Climbed To The Top Of The Property Ladder And Feel No Happier

For those of you who are looking to upgrade homes, let me tell you a sad truth. I climbed to the top of the property ladder with my latest home purchase, and after five months, I feel no happier.

Whenever someone would congratulate me about my home purchase, I felt nothing. What's there to celebrate about when I've got more bills to pay? Would be my most common thought. Of course, I responded with a thanks instead.

Although I appreciate the extra space, I've had moments of dread regarding whether I did the right thing. My wife and kids were perfectly happy living in a smaller house. Why did I give up my financial independence for this?

With so many “surprise” capital calls, my liquidity has been sucked dry and I'm now living paycheck-to-paycheck. Eventually there will be distributions from my private funds. But that could occur years from now.

For twelve years, I felt low stress financially. But now, the stress is back as I strive to regain financial independence by the year 2029.

This post will delve into my two home-buying guides to aid you in making a well-informed decision if you're contemplating purchasing a nicer home.

Furthermore, despite my home purchase not necessarily contributing to increased happiness, there's a notable shift in one particular aspect. In the end, this newfound element might hold even more value than mere happiness.

Climbing The Property Ladder With My 30/30/3-5 Home Buying Rule

Since 2003, I've owned multiple homes, and I find it valuable to meticulously document my sentiments after each home purchase to assist others in preparing for their significant acquisitions. The psychological aspect plays a crucial role in financial decisions. Crunching numbers is essential, but experiencing the unknown is equally important to truly understand your emotions.

Despite the expectation of increased happiness with my recent home purchase, I find that I'm not as content as anticipated. Consequently, I want to reevaluate my home buying guides to determine if adjustments are necessary. The purpose of my home buying guides is to safeguard buyers and instill confidence in their purchases.

My 30/30/3 home buying rule states:

  • Spend no more than 30% of your gross income on a mortgage (you can include all housing related expenses in addition to the mortgage to be more conservative)
  • Put down 20% and have a 10% buffer in savings
  • Pay no more than 3X your household gross annual salary for a home, although I’ve stretched the multiple to 5X when rates were lower

If you follow at least two out of the three rules, you should be financially fine. The last thing you want to do is buy a home and feel stressed out.

However, now that I've gone through how I feel about my latest forever house purchase, I've changed my mind. If you want to truly feel great about your new home purchase, then it's important to fulfill ALL three rules, not just two.

I Fulfilled Only Two Out Of The Three Rules

For me, I'm spending no more than 30% of my gross income on a mortgage because I don't have one. I put 100% down by paying cash. I also paid within the 3X – 5X of gross annual household income for the house.

However, I don't have a 10% buffer (10% of the value of the home) in terms of liquidity, which is causing me stress. Instead, I've got a 1% buffer. If some big expense were to happen, I'm in trouble. I will have to borrow money or sell a property at the wrong time.

As a result, I'm focused on trying to save as much money as possible over the next three years to build back my liquidity. I'm also hoping there will be no more surprise capital calls for a while. Even though these are investments, they are also requirements. If I don’t meet the capital calls, I got blackballed. I’ve also got ongoing property taxes and maintenance expenses to pay.

For those of you who want to climb to the top of the property ladder and feel great, I strongly recommend you fulfill all three rules before buying. I'd also stick to paying no more than 3X your annual household income for a home too.

You have to be supremely confident in your income and the health of the real estate market to pay 5X your annual household income. Don't let real estate FOMO make you buy a home you cannot comfortably afford.

Climbing The Property Ladder With My Net Worth Home Buying Guide

My other home buying guide is to ideally keep your primary residence purchase equal to 30% or less of your total net worth. This net worth buying guide is mostly for older (40+) and experienced homebuyers looking to buy their forever home.

By limiting the home's purchase price to no more than 30% of your overall net worth, you are well diversified and have enough investments outside of your home to feel more financially free. You might not be completely financially independent with 70%+ of your net worth invested, but you're at least heading in the right direction.

net worth home-buying guide for climbing to the top of the property ladder

I spent about 29% of my net worth on my home. Therefore, I should be feeling relatively stress free if 30% or less is the appropriate recommended limit.

However, because I utilized ~70% of my taxable stock and bond portfolio to pay cash for the house, I have seriously compromised my passive income generation. In addition, my liquidity is low. As a result, I want to find a job again to make up for the shortfall.

25% Of Net Worth Is A More Appropriate Limit

To feel great about your new forever home purchase, you may want to keep its purchase value equal to 25% of your net worth or less. If you do, you likely won't have much financial worry because 75%+ of your net worth will either be generating enough passive income or is more easily tappable in case of an emergency.

For example, if your net worth is $3 million, you may want to limit your next home purchase to $750,000, instead of $900,000. If your net worth is $10 million, a $2.5 million home may be more appropriate instead of $3 million.

Whatever home you want to buy, multiply it by 4 to get your target net worth figure. If your net worth isn't at the target or greater, then don't buy the forever home until it gets there. At the very least, your net worth should be 3.4X greater than the home you want to buy.

If you have already purchased your forever home, then you can find out when you'll finally feel more at ease by multiplying the purchase price by 3.4-4.

A Primary Residence Equal To 10% Of Net Worth Feels Too Stingy

In my net worth buying guide, I also suggest aiming to have your primary residence eventually account for only 10% of your net worth or less.

However, I am now uncertain if this is a realistic goal. Achieving this goal might lead to a sense of living too frugally, potentially hindering the pursuit of happiness.

