but we haven’t really thought through anything like that to date. We’d like to avoid adding more debt to our current commitments and we imagine it’s a significant pile of paperwork to execute a HELOC, but that’s just my conservative reaction to the idea. We’d love to hear other readers’ perspectives and experiences if you’re willing to share!

      On a related note: Mrs. Frugalwoods advice about immediate access to funds if we find ourselves “standing in a hospital” after an emergency is definitely something we hadn’t factored in, so we will start addressing that next pay period!

      • Mrs. Frugalwoods says:

        Jack–I agree with you, I advise against HELOCs unless you have no other option. It’s just more debt and I don’t consider it a viable choice (plus, it’s never a sure thing that you’ll actually get one).

  36. Bonnie says:

    Congratulations on doing a great job with your finances! My suggestions are as follows,
    1) Stop paying extra on your mortgage!
    2) Sell the extra cars (keep the Volt, of course!)
    3) Increase your emergency fund to at least 3x monthly expenses. (Car sales could finance this fund)
    4) Start making improvements to your current house now – or soon!
    As someone who has spent a lifetime investing in real estate and fixing up old houses, I can tell you that your current house can be a lot closer to your dream home with some careful updates and alterations. This will also increase the value (hopefully) of your biggest asset so that if and when when you do decide to sell you will reap larger rewards. If you are at all handy and can do some things yourself, you can save a lot of money on renovations. I also would advise that when making updates to your home that you stick with the architectural style of the house and do not get caught up in the flavor du jour! There are many trends in home remodeling that quickly look dated.
    Good job on being in an enviable financial position for your ages!

    • Heidi says:

      Just wanted to add to this- if you are keeping the truck for home improvement hauling, you might be better off selling it and renting a truck as needed. I live in the city and have a small car while doing a gut-reno of my entire old house. If you don’t have a friend with a truck you can borrow, Home Depot (& Lowes) usually have rental trucks that are $20/ first 90 minutes. I have used them once or twice, as well as paying the contractor who was working on my house an additional $80 to pick up a large bulk load of materials I had ordered into the store at one time. In five years, I think I have spent less than $150 on renting trucks/hauling items, which is much cheaper than constantly paying for a larger vehicle.

      You guys are awesome! I think it is commendable that you are really looking at every detail and putting yourselves out there.

  37. Lynne says:

    Congratulations for being so young and thinking about financial stability.

    I echo the recommendation to establish the emergency fund. You are literally one water heater failure away from living paycheck to paycheck.

    Also pay your mortgage payment only – it’s at a low rate and you get a tax deduction for interest paid. Use the money you’re currently using to pay down principal to fund the emergency fund first then invest and/or funnel some into building your renovation fund.

    I’m an advocate for smaller living. A 3000sf house needs to be heated, cooled, furnished, cleaned, maintained – all of which take your time and money, more money than you can imagine. And that is a lot of space which I expect will feel excessive to you over time given what you’ve shared about yourselves. I too have a smaller house – 1800sf and am so happy I don’t have a giant house with lots of stairs to steal my time and money away from other activities I enjoy.

    One advantage of renovating your existing house is you can scale your renovations to your budget and do them over time as you save the money. Renovating a kitchen? Stone counter tops are great but you can use HD laminate with an eye to replace them in 10 years as a mini kitchen update and your budget allows.

    I know it’s really hard to resist shiny objects but you can make your home into exactly what YOU want over time. And good things come in small packages.

  38. Olin says:

    I will agree with most of Ms. Frugalwoods’ observations (except the mortgage), however what stands out to me the most glaringly is the fact that two people who work at the same place have four cars. Cars only drop in value and almost never appreciate. The rolling “emergency fund” is not a good idea at all. Lets say that you’re on a road trip and have an accident in the “emergency fund” which keeps both of you out of work for an extended period of time. Even if this accident is covered by insurance, you will need cash to survive such an event financially. I think you see where this one is going. Also, the only kid-friendly car is about to be sold to relatives? I would personally never sell anything to relatives, especially on credit. What happens when the transmission goes out? When a head gasket blows? They will almost always blame the previous owner for anything that happens in the first year or two. Then what happens when they lose their job and cannot make payments? Will they still come to Thanksgiving dinner? “The borrower is servant to the lender” is just one phrase that comes to mind. If I had these four cars and was about to start a family, I would keep the CR-V and sell everything else. That would get rid of the payments and upkeep of the other three and leave you with something that carries kids. The Volt would be a decent second option, but maintenance can be expensive on hybrid cars (batteries, etc.). As far as the house, I would stay where you are for now and pay it off, but only after diverting the extra payments (and selling cars) toward building up your emergency fund. That way you will be able to devote your entire income to building wealth in a few years. Your children will grow up wondering what debt is and how people survive with debt. In summary I think you are doing a great job on tackling your debt and handling finances. It sounds like you should easily be able to live on one income in the near future by giving up on the dream home. There will be more homes to choose from in the future when you are on more solid footing.

    My advice is worth what you paid for it. Best of luck!

    • Mrs. Frugalwoods says:

      This is a good point about selling to relatives and also the fact that kiddos (carseats are big) would fit well in a CRV! Something to consider 🙂

      • Jack says:

        Great points Olin + Mrs. Frugalwoods, thank you so much! We’ve certainly seen drops in value over the years we’ve owned them, so it’d good to keep that in perspective. Elizabeth is excellent at keeping emotional attachment out of vehicle ownership and I admire that a lot in her. I’ve been a gear-head from way back and have always kept on top of maintaining the CRV in top shape. While I truly enjoy the time I spend working on cars, I feel as though these mechanical skills – and time – may be more valuable if transitioned over to DIY renovations of the current home instead of wrenching in the garage on the weekends. I sense some synergy brewing here…

        • Olin says:

          I am with you on the gear-head stuff. I have always been the mechanic at our house. I was also a helicopter mechanic in the Marine Corps in a previous life. The same skills will serve you well in the DIY renovations arena. I am constantly looking for things that I can do myself around our house that will improve it. Fewer cars means less stuff to break and more time to fix up the house. The only thing I dread is painting. I would rather have a root canal than to be subjected to painting the house.

    • Walnut says:

      I’m about to have two car seats in a compact car. If they can fit in mine, I’m sure they can fit in a Chevy Volt. As far as family sales for cars go, it’s common in my family. I do suggest having the other party take out a loan a the bank though. Don’t be their banker.

      • Olin says:

        Good idea Walnut. One other point about doing family loans on cars is that the title will have to either be transferred on faith or retained by you until the loan is paid. How will they register/insure the car if it’s still in your name? If you give up the title, you do not have legal standing to being the owner of the car. Definitely have them get a bank loan to settle these issues. It might also save Thanksgiving dinner.

    • Elizabeth says:

      Olin,

      Thank you so much for your advice! I am also a fan of decreasing the size of our fleet 🙂 I will say that I believe there is an established level of mutual trust, and my parents have made monthly payments to us before (for the design of their home, after the first was lost in a fire) without issue. But I do agree that it is probably the safest vehicle we have when it comes to toting little ones, and there is an added benefit to having paid it off. Thanks so much!!

  39. Sarah says:

    I’m torn because we had a similar dilemma when we bought our first home. In retrospect, we made a pretty reckless decision, but we have no regrets and I’m so glad we took the leap. We live in southern CA, where prices are much higher, and we reeeeeally stretched to buy our first home at a time when interest rates were over 6%. Like you, we had retirement savings on track, very little in cash, but we loved the house and could easily picture ourselves living there forever. So, although I agree with previous commenters that dream homes create a false sense of urgency, I get it.

    Fifteen years later, we’re still in that first house, and here’s what made the difference in making it all work:

    1. Our incomes have doubled since we bought the house. The first few years were incredibly tight, and I developed frugal-fatigue after 3 or 4 years because I was just so sick and tired of having to think about whether we could afford a $10 T-shirt that month or not. But, we stayed the course and invested in our careers so we could increase our income.

    2. Because we were already tight and didn’t have much in cash, we had to finance some major home repairs and a car. We had to replace 100 feet of sewer line for $12K, deal with a surprise mold problem for $6K, and then I was involved in a car accident that totaled my beloved little Corolla, so we had to buy a new-to-us car for $10K. Good times. If we weren’t so stretched with the house, I don’t think we would have had to finance these. Now, ten years after all that, it doesn’t bother me much as we got very low rates on all the loans (all under 3%), but it was very stressful and upsetting at the time.

    3. No vacations for 7 years. We didn’t necessarily plan on that, but we were tight due to the house, and then we had a baby 3 years later. Daycare was $11K a year. I have no idea how we made our already-tight budget accommodate that, but we did. We just didn’t go anywhere until our daughter was almost 5! Traveling with a baby or toddler isn’t exactly relaxing anyway, so I don’t consider that a big loss, but if you value travel, you might. My job doesn’t allow part-time work — it’s full-time or nothing — but if yours does, and you want that option after you have a baby, you might want to see if you can afford the house with less income.

    All of this is to say that it’s okay to take a calculated risk once in a while. I’m generally pretty conservative financially, and I knew at the time that stretching so much to buy our house was a leap of faith, but we made it work.

