The Best Time To Own The Nicest House You Can Afford

The best time to own the nicest house you can afford is when you have the most number of people living in it at one time. This way, your house is providing for the most number of people, the most number of people are enjoying it, and the cost is spread out and provides better value.

Therefore, the best time to own the best house is when your kids are at home. If you are taking care of elderly parents or other relatives, all the more reason to own the nicest house you can afford too.

When we're all spending more time at home, the intrinsic value of our homes have gone way up!

More People Are Appreciating Their Homes Today

Given we are all spending more time at home, more people are remodeling their homes to make them more comfortable. Homeowners are building decks, installing hot tubs, creating amazing landscaped gardens and so forth.

The best time of the year to buy a house to get a deal are usually the summer months when school is out and people have already decided on where to live. Finally, my favorite time to buy a house is during the winter holidays. The weather is generally the worst and fewer people are looking.

If there's one thing I love, it's living in a fabulous house. Nowadays, I spend between 18 – 20 hours at home on average. Robbers beware! Therefore, it's only logical to own the nicest house I can comfortably afford.

For those who went from being outside the house for 12 hours a day to now working from home and not having to commute, the desire to live in a nicer house has likely also gone up. I'm assuming millions of people started to feel this way since the pandemic began.

My wife and I have been living the majority of our hours at home since we left our day jobs years ago. Spending more time at home is why I wanted to buy a house with an ocean view. It's also why we built multiple large decks. Mai Tai's while feeling the sea breeze during sunset, check!

Given we've been homebodies for a while, our incremental desire to own a nicer house since the pandemic began probably wasn't as strong as most people's. That said, we still had enough urge to buy our “forever home” soon after initial lockdowns began in 2020.

Curiously, after only one year in our new house, my desire to own an even nicer home increased! Talk about real estate FOMO and not being satisfied with what I already have.

For those of you looking to buy the nicest house you can afford, let me share a recent epiphany. Once I tell you what it is, it may seem stupidly obvious. But I also bet plenty of homebuyers haven't thought about this logic yet.

Reconciling The Two Home Buying Guides

You have about a 20-year window to own the nicest house you can afford. After this window closes, it is likely shut forever. Before I get more into the details, let's review my two home-buying guides.

I'm always trying to help you live your best life in a responsible way. I've seen way too many people blow up their finances since 1997 because they got too greedy or didn't properly assess their risk tolerance.

Therefore, I came up with a Primary Residence As A Percentage Of Net Worth guide to help you buy responsibly throughout your financial journey. This guide is conservative. However, it is also based on my almost 20-year homeownership journey to give you an idea of what works.

The Original Home Buyers Guide

Savvy readers immediately pointed out that my Primary Residence Guide wasn't entirely congruent to my 30/30/3 home buying guide. My 30/30/3 home buying guide is slightly more aggressive. They pointed out that most first-time homebuyers usually don't have a net worth greater than the home they want to buy. That's logical.

As a result, I adjusted the percentages from 80% – 90% to 80% – 200%. In other words, first-time homebuyers can now buy a home up to 200% of their net worth.

If you buy your first home responsibly and eventually get your primary residence to equal 30% or less of your net worth, you will be in great financial harmony. For example, owning a $600,000 home with a $2 million net worth or a $3 million home with a $10 million net worth is a good ratio.

Being able to “comfortably afford” a home is somewhat subjective. We all have different financial requirements for how well we can sleep at night. Therefore, follow what works for you. Our lives are constantly changing.

Own A Nicer House As Your Wealth Grows

Ideally, you want your net worth to grow much faster than the value of your home. This way, you are organically decreasing your home's value as a percentage of overall net worth by increasing the overall pie. As a result, you're always living the same lifestyle or better, while increasing your wealth.

If you don't continuously improve your lifestyle in a responsible way, that's fine too. You're just taking unnecessary investment risks and spending too much time on work if you're not spending your money.

There may come a point where your net worth grows so fast and so much that you want to continue upgrading your primary residence to equal 30% of your net worth.

For example, you might have spent 125% of your $400,000 net worth to buy a $500,000 home. But after 10 years, your net worth has risen to $3 million while your primary residence has only appreciated to $600,000 (20% of net worth). Given you've done so well, you feel like you should at least own a $900,000 home (30% of net worth) and live it up more.