Consider living in a $300,000 home with a $3 million net worth; this might not strike a balanced lifestyle. Given the increased time spent at home, it makes sense to live in the nicest home affordable.

I would personally feel dissatisfied living in the home we bought in 2014. While it's currently valued at about 10% of our net worth, it isn't sufficient for our family of four. Both my wife and I work from home, so we decided to rent it out for semi-passive income.

Rather than adhering strictly to the 10% goal, consider flipping it around and using it as motivation to build a net worth equal to 10 times the value of your primary residence. For example, if you currently reside in a $750,000 house, strive to achieve a $7.5 million net worth before you die.

Of course, you don't have to go to this extreme. But if you're someone who enjoys a financial challenge, this is a good one to consider.

The Net Worth Guide Is Different For First-time Homebuyers

For first-time homebuyers, you will most likely spend way more than 100% of your net worth on the purchase price of a home. For example, you might have a net worth of $100,000 and buy a $400,000 home. That's fine if you follow my 30/30/3 home buying rule and have income upside, as most first-time homebuyers do.

When you're younger and have a lot of energy left to grind in your career, you tend to have less fear. But as you get wealthier and older, your energy will fade.

If you decide to retire early or take things easier, having your home equal to more than 50% of your net worth is going to bring about unnecessary stress, especially if you still have a mortgage.

Even if you don't have a mortgage, due to your net worth composition, you might not be able to generate enough passive income to cover your living expenses. Hence, I strongly suggest following both of my home-buying guides.

Hedonic Adaptation Happens Quickly With Homeownership

As you can tell from my home buying guides, getting to the top of the property ladder is both subjective and objective. They are based on my experience owning multiple homes since 2003, meticulously recording my journey, and financial logic.

To me, the top of the property ladder is owning a home worth 5X your annual household income or 30% of your net worth. The farther you push these limits, the more likely you’ll be overly stressed out and experience buyer's remorse.

If you believe that purchasing a luxurious house will bring you happiness, that feeling is unlikely to last for more than six months. Hedonic adaptation occurs swiftly with homeownership, just as it does with buying anything nice or getting a raise or a promotion.

Once you opt for a larger home or a newly remodeled home, it becomes challenging to imagine living in a smaller or older place, especially if you have the same number of people in your home. This hedonic adaption is also the reason why you should travel as cheaply as possible when you’re young. Couch surfing is no longer appealing after age 40.

Despite not experiencing increased happiness with my new home, I do have one positive emotion: a heightened sense of satisfaction.

Perhaps, Satisfaction Trumps Happiness

Since my middle school days, the dream of owning a hillside abode had my heart. Fast forward 30 years, and voila I've got one—a testament to the grind paying off, filling me with an undeniable sense of satisfaction.

What adds to this satisfaction? The fact that, as a dad, I didn't shy away from going all in and securing the nicest home I could manage while the little ones are still, well, little. No more hoarding funds here—just a calculated plunge into creating the best life possible for my family.

While I was looking for tenants to rent out my old house, I met a father of two teenage boys. He was a partner at a media agency who likely made over $500,000 a year. He wanted to move his family into my home but his wife, who also works, wouldn't let him. Instead, they remained in their 50% smaller, three-bedroom apartment to save money.

I get the whole money-saving ethos—I've been stuck doing so since 1999. But you know what? I'm also stoked that I mustered the courage to shake off my frugal shackles and embrace decumulation. This significant leap feels downright satisfying.

So many of us in the FIRE community take saving money to unhealthy extremes. We suffer from frugality disease because we’re so accustomed to saving the majority of our income for long periods of time.

Final Sense Of Satisfaction From The Home Purchase

After putting the finishing touches on this post, I hosted my parents and sister at my place for a solid five nights and six days. Having seven people under one roof can be challenging!

Unexpectedly, it turned out to be the best visit ever, thanks to one small yet crucial detail: everyone had their own en suite bathroom with bidets, dialing up the privacy and comfort.

In the past, I've noticed tension creeping in around the fourth day of my parents' visits as our differing habits started to grate on each other. Not this time around. We could've easily played housemates for a whole week or maybe even forever.

As my parents gracefully age, having this larger abode also gives me the flexibility to take care of them, provided they're open to moving in. The same goes for my in-laws.

Happiness might be a fickle friend, but the sensation of satisfaction appears to be more enduring. For me, satisfaction is that tranquil feeling that comes from giving it your all, almost regardless of the outcome.

So, perhaps the main objective when upgrading to a nicer house isn't about pursuing happiness. It's about finding satisfaction. When you can return to a wonderful home after a hard day's work, it's reassuring to know you've done everything possible to provide for your family.

Reader Questions and Suggestions

Have you climbed to the top of the property ladder before? If so, were you happier after you bought a new house? If so, how long did this happiness last? Do you feel more satisfied instead? What percentage of your net worth do you think is the maximum one should spend on a nice home?

If you're looking to invest in real estate passively, check out Fundrise. Fundrise manages private real estate funds that predominantly invests in the Sunbelt region where valuations are lower and yields are higher. Its focus is on residential and industrial commercial real estate to help investors diversify and earn passive returns. 

Fundrise currently manages over $3.5 billion for over 500,000 investors. I've invested $954,000 in several private real estate funds since 2016 to diversify my investments and make more money passively. After I had children, I no longer wanted to manage as many rental properties. 