  40. Laurel Biedermann says:

    Jack and Elizabeth, Bravo for having the foresight to analyze these numbers ahead of time! So many people jump in first and then look at the spreadsheet. So, I applaud you both for taking the time to look at all of your options. My two cents is that you would feel a lot less stress, as you start your family, and retain a lot more options, if you stay in your existing smaller house.
    In my experience, kids want to be where you are. Babies, little kids, medium-sized kids…..It will be years (seriously, as many as 16 years) before you’d ever need the extra GINORMOUS 3000 space you are thinking about with the dream house. Teenagers like having their own “hang out” space and I’m sure that it’s fun to be the house everyone congregates in (we weren’t “it”) But, carrying a huge overhead for 16 extra years is a significant burden. We raised two boys (so, four of us) in 1050 square feet and it was great not have them be “out of sight” in the teenage years 🙂 If one of you ever wants to do something different for employment, work in a non-profit (that doesn’t pay much), stay home with the kids, or one of you becomes ill, there is huge “peace” in not having a giant “nut to crack”. Pay off your house and you will feel huge sense of freedom and relief. Establish an emergency fund, do your renovations, as you can afford to and still pay cash, and relish in the fact that you are one of a tiny percentage of Americans that actually “own” their home. It’s a sweet deal.

    • Jack says:

      Thanks Laurel! We hadn’t even thought about how easy it would be for kiddos to “get lost” in that much space. Elizabeth and I have always appreciated the thought of how small homes make for tight families, but this is yet another factor in support of it.

    • Linda says:

      Agreed, Laurel. While I don’t have kids, you echo what a good friend of mine has often said. She & her husband elected to stay in their smaller home and raise their two kids…and it was only when the kids were older teenagers in high school (four short years!) that she wished she had the bigger house. But while the kids were growing up…and now, with the “kids” in their 30s, she’s grateful that they stayed…now over 30 years. It’s the perfect size for her and her husband — easy upkeep and customized over the years to their needs and taste. Plus financially, a much sounder and safer plan.

  41. Mark says:

    I’m in the camp of staying in your current house. The new house is a luxury. With your current income, you can either afford the new luxury house, or early financial independence. The new house looks to be a money pit. Even if you fix that roof now, there’s no guarantee you won’t continue to have problems with it in the future, especially with all of those skylights. You’ll have to determine which is more important to you…the luxury house or financial independence. I would also not renovate the existing house (other than required maintenance) if you choose to stay there. I would get it paid off, and then concentrate on starting your family.

    I’m also not in agreement that paying off your mortgage is a bad thing. You are so close to having your current house paid off. Having it paid off opens up a lot of options for you. It frees up extra cash for investing, it reduces your cash flow needs, which in turn reduces the size of an emergency fund and reduces the amount of money needed to save up for early retirement/financial independence.

    I agree with some of the other comments, both individuals working in the same job sector AND for the same company has increased their risks and need for an emergency fund.

    Also agree that having kids with both parents working will see much increased costs with childcare and time commitments. Plan on spending at least your deductible for the delivery. We met the max out-of-pocket twice for our kids. If they are planning on having kids soon, I agree they would not want to be in the middle of a major house renovation or have a large house to clean and furnish at the same time. Little kids don’t need a lot of room.

    I would try to become financially independent for the life (and house) you currently have before trying to upgrade to something more expensive. Once you are finished having kids, and the kids are out of daycare, and perhaps your incomes have increased due to the advanced degrees and you’ve had a chance to save up more…then look at the fancy house if that is still an interest. Your feelings may change after you’ve had kids, and also before closer to financial independence. You may decide that one parent staying home is more important. Not buying the luxury house now gives you that option.

    Also agree you have too many cars. Get rid of that mustang now before it depreciates further. No way that’s good for anything once you have kids.

  42. Mrs. Cheapheart says:

    I wish I had it together as you both do at such a young age! I agree with the other posters that recommend holding tight. Take the emotion out of this “dream home”, hell, with two architecture degrees you can design your own dream home.

    Some thoughts:

    -Forget “dream home” and focus on dream location.

    -“Buy the worst house on the best street” is great advice.

    -Kids shift your perspective in ways you can’t imagine. My first thought was that you would be constantly cleaning smeary handprints off of those beautiful floor-to-ceiling windows in the dream home.

    -Extra square footage means more to heat, cool, furnish and clean. Dumping out bins of toys is a developmental stage for children. My son has been in this “stage” for three years. So glad I don’t have the extra floor space for him to trash.

    Focus on increasing your cash flow. Then make a list of the the things that are driving you most crazy about the house and see if you can tackle them yourselves before the baby comes. Peel up a corner of that old 70’s carpet, chances are you might have some beautifully preserved hardwood underneath that can be refinished. You will be so happy to have a small mortgage when the baby limits the amount of money you can make.

    If you can hang onto your little house long enough to pay off the mortgage and then sock away a down-payment for a new house and rent out the little one, you’ll be leaps and bounds ahead of everyone else who is chained to their desks to pay off a big house.

  43. Mr. Tako says:

    Honestly, I think they need to save *a lot* more before they buy that fancy new home.

    My simple rule of thumb is this — never take on a home that’s worth more than your liquid net worth. Life changes too rapidly these days to take huge risks like that. You have to be ready for anything.

  44. Anne says:

    My husband and I remodeled a couple of homes. The time, energy, and expense that it took was enormous. It was an ongoing stress. If I had it to do over, I would do it differently. It’s makes more sense to buy a home which might need some improvements or upgrades but is fully livable. The dream home you’ve described doesn’t sound so dreamy with a $65,000 roof expense in the future. If you want to live closer to downtown, I can almost guarantee that you will find another home that you fall in love with which won’t require that expense. Be patient, the time will come when you are sure of what to do and have no doubts about doing it. In other words, if you have to ask then it’s probably not right.

  45. Elisabeth says:

    Since so many readers give excellent financial advice, I will focus on other aspects of this dilemma. My husband and I are more than twice your age and we have had a long and interesting journey together. We have stretched and bought the dream house, more than once…actually, several times. Your dreams change, they can actually change drastically like they have for us: From living in one country and loving it, to moving halfway across the globe and loving it even more; From loving the hustle and bustle of the city to fully embracing coyntry life.
    So my advice is: Let life be an exciting journey where you don’t necessarily know what the ultimate dream ends up being.

    I also have a degree in architecture ( I graduated late in life). And looking back I feel I graduated with blinders…so set in my ways of what was my absolute dream house, which (of course) was a mid-century modern with sleek lines and skylights for plenty of daylight and all the other good stuff. Do I live in that house today? Very far from it! Do I live my dream life? Absolutely! More as a result of coincidence. Our previous forever dream house in the city had to go due to a financial crisis (way to expensive to maintain). It took 2 years+ to get back on track, living part off our emergency fund during this period. We still managed to purchase (cash) acreage with an existing house out in the country. Our dream house? No, but it doesn’t matter, because we absolutely love living here!
    So, again! There is no single dream solution, there are many.

    Home size…I come from a culture of smaller homes and fewer bathrooms, and I see many advantages of that. Like you already mentioned, room for less stuff. And with your background in architecture I am sure you can come up with many clever space saving solutions. And, which I have found interesting, less space seems to bring family members closer together (we didn’t learn these things in architecture!). The following was a plus, too, and the value of it is totally underestimated. Having one and a half bath, you have to find ways to make that work, even with teenage daughters. And there was an advantage to the “natural learning” happening when several girls have to share one bathroom with their mom (although I sometimes envied my husband, he got his privacy.)
    And, as you also mentioned, it is easy to fall behind on cleaning, and even more so when the home is larger. Which in turn can affect indoor air quality.

    Renovate or not? We have lived in brand new homes, we have lived older homes, small and large, fancy and simple, renovated and not. The most sustainable is to keep things for a long time and maintain what you have. Renovate when absolutely necessary, or if it really improves the function of the space and/or ease of maintenance/cleaning. I am talking about the big stuff, not necessarily a coat of paint. Renovation can be so many things, it is not necessarily gutting the place. And I have seen some very successful additions to small ranch homes by the way.

    One financial concern: Your dream house has an awfully expensive roof for that price range house?!

    What I have talked about here is the reason I don’t have a bucket list. My dreams when I was young were not even close to what my dreams are today, or probably will be in the future. That’s why it is important to me that I don’t get stuck in today’s dreams.

    And one last life lesson I have learned: I have made my biggest mistakes in times of more money, and I have learned the most valuable lessons in times of less money!

    Hopefully, my perspective will help your process even though the numbers are missing. Life is a process, not a goal!

  46. Mimoza says:

    Well, it depends. We bought a 2,400 sq.f. house (includes 2-car garage which is perhaps 400 sq.f.) before children because it seemed so spacious, new construction, and also it seemed that mostly people buy houses larger than 2k sq.f. Oh, we also saw a house of 1,800 sq.f. sold by an owner (aka ‘their stuff was in the house’) and it seemed small. Fast forward almost 15 years… We live in the same house with 2 kiddos and boy, I wish I had bought a ranch-size house (less than 2k sq.f.). No, I do not hate our house, but I don’t like cleaning and organizing all that space. The kids are bigger (8 & 11) so they help to clean sometimes. After cleaning, it becomes messy again. So, the thought that our house is not forever for us, I wish we’ve bought a smaller house. In addition, we easily wouldn’t use another 200-300 sq.f. if we were more organized. The more space, the more mess and other people might feel compelled to fill that space with furniture, gadgets, etc.
    Now it’s all cute and rosy, but think about the future when you have children. Believe me, it takes energy to raise them. What if one of you decides to quit work and raise family. Unless you generate income other ways, you’ll feel a serious pinch in your finances.