Continuously buying a nicer house as your net worth grows is reasonable. However, it only makes sense if you have the same number of people in the home!

In other words, let's say in 12 years, both of your two kids will go off to college. Does it make to buy an even bigger home with fewer people? Probably not.

The Best Time To Own The Nicest House You Can Afford

In other words, the best time to own the nicest house you can afford is during the 18 years your children are at home. If you plan to have your children live at home past age 18, then your window is even longer.

Plenty of high school graduates end up not going to college or going to community college for a couple of years. Therefore, perhaps the window to own the nicest house you can afford is between 18 – 22 years.

After 18-22 years, even if your net worth continues to increase dramatically once your kids leave home, there's no need to get a larger house. Large homes with unused rooms may eventually start to feel lonely, if not downright creepy.

Instead, after the kids leave home, you may want to downsize. And most of the time, downsizing means saving money and owning a cheaper home or condominium.

If you don't want to downsize, given moving is a PITA and you appreciate the sentimental value of your home, then you can logically just remain in your home. Over time, it should become a smaller and smaller percentage of your net worth. And if you pay off your mortgage, even better.

Moving To A Nicer Home That Is Smaller

I'm sure some of you who continue to get richer will want to spend more of your wealth on better living arrangements. Therefore, here are some suggestions on how to spend more money on a right-sized home.

The nicest house doesn't necessarily have to be the biggest. For me, I put a premium on views, decks, and outdoor space. The ideal house size for me is around 800 sqft per person.

Therefore, if you want to continue living it up as you get wealthier, you will always have options to spend more money on the nicest house if you want to. When it comes to real estate, there are endless ways to spend more money.

Another Solution To Downsizing Without Selling

Given I'm a sentimental guy, I enjoy keeping my homes and renting them out for income. This is actually my favorite way for the average person to build wealth in real estate. Repeat this cycle every 3-5 years and you'll develop a hefty real estate passive income portfolio in no time.

Personally, I find it very hard to ever sell the home where we raised our first child. I still remember the very first evening we took him home and laid him down on our bed all swaddled and sleepy. There were so many amazing memories!

Further, I think our children will appreciate feeling the warmth of coming back to their childhood homes as they get older. I've felt this warmth every time I go back to Honolulu to visit my parents for the past 40+ years.

Therefore, in addition to building a rental property portfolio for retirement, another solution is to simply buy a nice vacation property. Buying a vacation property you seldom use is a total luxury and suboptimal use of funds. However, it serves the purpose of utilizing your wealth for a better lifestyle.

My children enjoyed the two times we went up to our vacation property so far. I just didn't buy the vacation property at the right time or the right size. I bought our vacation property when I was 30, nine years before we had our first child. Since then, so much has changed.

Therefore, buying a vacation property after you have children is a more optimal move. Here's my vacation property buying rule to follow.

My Wakeup Call To Buy The Nicest House We Can Afford

Upon realizing I only have a ~20-year window to buy the nicest house I can afford, I immediately started searching online for a price point 100% – 150% higher than the home we purchased in 2020.

When we purchased our house in 2020, it equaled about 18% of our net worth. But as we all know, the economy and the stock market recorded, and is still up after the 2022 bear market. Therefore, our primary residence is only about 15% of our net worth. I’m excited to upgrade our home in one or two years if luxury home prices come down more.

Being way below my own 30% guideline and realizing both our kids will be out of the house by 2038 has created a sense of urgency to buy a nicer home.

This uptick in desire is somewhat disappointing, especially since I believe the ideal time to live in a home is 10 years before upgrading. It's also great to appreciate what we have. However, there's nothing like having young children to make you realize how short life really is.

Researchers have calculated that roughly 80% of the time we will ever spend with our children is when they are between the ages of 1-18. Therefore, we might as well own the nicest house we can comfortably afford during this most important time.

Further, we'll have four or five bodies in the house maximizing the home's usage. In other words, a more expensive house's cost gets amortized/appreciated by more people.

Waiting until 2030 to upgrade seems like too long. Why not live our best lives now since tomorrow is never guaranteed?

Compromising On When To Buy A New Home

I brought up my logic of buying a nicer home to my wife and she gave me the thumbs down. She said, “There is no way we are moving homes again so soon! You promised we wouldn't move for at least two years after buying our current home.