Fundrise is a sponsor of Financial Samurai and Financial Samurai is an investor in Fundrise.

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66 thoughts on “Climbed To The Top Of The Property Ladder And Feel No Happier”

  1. Finance Ronin

    I had no idea you paid cash for your house. I suppose it’s tough to justify carrying at 7% mortgage at the moment. To me, more home = more stress, but kudos to you if more home = more satisfaction.
    One of my real estate rules is always maximize leverage. I’ve had my home for 21. It’s a modest 3 bd/2ba home but I’ve never felt the need to upgrade. I am a serial refinancer, but I’ve stopped due to the interest rate hikes. I regret not borrowing more. I’m stuck with only 50% leverage at the moment. I also own a lot of investment real estate.
    Having a bigger mortgage helps with your 25% net worth rule. I think most people make the mistake of having too much of their net worth stuck in their primary residence. Paying off your 3% or 4% (or even 5%) mortgage early was one of the worst “investments” you could have made. May last mortgage refi was a 2.375% 10 year interest only cash out, remaining 20 years at the same interest rate. As I’m fond of saying, “this is my last refi”.

    1. Yeah, at a certain age and stage of wealth, the desire to leverage to make max return fades. Instead, the desire for security and financial simplicity increases, although, having another rental property is not simplifying!

  2. Carrie Nulan

    Love this article. Keep doing what you are doing. I always look forward to your posts as they have helped me through the years immensely. In this day & age of constant doom n gloom articles for clicks it’s very refreshing to read authentic discussions on such presonal financial matters. Getting the reader to think & ponder several ways to consider such an impactful decision can be life -changing. Now whether it’s a good decision or bad one is subject to the individuals & their circumstances. Every person’s situation is different & I like that you look at it from all angles. One major thing I take away from reading all your posts is that what works best for your family & where you are in life is different from person to person.
    Also Love reading the comments & generating good discussions.

    Like that you welcome feedback & ask questions to the readers, getting others viewpoints.

    I’ve enjoyed reading your book as well. Thank for sharing your experience with us. Always wish you & your family all the best.

    1. Sold Treasury bonds first, then losing stocks, then winning stocks. Tried to minimize capital gains tax.

      Selling Treasuries was easy, despite the attractive rate, because they were always earmarked for a purchase of some type.

  3. Frugle minded

    Some of the comments are really interesting especially the ones trying to figure out Sam’s NW.

    We are both in early 60s, and we are struggling to decide whether it is worthwhile to rebuild our house. We bought our house 20+ years ago for close to $1m and now it is worth over $4m, but it is nothing fancy given it is located in Bay Area. Kids are grown and out of the house.
    We have very little mortgage left and can easily pay off the balance. Additionally, the value of the current house is a small percentage of our NW and we can easily afford the cost to rebuild. However, we spoke to a builder yesterday and he sort of talked us out of it.. We could build a really nice big home for $4m and will end up with FMV about $10m but it would be a stressful two year journal.. There was a house sold on the same street two months ago for $11m so there is a market for high end homes in my neighborhood. Most of the homes sold recently in the $4m+ range all got torn down and are be rebuilt. The question is whether to go through the rebuilding process and end up with extra $2m gain and also enjoy the brand new homes for a few years or just have a more relaxed and enjoyable retirement once my spouse retires in the next three years.

  4. Got my “dream” home three years ago. After the kids were raised we sold our home in the city and moved further out, getting more acres, 2 more bedrooms, 1,000 more square footage for the same price. We love it. Kids are now gone but they come back to visit and will have grandkids someday probably. No regrets raising them in a small house. They never seemed to care and loved our house. We never “got at eachother” or felt on top of eachother. By they time they were teenagers they were already rarely home anyway. The neighborhood and “action” in close proximity in the city seem to substitute for needing a big house.

    I tossed around keeping the former house and renting it but glad I didn’t. Just more to stress and think about and keep up. Paid cash from the house sale for this house – no mortgage.

    So there are ways to get your dream house and not add stress if greed doesn’t take over. And I think having more room for while the kids are around – for them – sounds great in theory but I don’t think kids care that much. They (at least mine) care much more about other things, like friends, and your relationship with them, their play or their baseball game. Of our friends at that time, never heard one of them say their kids wanted a bigger house so they got it – mostly they wanted it for themselves. And that is fine too.

      1. Based on your statements. You say in the article “Blew up my passive income” that your passive income from stocks, mainly SP500, is 5,600K p/a. Assuming 1.44% yield that would put your investments in stocks to approx. 1.083M$. You state in the post “How I’d invest 250K$” that your stock investments are approx. 15% of your NW. That would make your NW to be around 7M$ give or take. You state here that your house is 30% of your NW so that makes your house 2.1M$.

        1. Thanks for sharing. There is a difference between 15% in stocks before and after purchase of the house. And bonds too.

          How much is your house and what percentage of your net worth is it? Do you feel OK with how much you’ve spent?

          1. If you make 15,600$ p/a from stock with 1.4% yield and your stocks are 15% of your NW INCLUDING your home than 7M$ would be your NW. If it is 15% elexcluding your home and your home is 29% of your net worth your NW is like 10M$ and the house is 2.9M$. Otherwise something wrong with numbers and statements you provided in other articles.

            1. Hi Devrim, love the obsession!

              Please don’t feel shy sharing about your housing situation. We’re all trying to gain perspective and learn from others.