    So, my verdict would be not to buy the new house, but if you’re 200% sure it’s really a forever house, make it work financially. To be honest, $53k spending for two people is kind of high unless you live close to DC.

    • Jack says:

      Hi Mimoza, thanks so much for your feedback! Just a quick note on annual spending, that $53 does include our original mortgage ($8k excluding taxes/insurance) as well as the extra $25k additional principal we’re currently putting toward it. Removing the extra principal alone from our annual “today” expenses, that puts us right around $28k for expenses annually, including our current normal mortgage payment. I hope that’s more in line with what a moderately frugal, dual-income-no-kids couple in rural Ohio should be spending. Hard to tell how much that will increase once kids are added in, but hopefully it isn’t much more than that once we start growing our family. Thanks for your perspective!

  47. Rachel says:

    I say get your dream house. You will be able to establish yourselves in a home that you can love immediately and stay in for the long haul. You can start your family without worries about renovating or moving a few years down the line. There’s is so much inherent emotional value in factors that can’t be quantified. Plus, you can deduct the mortgage interest so you will be getting a financial benefit.

  48. Jen says:

    Forgive me if someone has already mentioned this, but since you’ve paid down a lot of your mortgage, what about renting out your existing home in order to produce some more income that would make building an emergency fund and buying your dream home possible? Could you qualify for a mortgage on the new home while still owning your current home?
    I won’t give a recommendation one way or the other on what you should do except to say that if this truly is your dream home (and you are certain you know what that is) and it truly is rare for one like it to come along (the combination of architecture, location, or whatever it is that strikes your fancy) then I might give more serious consideration to stretching financially to make it happen a little sooner than you may be fully prepared for so long as it’s not completely financially irresponsible and taking resale into consideration. But I’m in the DC metro area and have been trying to purchase my own dream home for the past 6 months and the market here, like many of the cities in the US right now is rough. I’m frankly astounded that you could actually make an offer for that much below ask and expect that they would negotiate with you. The last house I made an offer on was listed at $340,000. I offered over ask, but there were 4 offers on the table and apparently I never stood a chance. It just closed at $18K over ask. People always say there will be another house and while that’s true, I think if you have a main criteria or two that you are unwilling to bend on that really restricts your options, it will mean a potentially much longer search (and you may need to be willing to offer more money to then ensure you get the house) to find the right one. For me, I don’t need a particularly large property, but I need the lot to be private/wooded, which drastically reduces the inventory on the table for me (it amazes me how much people like their cleared, shade free yards 🙁 but to each his own). On the other hand, I would be careful of being drawn to that house because it’s a showpiece so to speak. It’s absolutely gorgeous and reminds me of a house I recently passed on that had a Frank Lloyd Wright type of architecture with huge windows looking onto a wooded lot. It was slightly above my price point and also needed a nearly flat roof (tar & gravel) replaced along with other updates. In the end, I had to consider that while it had the things I truly wanted, it also was more than I needed in terms of being a “showy” house, which would drive up the price even further. So I let it go.
    Anyway, I don’t feel I can advise either way in your case, but hope this at least provides some more food for thought. It does sound like your market is very different so that’s a plus. Good luck!

    • Jack says:

      Hi Jen! Excellent idea, and one that we’ve actually kicked around a little bit along the way. Thanks! With the landlords we’ve talked with, a home the size of our current abode is just large enough to basically price itself out of the rental market in our area since cost of living and housing prices around here are so cheap right now. Who’s to say that won’t change in the future, but that’s a big “what-if” in my personal opinion.
      As far as the nuts and bolts of qualifying for another loan, I’m afraid we’re at a significant disadvantage. At this point in our lives (and now understanding the risks of working for the same employer) I don’t know that Elizabeth and I would be willing to assume the added risk of carrying a second mortgage. Also, given our dearth of cash on hand, I don’t know that we would qualify for another mortgage on top of our current expenses. If I’m being brutally honest with myself, the thought seems a little overwhelming – especially if something were to need an immediate repair in the near future on either place!
      Again, great conversation and excellent perspective. Thanks so much!

  49. Kristine says:

    It doesn’t necessarily have to be one or the other. If you’re willing to get creative and hustle a bit, you can make anything work in your benefit.

    Is there uber or lyft in your area? If so, I’d consider becoming a driver during peak evenings and using the Volt since the electricity is free from work. You can make a killing from an hour of work if it’s popular in your area. Three hours a week would probably cover your whole car payment.

    Regarding the house, do some more research. If the new house allows you to acquire roommates or rent out on AirBnB regularly, then the new house could actually make more long-term financial sense than staying in your current home because it could be an extra passive source of income. Especially if interest rates go up before you’d be “ready” to buy the new home. (I’m with the Frugalwoods – keep your mortgage!! The money is so cheap right now!!) If your research finds that “it is kinda is a good market for that,” I would say that doesn’t cut it – stay in your current house and find ways to make it better for yourself and enjoy the financial freedom and flexibility that comes with it. Also, don’t be afraid to invest in reasonable updates to your current house if they make your quality of life better. Be wary in your search for a new house if you do go that route. As someone else stated, just because it cosmetically looks updated, that doesn’t mean it’s built well. It’s the guts that matter. My foreclosure looked awful when I bought it, which is why no one else bought it and I got it for $50/sq ft less than my next cheapest neighbor, but the guts are in perfect shape and I’ve already added $175k to my net worth in just one year from my updates/the hot market.

    In my specific area, a “starter home” (two bedrooms, one bath, 1200 sq ft) would have cost $300k+. I’d be working forever to pay it off and have very little space to grow with a family later if I want to go that route. Instead, I mortgaged an extra $125k for an extra 800 sq ft and 4 bed, 3 bath and I rent out the main part of the house on AirBnB. I’ve met really cool people and I actually am currently living for free in an attached suite. (Last month I even made $500 on top of every single expense that I’m saving for a “rainy day.”) If this new house really is in the prime location, as you say, then you could rent out rooms solely Friday and Saturday nights and potentially make a killing that would negate the extra costs and you’d still have the house to yourself all week. You just have to know it will be more work, more maintenance/upkeep since you can’t just let things go, and there’s a potential for some startup costs depending on if you need new sheets, towels, etc. New “guest” sheets and towels will set you back $100-$200 if you don’t want guests to use ones you currently have, I just got white and wash with bleach. Regardless of whether or not you move, you should consider renting out the house while you’re on your trips. You’d likely make more than enough to cover your whole frugal trip.

    As an extra but important note, I have a flat roof but thankfully only in the back where they did the addition. It leaked a bit when I moved in. I layered up tar around the edges and then painted two coats of a silicone acrylic on it that provide a good water-tight seal. I plan to go up on the roof and repaint this silicone acrylic at least once every year – it was $60 for 5 gallons and I needed two buckets – and I’m planning to extend the life as long as possible. Flat roofs are a nightmare. **No dream home – and definitely not a forever home – should EVER have a flat room.** Water just puddles and leaks.

  50. Bonnie says:

    I say build your dream life and don’t worry about a dream home, dream vacation, etc. Your joy in the outdoors and enjoying nature that seems a core family value might not be experienced as much by moving into the potential next home with even less time. But if you do decide to stay, don’t think of that home as the one that “got away” … continue to cultivate happiness in your current home.

  51. Kara says:

    My husband and I were 100% convinced that we would want 2 or 3 kids and bought a house that could accommodate us and 3 kids through their high school years. Now that we have 1 kid at home, we realize we only want 1 and our house is much bigger than we actually need. We still really, really love our house, but if we could go back in time, we would buy a smaller house with a smaller mortgage and reach financial independence much sooner. We sometimes think about moving, but the cost and hassle of moving out of a house we love is unsettling. So my advice to you would be to stay where you are, continue browsing houses, and reevaluate your goals once you have a child. If you still want a dream home at that point, there will be more dream homes to be found. Good luck!

  52. tkid says:

    I’m going to say you should hang onto the old house, but not for financial reasons. Right now you have a ton of activities you do, plus getting your masters. Your plate is full. I’d focus on getting your masters first, pay off the old house’s mortgage (paying off your mortgage by 2019 is phenomenal and Good Job!), then focus on getting that dream house.

    On the dream house, to me your 1950s ranch sounds dreamy, while the 3000 sq ft house sounds like a nightmare. It’s the roof: it’s flat in a snowbelt so how well will it take a load of snow? Plus re-roofing it at $65,000 is way too expensive. Are there leaks in it? What kind of upgrades could you do to the ranch with $65,000?

    • Jack says:

      Good afternoon tkid! Thank you so much for your input. The structure of the dream home was designed to take the snow load and, from what we can tell from walking through the home, it seems to have kept up well with the snowfall over the years. However, like you noted, the cots of re-roofing something that flat and ensuring it stays snow-worthy for years to come seems expensive to us as well. There are certainly many renovation opportunities we could tackle (someday) in our current home for that amount of cost!