              1. 10 years ago i bought the biggest and most expensive house that i could afford as i have a top 1% East Coast level income which allowed me to take the risk and was probably 80% of my NW and helped that i lived in Switzerland where prices were more expensive.

                I am glad i did as the house was brand new, in a prime location and interest was quite low i.e. 2.15%. During this time my investments grew and now the house is now slightly less than 30% of my NW.

                I would argue that the table should be adjusted for age and circumstances i.e. if you are young and employed and the interest rate is low, one can take a much bigger risk and go for a property 4-5 times NW which may be very difficult to afford initially but quite easy over the years due to inflation eroding the interest payments while the price of the house going up while if retired and older, a house of 30% of net worth guidance may make more sense. Except for my initial house, i do not like to finance my Real Estate purchases with more than 3-4% of my stock per year ( i dont do bonds) as i do not want to greatly impact the compounding which i am able to do around 13-14% growth with quite an aggressive portfolio of 50% single stock exposure and remaining a mix of S&P and Nasdaq. I try to achieve a 1/1: stock / R E ratio and i am fine if stock is higher but should not be below 1/1.

                If market drops, i am able to add more to investments due to my employment so i welcome it during my accumulation phase and sometimes it recovers so quickly that i can not add as much as i want. I intend to continue this aggressive strategy having learned a lot from Sam’s article “The two levels of rich” where i saw that except for the top 0.1% the remaining population is not able to effectively compound which i think is (1) due to being more risk averse by diversifying and perhaps (2) disrupting the compounding with big purchases. What we think is risky (say owning Nasdaq or a single S&P 500 exposure) is actually not very risky if you look at the top 0.1% portfolio who may be exposed by 40-60% to even off the market businesses. Even when i stop working i plan to be aggressive with being overweight on the stock and will try to reach escape velocity where even if the market dips by 50% for a given period, i hope to have so much more than otherwise so will continue to hold on like the top 0.1% is doing. Hope this helps.

                1. Thanks for the color. May I ask how old you are and whether you have family?

                  With a primary residence now under 30% of your net worth, do you have the same urge to work as hard?

                  If you could share your net worth or net worth range as well, that would be helpful. I’m curious to know what drives people with high net worths to continue working so hard and investing so much.

                2. I am 49 imagine an upscale (not top 1%) house in an affluent east coast town. Yes i have kids. What keeps me going is the unknown. I dont know how life is with more wealth. Probably it is the same crap as now and a disappointment in thay but i want to experience it for myself. I think this is number 1 driver for also very very wealthy. They dont know what the next level will feel Iike. I can only extrapolate that it could mostly be dissatisfaction but i want to see.

    1. My educated guess would be $6.0 – 7.5 M. $2.1 would buy a run-down shack in SF… :-D

      Sam is the Financial Samurai, he is likely to have had more than $10M in stocks and bonds, possibly much more, and he said he sold off 70%.

      1. Does not jive with the numbers he provides as explained. Your 6-7M$ house number suggests a 20-25M$ NW which if he had, would never write about the need to go back to work. Also he says he retired with 3M$ in 2012 with say 1M$ in real estate. Even if he invested all 2M$ in Nasdaq he would have had approx. 14-16M$ in NW, which we know he did not as he shies away from heavy stock market investments. I think he was able to only double his net worth to 7M$ with sole focus on passive income. He is a frugal guy 2.1M$ may seem a lot for him or he needs to change the numbers he provides in other articles.

        1. Hi Devrim, I wasn’t looking to get into the weeds, would have to re-read a lot of articles to do that. But Sam was already looking into buying a $4.5 M house in 2018, and he did not consider that his forever home. Reasonable to think his forever home is priced higher, especially 6 years later – SF property values increased a lot during this period.

          I think the main number you’ve overlooked is that most of his income is not passive. I’m guessing this blog generates over $500k a year (and has a valuation several times that), and he invests much of that, so his stock holdings would be much higher than when he retired. He also has a book deal. As a “retiree”, a fiscal conservative, and to generate more views, he says he blew up his passive income by $150k a year and has a shortfall now. I think the shortfall is based only on passive income, his active income from the blog and book deal would easily cover the shortfall.

          I also think his investments have done well – he invested in leveraged real estate in SF during an incredible real estate boom. That probably outperformed S&P, maybe not Nasdaq but close. I put his net worth between $15-$22.5 M, including his business. :-D

          1. Hah! Love it. That would be sweet if I earned so much here. Just ask yourself this, have you ever clicked on an ad, or picked up a copy of Buy This Not That or How to Engineer Your Layoff to support my work over the years? Chances are no, and I don’t blame you. And if you did, you’re part of a tiny minority and thanks!

            We’re in a world where everybody wants everything for free, but aren’t willing to work for free themselves. It’s a conundrum!

            But I appreciate your readership and faith in me. Writers really don’t make much.

            Remind me again about your occupation and financial situation? I think you said you’re in the 8 figure and still working? Thanks

            1. Hi, Sam! I left work several years before you wrote How to Engineer Your Layoff or I would have been all over that!

              I have watched you steward finances over the years and have total faith in you. Several years back you were championing how lucrative blogging was and you provided some jaw-dropping numbers, but perhaps it included both active and passive income and consulting opportunities arising from blogging. My guess at income might be a little high but surely you have added a lot to investments over the years. Owning 4-5 properties in prime areas is testament to that.

              I used to be in engineering. Currently at ultra level, but my claim to fame is that I diversified out of an equity position that would now be in the mid 10 digits :-D

              I’ve been reading more articles here recently to get some insights (mental and financial) into upsizing a home. Thank you for your content!