  53. AW says:

    You have gotten some great financial/ frugal advice, but I will say that if it were me, I would buy the dream house. We live in a competitive real estate market and got outbid on our dream house 2 years ago. We ended up buying a much smaller (1450 sq ft) much cheaper home for our family of 4. Our house is nice and it’s nice that financially we are not stretched, but I do wish we were in the dream house even with the higher cost. We are home a lot so we spend a lot of time in the house, cook most meals at home, etc. I would love a spare bedroom/ office, since we frequently have out of town family visiting and I work from home often. (Last Christmas we had to put one relative up in a hotel because our house just got too crowded. In the dream house we would have had plenty of space.) Our kitchen is also tiny and the lack of counter space for food prep is irritating. I dream about the dream house every time we drive by. Anyway, good luck with your decision.

  54. Jenny says:

    When my husband and I were in our 20’s, we bought (financed) our first “starter” house. The house was definitely not our dream home – it was older than we were, was a 1200 square feet tract house but with a nice size backyard. Our plan was only to stay there a few years, sell, and move up. Two kids came along, we realized we were in a great community for raising kids, paid off our mortgage, and had the flexibility as to who worked and who stayed home (it flipped several times during those kid-rearing years). Somewhere along the way the starter house became our home – not because of any renovations that we made (we aren’t handy that way) but because of the memories and community that we made. The kids are grown and establishing their own lives and it looks like our “starter house” will become our “retirement home”. It’s just the right size for us and I’m so grateful that we didn’t get a two-story house (definitely on my “dream home” list) as stairs lose their luster as we age. I recommend you take a step back and really evaluate what is most important to you..

  55. Casey says:

    I haven’t read all the comments, but have kids before you decide what is truly your “dream house”. We thought we bought our dream house, but I think we might choose differently if we had to do it over again. Ours is 3000 sqft and it really is too big for a family with a baby and a toddler. We were looking for a 2.5 or 3 car garage because my husband likes to tinker on his motorcycle, but in retrospect it probably would have been cheaper to just add on a lean-to or shed for that.
    And then… you know, having babies is not always as easy as it might appear. You might struggle with infertility and want to spend your nest egg on fertility treatments or adoption. Or you might have a special needs kid who is going to require lots of medical attention. Until you’re done having children, you might not know how much it’s going to cost to establish the family that you want. That might sound harsh, but building a family is just not for the faint of heart. But I’m generally pretty risk averse and we decided to put off any further major financial decisions (beyond buying our house) until we were done having kids – part of my personality, and my husband’s too.
    Also, if you’re in architecture… presumably you have contacts in your local construction workpool? You probably have some leads on a general contractor who does affordable yet quality work? So if the day comes and you don’t want to DIY your own reno, you can hire out reliable help. I get that it will still be an inconvenience to have your house torn up (ours is torn up right now due to a flood in a poorly-maintained-by-prior-owners master bath, but we had to do it because there was mold and we have an infant), but at least it won’t be your headache to manage.
    Good luck! You are doing great!

    • Laronda says:

      This, absolutely this! We have been incredibly fortunate and have three amazingly healthy children. However, my husband’s employer switched insurance companies right after the birth of child #1, and we suddenly went from a $25 copay to shelling out between $400-$900 for well-child checkups with immunizations. We can pull it off on one income because they are all insanely healthy and we live in a 1400 sf home with a $620 mortgage–quite big enough for all of us, as others have attested to, and the kids learn valuable lessons about sharing and taking turns. 🙂 We have one set of friends going through round #4 of in vitro which is costing an arm and a leg. We have other friends who have spent the past six months trying to get an accurate diagnosis for their 3-year-old and just learned he will need ongoing and tremendously expensive medical interventions. Another friend’s child’s lifelong medical needs were well covered until her husband was laid off from IBM at which point they had were facing bills of several thousand each month. You just never know what’s going to happen, and when children enter the picture, more issues will become nonnegotiable than you may expect. Sticking with a smaller, less-expensive home gives you 1) a chance to figure out what you really need after you grow your family, and 2) so much more flexibility to deal with all the crazy crap that will come your way. That said, they’re worth the grief. And I only hope mine grow up to have the sensible heads you two obviously have on your shoulders. Good luck!

  56. Cindy Brick says:

    Maybe it’s me, but your Dream Home price seems incredibly reasonable! (Granted, we live in the Denver, CO area, where home prices are zipping all over right now.) The size would be just fine for kids — and if you can sell your current home, plus make the other sacrifices you’re mentioning (including selling the car), that should be more than enough to ensure you don’t have to pay mortgage insurance. (One of the biggest wastes of money out there, in my opinion — and it only benefits the mortgage people, not you.)
    IF you can sell your current home, and this really is your dream home — then why not. But I would definitely negotitate, based on the knowledge you’ll have to replace that roof soon. You are far ahead of many people your age in planning your financial lives out — good for you. (But you really do need to add to that emergency fund, just in case…)

  57. Joan says:

    I vote for staying where you are. I agree with everyone about the cars. Limit to 2 cars, 1 kid- friendly. As long as your current neighborhood meets your needs now and when you have kids for a extended period of time (thru 6-8th grade), that’s all the better!

    Time now to re- allocate your funds. “Rolling driving fund” gets cut by 2/3 into your cash reserves. Let’s be honest, you’re not going to be extensively traveling with newborns or toddlers. Ditto for the proceeds of cars go there also.

    Extra mortgage amount gets halved. (1/2 saved for extra mortgage pymt, other half towards house repairs/reno item now line of budget) yes it’ll take longer to be mortgage-free but you need the dedicated cash reserves more to be at peace in your home!

    Renovations can be cash- flowed, save for it. Prioritize: heating. Roofing and safety Items first. Sometimes all you really need are some low-cost items to make a big impact. Change fixtures, paint, lightning, doorknobs etc. Not everything needs to be a gut job!!

    Heloc is last option, not your first. You have the time to accumulate money, every dollar counts.!

    I raised 2 kids to adulthood (Yes they are well- adjusted! Lol) in a 2 bedroom, 1 bath apt. (Their bedroom was 8X10 in less than 700 sq ft, total apt sq footage!) No, kids don’t have to have their own bedroom each!

    Since you indicated you want more time with kids, give yourselves a time deadline. Say. 1 yr before you want become pregnant, start living on 1 income as a test run. I think you guys have done awesome so far! You should be proud of yourselves!!

  58. Joe says:

    First of all, you guys are doing very well for a young couple. Congratulations!
    Now, I’d say put off your dream home. You’re still young and people change. Your dream home will probably be something else as you get older.
    Are you going to have kids? They aren’t cheap.
    3,000 sq ft is huge. You don’t need that much space, do you?
    You’re doing well now so you should keep doing what you’re doing. Why make such a big change?
    Good luck!

  59. Abbie Burnham says:

    Personally, I wouldn’t go for the dream home because it would be eating up 37% of your take home pay. (37%!!!!) That’s a really uncomfortable amount for me (and should be for you), especially with zero liquid savings and both working for the same company, which greatly increases the risk of you both being laid off in the event of an economic downturn. There’s something to be said for frugality on not eating out as much and not having too many cable, Hulu, Netflix, etc. subscriptions, but when it comes down to it, your biggest savings would be NOT increasing your standard of living by doubling the size and price of your home for no good reason.

    I agree with everyone’s suggestions above about what your dream home is right now vs. what it will be three or four years after you’ve started having kids. It will change GREATLY. Don’t lock yourself into such an expensive home at this point in your life when you could be dumping huge amounts of money into savings and letting time multiply it for you.

    My suggestions: dump that $2100 extra per month into a savings account for an emergency fund until you have a minimum of three months of expenses stored up, get rid of the extra cars (I would include the Mustang GT in this category; you could more than pay off your Volt with the proceeds), then finish paying off the current house and start renovations. Practice the art of contentment. I have a dream home, too, but I will never own it because a) it would be a nightmare to clean b) kids destroy things (often) and it is easier not to scream at them when they punch a hole into the wall of your “good enough” home and c) I value my time with my kids more than living in the perfect house or having the nicest furniture, the best car, etc. I think you will, too. Do you really want to lock yourselves both into these jobs for 15 more years? Think about it in terms of the amount of time you will have with your children at home – only 18 years. Is this house worth most of their childhood?

    Picture the freedom you will have with your money from living in a smaller home with NO MORTGAGE. $3000/month freed up to do ANYTHING with! That is the dream life to me!

  60. D$ says:

    It’s hard for me to even comment because a “starter” home in an OK hood where I live in San Francisco is about 900k+. Granted, our incomes are higher but not high enough to make 900K doable.

    Let’s take the $$ out of this completely- I agree with other commenters that 3000 square foot space sounds like less of a blessing and more of a curse, same with maintaining and insuring 4 cars. Your stuff starts to own YOU at some point. I have some friends that moved into a big house with no kids and they have extra rooms that are just filled with crap that they have no urgency to get rid of because they still have plenty of space. They are very busy people that probably thought they would make their home gym/office/meditation room or whatever, but in practice thoughtfully filling the extra space wasn’t a priority.

    Also, careful what advice you get from realtors. For them, it’s always a fantastic time to buy or sell. They want you to think that this house is only available once a decade in order to create a false sense of urgency. You’ll be happy in many different houses. I would say let this one go and put yourselves in a killer position to be a super competitive buyer when you have kids in a few years.

    • Mary in Maryland says:

      He’s right about realtors always thinking this is the best possible market for buying, and that nothing this perfect will be available for another decade. My Dad used to joke about deals being “yet another once in a lifetime opportunity.” More memorably he used to say, “You can have anything you want, but not everything.” The introductory remarks didn’t make it sound like you guys spend much time at home. That wouldn’t seem apt to change with a bigger mortgage. My husband and I live in 1400 sq ft, and it’s plenty for us and more or less permanent houseguests. We laugh when we drive through the lovely neighborhoods closer in–with huge wrap around porches that never have anyone sitting on them. The air bnb thing works well if you live in a hot area. Given real estate prices, I’m guessing your area is not rife with tourists. Good luck. there’s always another house coming.