          2. Joe i am only having fun i am a corp finance guy and i do this automatically as i was reading the articles last couple weeks. He actually has published his passive income from all sources in the article ‘blew up my passive income” his annual passive is 260K$ including his business after the purchase of his home as stocks and bonds are quite low. So assuming 3.5% average yield (which is actually low but helps in over estimating his NW), that would put is NW at 7.4M$ including his business and excluding the house which does not generate any income. His ‘alternate businesses’ only brings $76K which by this calc is valued at around 2.1M$ and that is a very healthy valuation. He may indeed be misleading by not quoting the income from this web site but then his claim that he is $141,500 short is not valid and would be outright misleading as income is income. If he is not misleading, then the math is right, his NW including his house is approx. 10M$ with very generous assumptions for the value of his book etc. but i agree with you i have not seen the numbers from this site there but his claim of being short would not be right. Sam just tell us who is closer Joe or me?

            1. Yep, I get where you are coming from based on the numbers you put out. But in the “blow-up” chart he only included the passive income from Engineer Your Layoff, and didn’t include income from Google AdSense, affiliate partnerships, consulting, and book deal. His business is worth considerably more than a multiple of the Layoff book. While 3.5% overall yield would generally be considered low, I think his yield is much lower due to investments in high tech stocks (no yield), and in SF rental properties (very low yield). His gains are likely made from appreciation not yield.

              I’m sticking with my net worth guess… all in fun of course. 30% primary home, 25-30% investment real estate, 15-20% stocks and bonds after selling off ~70%, 20-25% business (valuation change over the years due to YouTube and TikTok popularity). :-D

            2. Hi Devrim,

              To stay in topic, how much of your net worth is your primary residence worth?

              As a corporate finance guy, is they banking? How long more do you plan to work and what age are you?

  5. Our primary home price is equal to about 20% of our net worth. I think that’s about perfect. We’re renting half of it out, though. In a year, we’ll take over the whole place.
    We used to have a big house, but I didn’t like it. It was too much space for two people.
    People rarely came to visit. The guest rooms weren’t used much.
    Why buy a big house to accommodate guests for just a few days per year? Easier to get them a hotel room.

    1. Finance Ronin

      We bought our house years ago using most of our non-retirement wealth on the down payment, so maybe 70% of our NW. It is 3bd/2ba, 2000 sq ft and likely the largest house I’ll ever live in. 21 years later, it is 5% of our NW. Houses (and spouses) are expensive to continually upgrade so I stayed put.
      I’m a slightly older than you and Sam. I’ve upgraded iPads, sports cars, mattresses, etc., and they have been benefit neutral, i.e., I felt some short-lived satisfaction but only just enough to offset the cost. The only recent upgrade that still provides some satisfaction is the memory of paying for a business class upgrade on a 16 hour Qatar Airways flight which was priced as a last minute deal. It might have been $1600 or $2400 extra–uncharacteristically, I can’t remember. I just remember the lie flat seats, the cubicle doors, the medium screen TV, smoothie drinks, and the joy of my teenage daughter.
      I’m happy for Sam that he bought the the house of his dreams and he is creating some good memories. I wouldn’t do that if that meant the tradeoff was abandoning my early/semi-retirement lifestyle. As early retirees and people of means, our most precious resource is our time. I don’t place enough value on my time on the smalls things, e.g., I circle the block for a cheap parking spot or fix things myself instead of calling a repair person. However, on the big things (like returning to a full-time job vs. time with my family), time wins.
      BTW, I think it would be really interesting if Sam ran a poll to guess his net worth. I don’t expect him to reveal the truth, but it would be interesting to see what his readers thinks. As a former engineer, consultant and finance person who has thoroughly the crunched the data using AI combing through Sam’s posts over the last 12 years, my vote is for “bajillionaire”.

      1. It may be hard to fathom giving up freedom for a nicer house. But I don’t think the sacrifice will be for more than 5 years. After you’ve spent 12 years more or less free, it’s nice to change things up too.

        Besides, the satisfaction gained from providing is greater than the loss of freedom, at the moment.

  6. Thanks for the post. Really enjoyed it and can relate…I had commented a few months ago, but I am in a similar position, albeit much more “irresponsible.“

    Like you, I have two young kids…I am building a home and spending around $3.6M all in… While my net worth (on paper) will go up as I believe the value of the house will be (conservatively) to $4.4ish once it is complete… My expenses are going vertical…Even after putting $1 million down, my housing nut will be around $250K annually and with my other non-housing expenses, I will basically be at wash with my after tax-income.

    I have been grinding for 15 years, I have saved 4.7Mish (1M of which will go towards house downpayment)… it seems completely irresponsible to basically spend this much on a home, where, my after taxes cash flow will essentially offset my expenses, and I will not save a penny for the foreseeable future… I am spending just over five times my annual gross income, I’ll be at I don’t have any other debt and live in a tax-free state. While I am constructive on my income, moving forward, this is a massive number.

    However, I can always flip the house down the road, if it becomes too much to handle, refinance if/when rates come in, I am bullish on my income and there will be An inheritance 20+ years from now.

    I’m just essentially living in the moment even though I am spending a very inappropriate amount on the home relative to my income and breaking your house buying principal rules.

    I hope I can enjoy the house once it is built and not be stressing about literally living paycheck to paycheck… it is already stressful and I am routinely perusing Zillow at values daily… I am just caught up in the fact that I will have a meaningful amount of equity by building.

    1. When will your house be completed? Please let me know about 3-6 months after move in how you feel and such.

      What is it that you do for a living? And can you pull the income vertical by having your wife work/work more?

      It feels good to add value with your home build. Also, it’s great you have zero debt. However, I think feeling anxiety after plopping down that $1 million down payment and then using 100% of your after-tax cash flow to survive WILL feel stressful. But if you can recognize this stress now, know that things will also GET BETTER every month you “survive” and build back more liquidity.

      I feel better today, in month 5, than I did in month one. Every month provides more relief.

      1. I appreciate the quick response. We likely will not be done for another 12 to 18 months…process just started. My income is reasonably predictable and should go up over time as I work for a small business and my ownership is scheduled to gradually increase over the next decade… I should double my income a decade from now..:my wife’s income is modest.
        10 years ago, I would never have though to go down this route and was more inclined for the retire early path. However, I enjoy what I do and just have to be OK with grinding for the foreseeable future. With that being said, I often dream about what it would be like to be completely free. I am also completely annihilating/failing your home buying rules….i suppose, if it gets too much, I can always sell and downsize. I just don’t like the fact that I’m already feeling a great deal of stress… I have always lived meaningfully below my means.
        I am just trying to zoom out as hard as it is… My net worth/income should continue to creep higher as the years go on, I’m gaining essentially 1 million on paper once the house is complete and if I am content working, what is the need to save if I am already worth 5ish with a future inheritance when I’m gray/old.

        1. I’d use the next 12-18 months to save as much as possible then. It’s actually nice you have this long time buffer to save.

          My only concern is you mentioning “inheritance” multiple times in this comment and in the past. I would do your best to cut that out of your expectations. It is out of your control.

        2. Very good point. I will tell my wife to watch the spending!
          I should be able to save another $300Kish until my expenses really start to ramp… you are absolutely right regarding the inheritance. Honestly, it isn’t something I have ever thought about in the past. Perhaps, given my current state of my mind, I have used that to help justify my decision. I am certainly not counting on it, I just am unsure what the incremental impact is in saving over the coming years if I plan on working and already have the 5ish that should grow over time as well. I am candidly nervous and have never spent so much time in my head about anything. I really do not want it to adversely impact my quality of life, only have so many years while I am young.

  7. Thanks for this great post! It’s given me a lot to think about as we start planning to purchase our “forever” home in the next couple of years (or at least the K-12 home). We’ve definitely been living with a very frugal / minimalist mindset and this next house purchase seems like the right situation to prioritize overall well-being and happiness. Just need to stay realistic about how financial anxiety might fit into that…

  8. Damn Millennial

    This is interesting, seems like life is always pulling us forward as far as the hedonic treadmill.

    It is silly to neglect yourself and family of the nicest home possible since money is there to be enjoyed. At the same time though if you trap yourself in the feeling of perpetual stress then those years with your family are not as enjoyable either.

    Having a family in itself is a huge challenge in todays expensive world. Daycare costs for us are currently higher then our mortgage we locked in with a 3% rate in 2021. My wife wants to be in a different school district in the future but that means selling and buying and the purchase price is anywhere from $1-$1.5M. We bought the current house for $750K and it would probably sell for $850K. Roughly $250K equity in it.

    We would be in the limits of your three rules but I hate the idea of devoting so much of our income to a house. I enjoy loading the investment accounts and guilt free spending the excess on trips and having fun. At the end of the day a house is just a house.

    Maybe I will feel different if the investments keep growing and we are even more comfortable in 3 years. We are still shy of a $2M networth at $1.7M. With two young kids I firmly feel all the pressures of money and life turning 34 next month.

    1. How much does your wife want you to move to the different school district and buy the nicer home? I was just telling my friend, whose wife is pregnant, they probably should buy a home before the baby comes. When it does, the desire to provide the best can grow irrationally high

      Using my 30% guide for net worth, it puts you at a $510,000 house. If your house is worth $850,000, then it would be financially prudent to enjoy it for longer. A $1.5 million house with a $1.7 million net worth is very aggressive, even if you do qualify based on the 30/30/3 rule.

      Everybody is different though. I left work at 34 b/c I was burned out and disliked my work. If you are still enjoying your work, then you can take more risk.

      Going from $850K to $1 million home won’t feel like that big of an expense though.

  9. Can confirm.

    We just moved into a large, beautiful new home a year ago – hedonic adaptation quickly set in but the increased satisfaction is still there. Interestingly enough, the satisfaction is mainly from the new friends we have met and all the fun stuff we do together. This happened because the neighborhood has a happy hour every Friday in the summer which made it super easy to get to know the neighbors and become friends.

    Because of this experience, I think the social credits or debits of where you live are actually more important than the real estate technicals….but no one seems to be talking about this.

    1. Friday happy hour sounds great! Our neighborhood has a clubhouse. I’ll ask them if they host such gatherings too.

      Lots more folks just keep to themselves nowadays. Kinda sad. I’m going to try and be more open and inviting.