  61. gk says:

    you guys are doing so awesome for your age! i’ll join the chorus of people voting to stay in your current home for a few reasons –
    – i’m a big proponent of smaller living. you two seem pretty eco-minded. i am too, and i’ve always thought that living in a smaller space is great b/c less space to heat/cool, clean, maintain, furnish, and accumulate stuff. all good for the earth! and so cozy! (we are a family of 3 in 2100sf. i grew up in the same size house. my husband’s house growing up was smaller. what we have now is plenty big, and there are entire rooms we don’t use. we could totally downsize. whoever commented that kids just want to be around you are totally right.)
    – imagine how awesome you could make your current place with the $65k (!!) you’d have to pay for a new roof at the *dream house*. and that would be $65k of making your living space and things you use on a daily basis awesome – not a roof. you both have architecture backgrounds, so you could make the current house so perfect for you. and add some solar panels!
    – dreams, and dream houses, change – as many people have noted above for many reasons. you want kids, but you don’t know when you’re going to have them. and frankly you don’t know if you’ll be dealt infertility or loss or a sick kid or a special needs kid, or decide to adopt. don’t extend yourself now for something that may or may not be right for you down the road. there will always be another dream house. maybe even one with a less expensive style roof 🙂
    – don’t underestimate how dreamy it is to buy a house well within your means! jack, especially, seems pretty conservative. me too. it is so nice to have a cushion in the bank and the freedom to know that if something goes wrong (like if my husband or i lose our jobs; or if i lose it and decide to quit my job to become an underwater basketweaver or whatever), that we will be okay. we purposely bought a house we could afford on one salary, and i do not regret it one bit. we *almost* bought a dream house before this one – my husband refers to it as the one that got away. but the house we got and the neighborhood we ended up in (which wasn’t even on our radar at the time we were looking at dream house) are perfect for us. and i don’t have to lay awake at night thinking about how i’ll just never take a vacation again and eat PB&J every day.
    – if you stay, you could redirect some of your $2,100 extra mortgage payments – keep paying extra on that mortgage if it makes you feel good (i do), but also build up your emergency fund and start setting aside some cash for renovations. yes, renovations are stressful. they become even more so with kids around. if you start setting aside cash for renovations now, you can start doing some renovations now. if i were you, i’d choose the most disruptive things now, before you have a kid.
    – don’t let people talk you out of your volt. you can fit kids into sedans (although the headroom on the older volts can be pretty low in the back, and i think you have to put the car seat against the door if you have the version w/o a middle back seat). and again, you don’t know when you’ll have a kid. life throws curveballs at you and cares nothing of your plans. as someone who has had lots of friends experience infertility and has herself experienced loss, i’d be loathe to change up the car until the baby is actually here. in the meantime, you will have low fuel costs and that’s awesome. i do think you should get rid of the other cars, though, and add to an emergency fund.

  62. Jack says:

    Thank you gk, Joe and all the rest of you generous readers so willing to share stories and advice! You’ve all been so incredibly kind and helpful! Elizabeth and I cannot begin to tell you how much we appreciate everything you’ve helped us understand today. What a fantastic conversation! A BIG special thanks to our gracious hosts, the Frugalwoods, for allowing us to share our little sliver of the world with all of you. It’s such an honor to be a part of the Frugalwoods’ Case Study Family and we hope our dilemma will continue to help shed light on future Frugal Weirdos.
    Thank you ALL so much! You have given us so much to think about in the coming weeks, months, and even years!

  63. Julia says:

    It looks like you have some good advice and a lot to think about.

    My suggestion is for the scenario where you decide NOT to purchase your dream house. I am assuming that one of the reasons you were looking at real estate to begin with is that, as you’ve mentioned, your current house is very outdated. There is definitely something relaxing about coming home to a place that looks nice and is to your taste, and on the flip side, irritating when you come home and all you see is what you’d want to change.

    That being said, if you divert some of your extra mortgage payments into a renovation fund, within 6-12 months you could afford to change a few things. Not everything, but make a list of what would make an impact on how you feel about the house. For instance, I think I saw you say the carpets are very old. Replacing them to something you like could make a big difference, or some new lighting, or paint. It doesn’t have to be $60k, renovate every room kind of a thing, but could help you be content where you are for a while. And then you could resume the massive payments if you like and still pay it off quickly.

  64. Sandi says:

    If I could go back and tell my younger self (“dream” home purchased at 31, haven’t lived in that nightmare since 1998; coincidentally I also worked for the same company as my spouse, and the house needed a roof) the truth about the real cost of an older home, the missed opportunities due to the high mortgage payment and payment of that new roof among other necessities, what happens when a company merges with another and only one of you can stay on – in another city – and how silly it is to actually furnish all those rooms for which there are currently no residents (otherwise, why own the space, right?) just to have to sell all that furniture for pennies on the dollar at the garage sale before moving… Well, read today’s new post at Keep Thrifty, they’re 5 people in an 1800+ sq ft house who want to go smaller. My “dream” that became a nightmare was only 2700sqft. Today we have 2 kids and a dog and much less than 2700 sqft and it turns out that smaller, easier to maintain (read that as “more economic”) and newer (compare the cost of insuring 3000 sqft of mid-century to 1800 sqft of something built this millenium) was actually the real dream. Beautiful expensive big houses are fun to look at, but they don’t have to be home. Leave the expense to the older retired FI folk. Too many unknowns surround your next 15-20 years.
    Also, if we hadn’t downsized, I’d still be working. A smaller place let me be a stay at home mom, something I never thought I’d want to be.

  65. tess says:

    Ah, to be young and in love! Super sweet photos of yourselves & kitty.
    Either house seems as cheap as chips. $500k will barely buy a starter condo locally, so I understand the allure of the new home. Looks great.

    The square footage seems excessive to me (even with potential future children). Do you need it? Will you need it? How will the space be used? Rollerskating? Entertaining? Business? Is there a possibility of working from home? Starting your own business? Would you need a dedicated home office? Nanny’s room? In-law suite? Guest rental?

    I understand the appeal of paying down a mortgage. I paid off a 15-year mortgage in 7 years, which allowed me to work part time after the birth of my son. However, I agree with Mrs FW and others to channel $$ to building a cash reserve for emergencies and home repair whether for home 1 or dream house 2.

    Personally, and as a bossy older sister, I would advise cutting down on outside activities and channeling your energies/spare time into feathering your current nest. Pulling up rugs, washing and painting walls are great for building bonds with your partner and your home.

  66. Nancy says:

    Congratulations on such a great financial start to your lives together! My comments are from an older viewpoint…..my son and DIL are exactly your ages. Our older son is 3 years older. What I have seen in them is a drastic changing of dreams through the late 20s/early 30s. None of the dreams were bad, nor wrong…..they just developed as the kids matured. Sometimes, when a dream is costly, it is best to wait….and continue to get ready. In your case, sell the extra cars, make that cash emergency fund, max Roth IRAs. Build your down payment. And let life develop a bit more. Houses come and go, and the dream one may change size and importance over the next couple years as you get those other financial aspects in better order. Enjoy these years as you grow together and develop your dreams, in all areas! Don’t plan a house for children you do not yet have. Life doesn’t always give us what we expect. Meanwhile, if you get those finances in top-notch shape, you will be ready for what you need and want when the time comes.

  67. Norm says:

    I feel like everything has been said at this point, so I’ll just add that I think you’re being taken for a ride on that roof cost. We moved into our flat roof house in 2009 and put on a new roof for all of $3,000. Granted, they just went on top of the old roof, and removing and doing a new one would probably cost twice as much, and we don’t have any skylights, but damn if I can’t figure out how they could possibly get to $65,000. I use CostHelper.com to check estimates like this, and yours is on the extreme high end.

  68. Dtuff says:

    Seems cheap to me overall – I’d say buy the dream home if you like it that much, and refocus from there.

  69. Jim says:

    As the proud owner of a ’95 Ford Ranger, I wholeheartedly recommend keeping the S-10. Yes it is unnecessary, and yes it costs more than renting. To me the cost is well worth the benefits.

    – I’ve found 75 minutes to be much shorter than it sounds when it includes loading a full truck load, driving home, unloading a full truck load, driving back, refueling, and returning. I don’t think it’s a scam, but I always found it to be stressful. And this is all assuming the rental truck is even available when I happen to be at the store. And assuming I manage to get the exact quantity of every single (large) item that I need on the first try.

    – Before I had the truck, I ripped weather stripping, stained seats, and broke the windshield of my Mazda sedan trying to cram in too many home improvement materials. Just because the rental truck is an option doesn’t mean you’ll use it.

    – In the two years I’ve owned the truck, it’s cost me about $700 in insurance, maintenance, registration, and opportunity cost. It’s saved me about $200 in delivery fees on appliances from the scratch and dent and a fancypants new chair. Plus of course I haven’t needed to rent a truck. My truck is a luxury, but not a particularly expensive one.

    – There are no sweeter words to any craigslist seller or freecycle poster than “I have a truck.” Nobody wants to sell or give away a piece of furniture only to find that the new owner can’t get it home.

    Best of luck!

  70. S.G. says:

    A few thoughts:

    Any plan to buy a house that starts with selling a car to produce the capital is probably a no.

    I’m interested in what you think is so important to renovate in your $107k house that is going to cost you about the same amount as your $279k + $65k roof. Somehow I think there are a lot of huge wishes on that list and not just necessities.

    It’s amazing how long it takes you to actually need more space with a kid. Since it sounds like you aren’t even pregnant yet, you are likely over 2 years away from needing a baby room. We aren’t attachment parents, but we kept the crib in our room until sleeping through the night for our own comfort in not walking across the house in the middle of the night.

    It sounds like you might be thinking about the whole situation as extremes. It’s between paying off the current house 100% before doing anything or taking on way more than you should for the finished house. Maybe you need to relax your current lifestyle a little so you feel some of the benefits NOW of having a mortgage that you can double pay on, because you won’t have that option if you buy the new house.

    Bottom line: the new house strikes me as a big risk. If anything happens you have no flexibility. Think about if that would weigh on you emotionally. I know it would weigh on me.

  71. Andrea says:

    Your current path puts you well on the way to FI, but I think buying the dream house would completely throw you off course. It doesn’t seem financially possible to buy the house and establish a family while also cutting back on work hours (unless the main breadwinner receives a significant pay increase). Have you created a budget that includes the increased costs that come with children (healthcare, food, diapers, clothes, college funds, life insurance, daycare, etc)? Full-time daycare is $8,000 to $12,000 per year per child; having two children would chew up the extra funds you’re currently using the pay down your existing mortgage.

    Also, we bought our house “knowing” that the roof needed to be replaced in 5 to 10 years. Less than six months later, we were interviewing contractors. Therefore, I would assume that the roof needs to be replaced within the first year or two. I wouldn’t be comfortable buying the house without the cash for the roof replacement and an additional $10,000 for repairs and “minor” issues that are bound to pop up in the first few years of ownership.

  72. Monica says:

    Hi,
    I have not red though al the comments, so hope this is not too repetitive. My main thoughts:
    1. Roth IRAs! Even my 17 year old has one!
    2. I would get a home equity line of credit (not a loan, just a line of credit) which can be used as a back up emergency fund if absolutely necessary (I have one for $50K the I have never touched, but it is there if something catastrophic happens and I need access to more cash than I keep in regular savings)
    3. I don’t think you should buy the dream home. I know it lovely and all, but 3000 square feet is really large. I live with two kids (teenage boys), one dog and two cats in a 1280 square foot , 3 bedroom 1 bath ranch house and we do just fine. We do have some “living space” in the basement – a carpeted rec room where boys watch TV and play Xbox, where I never go. It is not lovely and it is not heated so it does get cool down there in the winter (we live just outside of Boston), but they just wear a sweatshirt. I think 1500 square feet it totally doable and will cost less as far as heat, electricity, AC and furnishings. Housing prices where we live are very high (as the Fruglewoods know!) so our paticular house is worth between 750-800K and my mortgage is around 200K at the moment. I could afford more house, but have decided this is the right size for us.
    4. My only bathroom is the original 1952 bathroom. When we moved in 7 years ago I could not imagine actually LIVING with the bathroom as it was, but in the end, I just resurfaced the tub, painted the walls and cleaned it up, and you what? It is Fine! We are living perfectly well with one bath (as did the three other families who lived here before us). I would like to update it at some point, but this will be hard because it logistically it is hard to update a bath when it is the only one. So, I think you should keep living in your current house, fix it up as you go along- times change and so do your tastes, you may not have to do as much as you think to be happy.
    5. Begin to think about childcare costs if you will need to – where I live costs are generally $1800-2400 a month for an infant – probably not that much were you are, but likely still a significant cost.
    6. Agree with Mrs Frugalwoods as far a mortgage not being terrible debt to have.
    Good Luck!

  73. Karl Nelson says:

    I notice that you do not currently spend very much of your time in your current home. However, every home needs upkeep (cleaning, repairs, etc.). In a smaller house, this can be done in less time. My family of 5 lives in 1300 square feet. Without help, one adult can do a weekly cleaning of the house in one hour; with help (especially small help) this becomes more fun and takes about 90 minutes. I recommend living where you live (Which does not appear to be in your house), sleeping where your sleep (Which does appear to be in your current house), and spending your most valuable resource (time) where you value it most.

  74. Rhonda says:

    There is a lot of great advice but I thought I would chime in. We are blessed that our house of around 2800 square feet is paid for. I have two teenagers one at a private college. My advice is to stay where you are and work on minor updates. In the end it is more to have extra cash flow and not have heavy debt. After trying to work with my first one I saw greater benefits from staying at home. The teenage years have been expensive with sports and other activities. They both had part time jobs but braces cars and insurance add up fast. I think it means more to have cash flow less debt and a good emergency fund. My dad is a land developer and I have too many stories of people getting more house than they need. My mom had great advice growing up “When in doubt don’t”

  75. Aaron says:

    You guys mentioned that you are hardly ever home- parenting doesn’t necessarily change that. Even before they walked I carried my sons in a backpack wherever I went. My sons are 16 and 18 now and 95% of my memories are things we did outside of the home. Sure I remember rocking my son to sleep or giving them a bath, but the house literally never contributed a single thing other than providing shelter. Maybe it would be different if we had a place like the Frugalwoods but I would suggest the average suburban home really doesn’t matter much as long as the neighborhood and schools are good.

  76. Emmy says:

    So maybe this is more in the realm of product endorsement instead of financial advice, but you mention expensive skylights being one of the drawbacks of replacing the dream house roof. In my childhood home, my parents installed “solar tubes” into a bathroom with no windows and my bedroom, which didn’t have much light. These mirrored tubes brought more light into the rooms and (from what I understand) had less heat loss/chance leaks than a traditional skylight.

    I don’t know how feasible it is to put in a new roof that removes the skylights and instead puts in something like these “solar tubes,” but figured it was worth mentioning if the roof expense was a big drawback to choosing your dream home.

  77. Mary Kay says:

    First of all, this couple is doing fantastic financially!!! My thought is that this plan doesn’t seem very recession-proof. I have a similar profession (civil engineering) and I’m a bit older (44). I would seriously consider what will happen when the next recession hits (and it will). Are you positioned for an extended lay-off? In the late 90s/early 00s I was living in OR with my ex- and he was unemployed for two years straight (he worked in tech). Then, in 2008 with my current husband, his job in construction ended and there wasn’t anything for him to do (which is how he became a SAHD). At that time, in South Sacramento, there was a foreclosure on every street in our neighborhood. This is not an exaggeration.

    With that said, it’s my opinion that it’s okay for both husband and wife to work at the same firm. When the recession hits, it won’t really matter which firm you work for because everyone will be hit hard. Architecture, development, construction… these are some of the industries that are most affected and feel the recession first. Over the years I’ve worked with a lot of married couples (who work together) and it seems very beneficial for these couples to work together.

    One last thing – In a recession it would probably be difficult to sell the car for its full value so I wouldn’t count on that.

  78. SharonW says:

    Housing decisions are financial, until they are 100% emotional. It sounds like you don’t have strong emotional ties to your current house. All the numbers and thoughtful comments point to keeping what you have, and changing for focus for extra cash to meet your goals going forward. I bought a too large, older home, but it was the best value at the time, and well in my price range. We’ve spent 15 years updating it slowly with cash savings – electrical, plumbing (oh my got the plumbing!), earthquake retrofit, sealing and finishing the basement, adding bathroom, kitchen, etc. By doing the work slow and in the order that made the most sense, we’ve now got a dream home for less money than if we bought it in turnkey condition. I would prefer less space, but we can’t downsize without spending more than it’s worth… our mortgage is paid off. If you have trouble keeping up with the cleaning now, don’t add more space in your next house! If you make the emotional call and buy the dream house, you may find it to be house full of regret. Give yourselves permission to make changes (with cash) to your current house and put some memories into it that give you that emotional attachment you crave.

    Regardless of the house choice, please dump the extra car inventory! The CR-V could tow a cheap, used utility trailer if you need cargo space, and this seems to be a fine car for family vacations, too. The mustang and the truck would be my choices to liquidate, then put the CR-V on a low mileage insurance plan and don’t use it much.

    Frankly, no matter what you decide, it will be fine. You’re doing so well and paying attention to the details. Try to enjoy where you are now – I find that I spend so much time future planning that I’m not living for today.

  79. Wade says:

    3 x gross salary should be the max. This house with future renovations is too much at the current income levels.

    I would pass. Own your house, don’t let your home own you.

    • Christine says:

      Yes, that 65K for a roof terrifies me. You have so many choices and freedoms now, I would want to keep that going…. Save the pictures of this house for later, when you makeep renovations or build your own (and learn from this builder’s mistake about the roof!)