  10. Long time reader here. I can speak on living the dream in a small house. I live in a 850 square ft home with my wife and child, as we had to downsize from our 3000 sq ft home due to burnout from my big high paying job. We did manage to keep our modest oceanfront cottage, that we will retire to in a few years. We lived in the big house, but I don’t miss the huge bills, and constantly filling it with stuff. We made a conscious move to downsize to match our much reduced income. 13 years later, I’m happy in my second career, and set to retire in a few years. When I retire, we will sell our small city house, and move to the cottage on the ocean, which is about 1200 sq feet, so not big, yet comfortable. More importantly, we are happy with our small houses, small jobs, and small car. We are healthy, recovering from burnout, and looking forward to retirement. Projecting out our financials in retirement, here is our current picture:
    *Retirement age: 62-65 (depending on investment returns)
    *Retirement income: $101,900/year (pensions indexed to inflation)
    *Estate Remaining: $601,250
    *Stocks: $64,000

    1. It’s great that you took action to adjust to your work endurance and income. That’s key, taking action instead of just being stuck in a suboptimal situation.

      The desire to move to a cottage on the ocean sounds great! What did you burn out from and how old is your child? A $101,900 lifetime pension is amazing. Congrats!

      1. Thanks! I burned out from being a medical doctor, and my child is 14. In a little over 3 years, she graduates, and my wife retires, we sell the city house, and I wind down at work for several more years. I started reading your blog when I quit medicine, so thanks for all the financial and life hacks!

  11. What percent of changing the rule from 3x to 3-5x gross salary was justified, and what percent was shaping it to suit your situation?

      1. My percentage is what was written in BTNT: 3x. The 3rd point ensures you don’t take on too much principal, no? It doesn’t seem reasonable to me to raise the limit because rate fluctuate or because homes are more expensive these days.

        That’s contrary to the rule’s purpose.

  12. Such a great post– and more relevant in our post-pandemic life. In 2020 we bought a MUCH bigger house so my 85 year old mother could move in with us. It’s way more house than we need but my mother has a full in-law apartment with a private entrance, separate kitchen, laundry, etc. The idea of sharing space with family should be a consideration for any of us who have small kids and aging parents. I want my mother to spend time with my kid, but I don’t want the stress that comes with sharing a kitchen or any living spaces with her. We live in the suburbs of Charlotte NC where a 5,000 sf house in a nice suburb was still affordable in 2020 and our interest rate is only 3%. The house has appreciated quite a bit in 4 years turning it into one of the best investments I’ve ever made (I own 3 other rental properties in NC). I had no idea that doing something selfless for my elderly mother would bring me so much financial satisfaction.

  13. I moved a lot until age 9 when I was growing up. Then I stayed in the same home until I left for college. As an adult I’ve moved quite a lot too but I’m finally settled and it feels great.

    Thanks for sharing such real thoughts and feelings about your experience. Satisfaction is huge. I’ve found that when I feel satisfied and/or that I’ve made progress, my happiness naturally goes up. Glad to hear your family’s visit went so well.

  14. Have the constant desire to do so in Cali but feel like there is always something getting in the way. First, the Great Recession brought new construction to a standstill for years for which we have never recovered. Then, COVID hit and the fallout from the high interest rates reduced new construction again. We have family in Texas and it seems like they have endless option to upgrade to new construction at the top of the ladder. Not the case in NorCal. Most of the new construction is cookie cutter, run of the mill tract homes. Perhaps buying a piece of property and building custom is the way but that seems stressful. We are also limited by a lack of desire to buy a used home. If spending 2M on a home, it needs to have new everything. Don’t want to buy someone else’s problems, neglect or filth. The other option is stay put in our newly renovated 2,200sf home and keep it as a forever NorCal home close to family and look to buy something in a more desirable place like San Diego for retirement. Also thinking about the possibility of geoarbitrage in the future with Cali pensions. Perhaps there is a desirable spot in NV or AZ that could make sense. Haven’t found any place that compares to Cali’s weather and beauty though.

  15. Loved the article. Feeling the same way as you, Sam.

    I have a $21m RE portfolio, with roughly $9m in equity. I also make around $400k a year in consulting.

    Unfortunately we spend around 530k a year (after taxes) as we pay for three private school tuitions and also have a child with a learning disability who has special needs.

    We live in a $3m home on a 3% interest rate, but I’m aching to buy a $6m Malibu dream house. But no way I want the stress of increasing that 530k a year nut.

    I guess the moral of the story is that schooling can be very very expensive.

    1. Is your net worth about $10 million? If so, you are right around that level of appropriate home purchase with a $3 million home. It’s hard to spend much more.

      But if your net worth as much higher, say $25 million, I think you should be able to buy that $6 million Malibu home.

      The private school tuition won’t last forever. And wouldn’t it be nice if your kids got to enjoy it as well?

      How old are you and your wife?

  16. I read often but don’t usually post… I wanted to today because I really liked the last part of this post, about satisfaction and hosting family at the end. Your rules about home buying make sense, are easy to apply, and probably put you in a good financial position, but its that last bit that is TANGIBLE. You made a huge financial decision and its paid off in an important way (outside of keeping your family dry and warm) – you have created an environment where you can bring your family together comfortably and sustainably. This is obviously situation and value-dependent, but its something I can put a finger on and appreciate. You needed the new house to get this… tangible.

    On the net worth percentage question you pose; it seems more relevant for someone who needs to generate meaningful current portfolio income, vs. an unretired, salaried worker (me). Your trade-off between cash purchase and portfolio balance is expressed as a different cash flow trade-off for me (and most ppl): between mortgage payments and long-term savings. So, I tend to think about the house in terms of cash flows: can i still hit my desired retirement and other (college, etc.) savings goals, can I still afford the day-to-day lifestyle I want to live… and these have more to do with the absolute mortgage balance and interest rate and less about the diversification of my overall net worth. Because it could be >100% of NW or 10%, but its still the cash flow situation that matters (depending on the liquidity and income generating features of other financial or real assets you own).