  80. 1. Buying a dream home isn’t wise at your age or any age. When you sell a house, there are certain transaction fees involved, the highest of which is realtor fees. Only realtors get rich when you sell a house and buy a new one. Also, there is the elusive dream, one that only pushes the envelope further and further as you get older. 1500 square feet is a huge space compared to most Countries in the world. Are the renovations really needed? Example, your bathroom shower has tiles that mildew is eating away at and are following out of the wall (my childhood home-real example). In that case, some renovation is needed, such as replacing said tiles, in order to make it back to functional. If the home just looks like something out of the “Jetson’s,” but functions well and has been maintained, NO renovations are necessary, IMO.
    2. Yes, it would be stretching your budget.
    3. No, absolutely not. One and done is my philosophy. We have lived in our only home since 2008. We never plan on moving, moving is expensive and only realtors get rich when you move. The buyer and seller both get hosed, IMO.
    4. Probably, but the one that caught my attention is the extra mortgage payments you are making. With all due respect, please stop. Instead, invest in a low cost index fund, say at vanguard, like VTI, and reinvest the dividends. The historical retursn of the SP500, since 1965, is 9.7% compounded!

    I hope this helps you. I am 40, not particularly frugal (compared to FW), but am getting ready to ER soon. I have opted to ask for a layoff with severance, and much to my pleasant delight, my boss agreed. I can’t wait to see what the future holds. The advice I give above is to get you to FI in the very fastest path. If that’s not your goal, my advice probably doesn’t apply.

  81. Laura says:

    Just wanted to give you both another avenue of thought. I second all things said about waiting to have kids first before moving, and until you fully outgrow your current home, as you will never be able to predict what they will get into or what could be a potential hazard in a home unless you see it through children’s eyes. Extra space is just more to clean. As long as you have somewhere to utilise as a toy room or space in your current home, with a bit of a garden that is safe you are good to go. Can I also just say freedom is so much more enjoyable than a large home that you probably won’t see very much of if you are working extra hard to pay it off and with lots of other hobbies and commitments you enjoy outside work. Why not use the skills you both have as architects, hold off on the dream home now and wait until you have a family and use that time to plan out and design your own home. Buy an old home on a piece of land that can be knocked down and replaced in your chosen area. That way it truly will be your dream home, with every fixture and fitting you feel would be necessary to your lives, (including a roof that is better in design and will not need fixed for many years to come) and to which you can add solar panels during construction. Congrats on being such savvy savers and all the best for the future.

    • Christine says:

      Agree with Laura’s post. There is always always another option. There will be another house, and you will love it even more … 3000 Sq feet is a lot of space. We’re happy in much less…and fans of Susanka design/architecture.

  82. Maya says:

    Is it possible that some expenses are missing from your breakdown? I don’t see anything for the following:
    – Home maintenance and repairs – surely there would be some costs? At a minimum, you should include the amount you need to save up every year to periodically pay for the big ticket items (roof, furnace/AC).
    – Car maintenance and repairs – you must have some costs, especially with four cars.
    – Entertainment, grooming – this can be small but is it really zero?
    – Travel – you mentioned that you like to go on road trips, but there is no travel cost such as hotels or food on the road.
    – Other – other expenses often come up. Have you tracked your spending for at least a year and seen how high this might be for you?

    If your actual expenses are higher than what the table shows, it may mean you have less flexibility than you think.

  83. Jenn says:

    There are so many great comments here already that this may get buried, but it’s not often I find myself in such a similar career situation as someone else so I hope this is helpful.

    I’m also 29 & work in marketing for the AEC industry, just like Elizabeth. Specific numbers are always helpful, so here goes: I started an entry-level marketing position working for a commercial general contractor in Atlanta in 2011 at $42k/year. My BIM coordinator best friend was even higher than that. Your skills will transfer to construction (or engineering) very easily. I don’t know the exact town you live in, but find your local SMPS chapter if you haven’t already — they always have great job postings in all the places I’ve lived.

    Working for a company you love is great, but maybe it’s time to test the market a little bit & see what other firms are paying these days. I wouldn’t be surprised if both of you could command at least $10k more each, even in a low cost of living area.

  84. Christine says:

    Hi! Late to the party here 🙂 Wow, you two are awesomenjoying at social responsibility. Another vote from me for building up a larger all-cash emergency fund. Also, as always, I strongly disagree with the advice to keep a mortgage (and that most people choose to hold a mortgage – not in older, wealthy age brackets!). We LOVE owning our home, and no amount of spreadsheet-investment number massaging is ever going to convince us otherwise. My mother, at 71, just paid off her mortgage this January. She is at 1M+ answer proud to owe nanda nothing zip to banks. Lol yes we are quite biased. It feels different. Best of luck to you both. You’re way ahead merely by paying attention.

  85. Mary in Maryalnd says:

    You don’t want a house with a complicated roof. Or dormer windows. Or anything other than two well-sloped surfaces.

  86. Kaylin says:

    DON’T DO IT! I live in a 1300 square foot home with my husband and 10 month old, it’s totally doable. Don’t fall into the trap of believing physical things will make you happy. You have a home in the town you want to live in with good jobs and each other. That’s enough. It’s also definitely not a good idea to buy a home that has such an expensive roof. Resale would be tough.

  87. KristyB says:

    As expats who have moved countries every 2-3 years for the past 18, we have lived in 8 homes since my now 13 year old was born. With each move we have had a very different list of must haves based on the ages of our children. We have also tried out a range of house sizes (1200-4500 sq ft) and worked out how much we realistically need (definitely not 4500!). It has been an interesting adventure ‘testing out’ all these different homes, but what we have learnt is that there is never one perfect house, even if you chose to self build – your priorities change with every passing year. So, I would say rather than chasing the ‘dream house’ that you stick with what works and is in your budget right now, and if / when your situations changes you look then for what is now important to you. Your future self will thank you when you look at your bank balance and the increased options available to you at that point financially.

  88. Mirabelle says:

    3000 sq ft is a lot of house to clean, heat and cool, and maintain. The intended offer sounds low-ball. The sellers may need to hit a certain number and with taking out realtor fees along with a low offer, it may not fly anyway. Which with my roll the dice personality would make me put in an offer if I really liked the property. However, I would pass on it as being too costly. Kids are costly too and sometimes priorities change once the kids come, and by then the dollars are tied up in the house. But let’s face it — most home purchases are emotionally driven. No right or wrong here, just learning experiences.

  89. Carol says:

    You two are off to an awesome start! From my experience and ripe old age of 51, I’d vote you choose the path with more financial freedom. If and when you grow your family, you can be flexible with reduced work hours or even some stay-at-home years. If and when you want to stop “working for the man” and build your own company, you’ll be able to fund the start of your business and support your family during the early months, when you might have little or no salary. If and when you want to do some generous charitable giving or help those future kids with college, you can. There are more options for you as your dreams and goals change if you’re not locked in to an oversized mortgage. Again, good job so far and best wishes!

  90. Nora says:

    Jack – sell the 2010 Mustang and buy a vintage Mustang that won’t depreciate. Then it is truly an emergency fund. 😉

    My husband has a 1969 Mustang – it’s not fuel efficient, practical in New England, or environmental friendly. However, when I ask him when he wants to retire, he says 75. He loves his job, loves being around the people he works with, and being home (without his toys) would be torture to him. It’s definitely not the path to financial independence but he doesn’t want to retire early.

    My husband and I are planning a similar switch – I have found our dream home (or at least an idea of one since there are similar in the area) and since I work from home, I’d love to make the switch for purely non-financial reasons. Our current home is lovely and practical but it lacks the character of many homes in our area.

    Only you and Elizabeth know what you want. There are a number of good ideas to financial independence but we chose not to make ourselves crazy getting there. We won’t be retired at 35 but we know what our personal goals and priorities are. They don’t need to match anyone else’s.

    • Nora says:

      Oh yes and build up a cash emergency fund. Then when you find that Mustang, you don’t need to feel guilty about it. But joking aside, having a large cash emergency fund has allowed us to purchase vintage cars from our non-emergency cash balances. It also allows me to be more comfortable as we start to make plans to open future businesses, etc.

  91. Elisabeth says:

    When we sold our previous home due to a finacial crisis, people asked how we were able to let go of our “forever dream home”…and that’s when I realized we were not selling our home, we were only selling a house. We took our home with us when we moved!

    As a new follower of this blog I find it very inspiring to read this post and all the comments that followed. Thank you so much to Jack and Elizabeth for sharing, the Frugalwoods for offering an outlet, and all the genuine and passionate readers out there who takes the time to respond!

  92. indigo says:

    Lots of good advice. I think I’d buy a house rather than renovate – after finishing renovating three houses… It is a lot of work.

    My only concern about this house is that it needs a $65,000 roof when a traditional roof of asphalt shingle can cost 10x less than that. Have you looked into the lifespan of a flat roof? Online it says it averages 10 years. Not sure if this applies to this house, but that is 1/4 of your house value. Heck of a lot to spend on a roof that generally doesn’t increase market value much.

    On top of spending the 65k, are you will to save an extra $6500 a year for a reserve fund for future roof costs each year in order to live in this particular house?

    The overall house value doesn’t seem to justify this disproportionate expense either initially or on an ongoing basis. Not sure if I am missing something but another nice 300k house is probably out there…

  93. Marie-Josée says:

    Wow. I will reiterate – what a great job both of you are doing. Congratulations! Here are my two cents: You are both focused on paying your mortgage fast, even though interest rates are at a record low rate and that the interest you are paying is tax deductible (I am Canadian and very jealous of this tax deduction). This speaks volumes to me. I take from this that you are debt averse and that you both deeply value financial freedom. I don’t think buying your dream house is a good idea from that perspective. It will be a financial burden and you both will be stressed by this. Since you both want children sometime in the future and you both clearly want to spend a lot of time with them, I would focus on making sure that you have the resources to make that happen. I don’t know if your current home can be renovated to suit your tastes, so whether you choose to stay there or purchase another home down the road, just make sure you can support your family on one salary and continue focusing on the great things in life: people, nature and expriences. And thanks for being so open and sharing the details of your financial life.