    Thanks for your commitment to intellectual and emotional honesty, even as your evolving financial position makes your lived experience less relatable.

  17. Bryan Heigert

    I’m curious if you looked into the benefits of a first lein HELOC? Some of the benefits I love about this is that you don’t HAVE to make a mortgage payment in the event that you lose your job or have a major financial emergency. It just applies that payment to your mortgage. Curious what your thoughts are on that type of loan, it has really helped my wife and I scale our real estate.

  18. Sam, thank you for another great post – we’re now weighing a similar move and struggling with these big questions. A couple of clarifying questions that I’d greatly appreciate (and your other readers may as well!):

    When you write “30% of gross income”, if we assume a reader’s effective tax rate is about 45% (i.e., after paying all taxes, we are left with post-tax income equal to 55% of gross income), do you mean that we can spend up to 54.54% (i.e., 30%/55%) of our post-tax take-home pay on a mortgage? (Seems like a big chunk.).

    And also, are you using “mortgage” as shorthand for “all cash flows out relating to the home, including the principal portion of the mortgage payments”? In other words, principal, interest, property tax, condo common charge (or HOA fees), home insurance policy?

    Thanks so much in advance.

    1. I hope your effective tax rate isn’t 45%. But if it is, congrats for making so much!

      If you’re making $100,000 a month gross, then I would limit your mortgage payment to $30,000 a month. It’s an easier variable to measure given everybody’s tax rates are different.

      I use mortgage to just include mortgage. But to be more conservative, you can include everything. Again, everybody’s expenses after just the mortgage are different. Might as well calculate both.

      What is it that y’all do for a living to make so much? And how expensive of a property are you looking to purchase?

      Good luck!

      1. Thanks for your quick reply! 45% is a bit of an overestimate – rounded up to the nearest 5%. In your 30/30/3 chart we’re within “reasonable” to “ideal” income and at the “reasonable” net worth amounts for a ~$4.5M home (we live in SF or NYC, so as you know that doesn’t go as far as some might expect), both in finance. But feeling very conflicted, especially with our current home having a 2.875% interest rate a mortgage about 1/3 of what we’d be taking out on the new home with a much higher interest rate. Our current place is good enough, but we’re outgrowing it and it’s significantly further away to kids’ schools/work than we would like. Don’t want to pay purchase/sale transaction costs multiple times so want this next one to be a big enough upgrade to not have to move again (unless and until we become empty nesters and can sell and scale down to a smaller home).

        I know we need to do some real soul searching (and consider the risks you insightfully shared here:

        I know we’re very fortunate to have this decision to make and are incredibly grateful to be in this position, but it does still feel like an existential decision point that could set us on the path to financial ruin….

      2. Posting from Canada here. Our housing market is next level crazy.
        Regardless of that, interest isn’t deductible against income up here either. Do you have a rule of thumb for after tax income?

          1. For Canadians, assuming 400k household gross income in 2023, after tax income (ontario) is 223k. If we do just 3x 400k gross = 1.2M purchase price, that’s still over 5x after tax income. And to be fair, in the major Canadian cities, that doesn’t really buy much.
            Personally, I would say this is a maximum purchase price to feel a tolerable amount of mortgage induced stress – assuming 20% down in the current rate environment. (approx 5+% 5-year fixed)

            from turbotax:
            Total income $400,000
            Federal tax $105,746
            Provincial tax $66,109
            CPP/EI Premiums $4,757
            Total tax $176,612
            After-tax income $223,388
            Average tax rate 43.03%
            Marginal tax rate 53.53%

  19. Sam,

    Is the stress of living paycheck to paycheck and over stretching in a house equal to the stress of having a mortgage? Are they both equally motivating?
    Also, no why no mortgage? Rates? Are the tax write offs gone at your purchase not making it worth it?

    1. This is a really insightful question, thank you for asking.

      My initial response is the stress of having a mortgage is more stressful than living paycheck to paycheck.

      When you have a mortgage, you MUST pay it, otherwise, you become delinquent and the bank comes after your home. If you stretched too much, it can feel overwhelming.

      When you are living paycheck to paycheck, you also feel stressed. But you may have multiple ways to improve your cash flow situation by finding new extra work and slashing expenses. I’m an optimist where I think I have a better chance of overcoming the P2P scenario.

      But in reality, the stresses can be quite similar. It depends on the circumstances. I no longer feel comfortable owing money to institutions at this stage in my life, especially not at elevated interest rates.

      What do you think?

      Also, I have NOT appreciated the feeling of not having a mortgage due to property taxes. I’ve got to work on feeling more appreciative of not having a mortgage.

      1. I appreciate the fact that my mortgage is so low at 2.75% and that I make over 5% in short term cash and treasuries. I only wish I had the bond portfolio to completely offset the mortgage. One day… maybe. In the meantime it’s risk on for me. 10% annual returns ftw.

        As for the rest of the post, I’d say it improved as you went along, even though it started off on a regretful footing. You got back to your convictions for buying the forever home and the satisfaction of owning it. Your journey into the home was well documented and you had lots of good reasons to do it. Don’t discount your ability to earn more or enough. You’re too enterprising to do otherwise.

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