  94. Erin Mace says:

    As a single mom of 3 in the A/E industry, I hear ya. I can also tell you that work ethic of even the most open-minded A/E firm does not lend itself to the demands of family life. Ask yourself how much overtime you work, and whether the ethic is that a deadline takes priority (aka: most weeks are 45hrs, but 2-3x a year they bump up to 80+) While these sacrifices are NBD without kids, they become literal killers with a family.

    With that said, I foresee that the birth of a child would almost immediately put one or both of you in a situation where you would be looking at PT work, immediately. Granted, this was my experience, but I also FULLY expected to be a FT career woman, even with kids. I had no idea how kids would impact my priorities.

    I would strongly advise you to make certain that your current decisions allow for 1-1.5x salary, within the 2019 timeframe that you mention.

    I’m sorry, this sounds harsh (clearly, I’m on the E side of A/E), but you guys are on such a great path to FI/financial flexibility, that i don’t want you to sabotage all of the great work that you’ve done so far.

    Further ideas (provided you’re even still reading!)
    forego this home. you’re looking at $350k worth of mortgage/roofing repairs for a 3ksf home.
    i believe you know the timing isn’t right, in that you mention that you would eventually do solar, but talk about a new roof pretty immediately. you guys know better than me about the intelligence of doing a solar installation on a recently installed roof. additionally, you’d need to do angled bracing on the solar, which may need structural reinforcement
    look for another home, in the neighborhood you want, understanding that you can act as the PM for any renovations. I’ve known many architects who successfully DIY, and then sub only the work they actually need/don’t want to do themselves.
    look for that home after a baby has been born. your current home is large enough for a family of 3 (and bigger, if you don’t mind).

    you guys can (literally) afford to be patient.
    Good luck!!!

  95. Mike says:

    This is a great case study. One potential thing jumped out at me, that I did not see mentioned. Skill Trade. This is something that I want to be able to leverage more in my own future, by building more skills to trade with others.

    Both of these people are architects, which is a very valuable skill to trade to other home contractor types. What if you offer free architecture planning to someone in trade for free framing/plumbing/electrical work to remodel your current house, or another fixer upper house. As architects, you can see a fixer upper and plan for what it could become. By trading work with other people, you could renovate a house at a drastically reduced rate. Just by scavenging craigslist or putting ads out yourself.

    I was getting a massage one, and the massage therapist was telling me that half of her clients are for trades that she had made over the years. She traded 4 masses for 4 lightly used tires installed on her car in one instance. That conversation opened up a whole new world of possibilities for me. Maybe give that a go, and keep a lot of your hard earned cash to invest.

    • S.G. says:

      The only caveat with this for professionals is to check with your employer first. Many places where the output is intellectual property or licensed don’t want you working outside the company. Many are fine with it, but it would suck to lose your job over a side job.

  96. Jennifer says:

    Hi Frugalwoods,

    Not entirely following on why the recommendation is to pay off the car loan at the 1.5% rate when the flip recommendation on the house is NOT to pay it off faster (and it has a higher interest rate). If I think about both loans as just general loans, I would want to keep the lower rate loan going, no?

    Thanks!

    • Mrs. Frugalwoods says:

      Good question! I am not advising that they pay off the car loan ahead of schedule–just that they pay it off at the required rate/timeline. Indeed, there’s no reason to pay it (or the mortgage) off early.

  97. Ann says:

    I have been on a frugal journey for awhile now and I find that I am still learning from my mistakes at times. I agree with Mrs. Frugalwoods about your very tight savings account.
    It sounds as if you are a spreadsheet-and numbers couple so use your skills to your best advantage. Recently, I had my 14 year-old Toyota Corolla totaled unexpectedly. I purchased it used with low miles, and it has been my reliable ride for awhile, but suddenly I was without a car. Originally, I had a dual savings/buy a car goal that would have taken me at least another year to accomplish and leave my savings where I wanted them to be. When my car was gone, I could have bought the dream car cash-outright from my savings account (part of my original plan), but that would only have left a few thousand dollars left in my savings account.
    I love numbers and spreadsheets as well! I crunched the numbers several times and didn’t like the results. when I downsized my expectations to meet my current budget, I saw a figure that I could live with for a cash out-right purchase. My next step was to make a list of why I thought this particular car was my dream. The result was that I bought a car 4 years older than I had planned to, but it was still my dream car. Same make, model, and features with low miles and high reliability. this was a cash-outright purchase funded by my tax returns, a bonus from work and a debt repaid early by a relative who realized I need the money now. In the end, I got my dream car, my savings went down only $500, and I have no car loan. Its about a mixture of crunching the numbers and then asking yourself what makes something your “dream.” Mid-century Modern? Could you stay where you are and build an addition later when more rooms are needed and you have more savings?

  98. snowcanyon says:

    Presbyopia here- your website is great, but the font and grey color are cruel to the visually impaired. Any chance you might make them more readable? I bet it would be a crowd pleaser!

  99. Chris says:

    Congrats on having such sizable asseats already.
    I would forgo the dream house for the moment and focus on building wealth for the moment. You never know what lives throws your way! For now I’d sell all cars but the volt; it should be large enough even with one child, so you’d benefit from the low running cost for at least another three years. Reassess once the prospective child gets older. The money could fund an emergency found (for example stacked CDs). I’d also stop making additional payments to the mortgage or for the car; bot carry interest that is much lower than what the market brings on average, so by stashing this money e.g. In a vanguard account you’d likely benefit from the difference in interest (which will compound).
    I probably would only go after the dream house once the children are older an d I’d really need more space, but really, I grew up in a 1500sqft house and 4 people, and we had more space than we needed. By now I believe at less space prevent accumulation of stuff, and wasting time and money to take care of it – larger roof, large bill.

  100. Master Duke says:

    Great article and kudos to the courage shown by Jack and Jill to reach out to you!

    I would say no thank you to the house, say yes to building more wealth! First step definitely, the emergency fund! They are doing such a great job, but if there company went on a downturn and they were let go, the new house would not be something they would care about.

    Once they have the emergency fund and start saving more, then their masters degree has the potential to increase the earnings. They can then decide on investing those earnings or saving for the down payment, either way I think they should wait to be in a better position before doing the renovations or buying the new house. Put the wants in the long-term goals, start focusing on the emergency fund need!

  101. Ok, I have to know what city this is. I’m looking at retirement options and a place where I can get a MCM like that for under $300k is a must-see.

  102. Sarah says:

    Well done for thinking about it. You definitely can save a LOT more..agree cut back in food and clothing..maybe need to change lifestyle to help. Agree have cash for emergencies.. Agree needs change a lot for dream home with a kid (wait till kid turns 18 months to choose)….is it non open plan so you can save on heating etc? Either way buying is fine, agree renovating may be waste of time since you arent home

  103. As a fellow 28 year old I think it’s awesome how you guys are hustling on the side – I would echo some of the feedback from before talking about trying to monetize some of those side projects, but I also think that if you are going to focus on the projects now and you’re rarely at home, there’s very little need for your “dream home” at this stage in your life. Unless you’re taking a specific view on the real estate market in the area and feel that the home is underpriced relative to the competition, there WILL be other “dream homes” in a similar price range over the next few years. I really think that this is the time to focus completely on work and your other pursuits so that in 3-4 years you will be that much closer to FI and will have a better idea of what you can easily afford without compromising your longer term goals.

  104. LivingDebtFree says:

    That dream home will really limit your choices. Being tied to a big expensive house is not bad if you plan on being home all of the time, but for most people, the house is a place to eat, sleep and maybe hang out in the evenings. When I had my first child, I wanted to move into a larger home and my husband talked me out of it. He said that if one of us ever died (morbid I know) or if one of us lost our job, the other could remain there with kids and not be forced to move. This made sense to me and we stayed in our first home, had a total of four kids, and renovated as we could. This enabled me to work part time and be at home to raise our kids. Our home is not fancy. He refinished existing cabinets in the kitchen and bathrooms with basic finishes. The truth is it works out great as when you have four kids and many people coming in and out of the house, things can get damaged. (chipped sinks, paint, etc) When my kids all move out, I will fix what must be fixed and leave the rest. I want to have money for trips with my grand kids someday instead of the latest home finishes. It is funny how priorities change and how frugality can be joyful. Had we upgraded the house, I would not have spent all of this time being involved in my kids lives and having the luxury of fostering good relationships among the kids and helping them with homework, college applications, scholarships and activities. Looking back, I am so grateful not to have upgraded the house! Just my two cents! Best of luck to you both. You are doing fabulous!

  105. Lindsey says:

    I say go for the dream home. It sounds like it is in line with your goals and dreams and makes more sense.

  106. Katie says:

    I’ve been lurking for awhile and this is the first post that motivated me to leave a comment…

    As an architect, the minute I hear anyone with an architecture background say they’ve found their dream house, my gut says BUY IT! Make it Work! Ha, not the most responsible advice, especially with this crowd. However, a house is not just a house when it comes to our kind, so we don’t necessarily approach the subject with the same objectivity. I think you probably have to really decide whether retiring early or the house is more worth it! (The house would always more worth it for me… 😛 )

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