I get it. Moving is a royal pain in the butt. Further, our son's elementary school will be closer to our current location by 2023. The only neighborhoods where we could buy a home 100% – 150% more expensive than our existing one are farther away. And given they are more expensive neighborhoods, we might only be getting 30-40% more space.

Therefore, we've decided to compromise. We've agreed that in 2025 (five years since we purchased our current home and half the ideal length of time to live in a home), we will look for a nicer home equal to 20% – 30% of our net worth at the time. Maybe the new home will be in Hawaii.

In five years, our children will be 9 and 7, the prime of their young lives. This will also be the time when they remember things the most. Kids have a difficult time remembering things from before the ages of 3-5 by the time they become adults.

Once we buy a nicer home in four years, we will then live in this new forever home for 10 years. After 10 years, we will then consider downsizing given our youngest will hopefully be heading off to a great public university.

There's just one problem. I haven't told my wife about this awesome compromise just yet. So wish me luck!

Real Estate Investing Recommendations

Owning the nicest house you can afford when you have kids is optimal spending. However, you also want to focus on real estate investment returns as well so you can keep living well.

Real estate is my favorite way to achieving financial freedom. It is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.

Take a look at my two favorite real estate crowdfunding platforms.

Fundrise: A way for all investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has historically generated steady returns, especially during difficult years in the stock market. For most people, investing in a diversified real estate fund is the way to go. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Growth rates tends to be higher as well due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio. 

I've personally invested $810,000 in private real estate since 2016. It's been great to earn more passive income and a less volatile way. Diversifying across the Sunbelt, where there is a demographic boom is also the long-term trend I want to invest in.

Real estate investing dashboard

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102 thoughts on “The Best Time To Own The Nicest House You Can Afford”

  1. Payton Reid

    Dunno man–I don’t see us upgrading our home anytime soon. I’m 33 with two kids (4 and 2) and we live in paid for home with no mortgage. Our net worth is roughly $2M and we purchased our home for $370k. I make $600k a year. Currently, we’re totally content with a “modest” home because it allows us to focus more time on the kids (not as much maintenance, no stress about messing up a nice house, etc.). I also really like the idea of “tricking” our kids into thinking we’re not as well-off as we actually are. If they see us comfortably living below our means for a large part of their lives—seems logical that may increase the probability of them being “contenters” as well.

  2. Hi Sam.

    I could use your opinion/advice on this. I read almost all of your articles on buying a house, as I’m looking to buy. The situation is I’m currently renting but my landlord is thinking of selling the place. He said he hasn’t made up his mind yet. However, actions speak louder than words. He’s still cleaning and throwing out a bunch of junk, so it looks like he’s leaning towards selling. Even if he decides to keep the place, I’ll have eventually think about moving as he’s approaching his 70s. If there’s one thing I’ve learned, it’s that life is unpredictable. For example, he may have no choice but to sell the place and move into a nursing home. As such, I’m protecting myself by starting to look. If I do this, then at least I won’t be forced to do something out of necessity. There’s nothing worse in my book than to be forced to accept a place because I have no other options.

    With some background information in place, here’s my conundrum. Is a house the best thing for me? You mentioned that “the best time to own the nicest house you can afford is during the 18 years your children are at home.” I don’t have kids, approaching my mid 40s, and the prospect of having kids or a spouse looks dim. Basically, it looks like it will just me a (single occupancy) in a house. What’s a guy like me to do in a situation like mine? Should I even consider a house or just go back to renting?

    I’m making $155 K, with a net worth of $600 K+, and live in the Bay Area. I ran through your 30/30/3 formula for the numbers the realtor gave me. Because houses are so stinking expensive here, he’s looking for ones at $800,000. He is asking if I would feel comfortable pushing out the housing costs to 37% of my income, after calculating the available cash on hand. This 37% includes property taxes and potentially PMI as I don’t feel comfortable giving up all my cash on hand, in case I lose my job. This obviously violates your 30% rule. The other option is to take a securities loan on my investments to come up with the down payment and bring down the numbers to 30% or less.

    (Wishing to Remain Anonymous but hopeful you’ll be able to answer my question.)

  3. I like your plan of keeping homes and renting them out as opposed to just selling. My wife and I are thinking of moving up in homes sometime in the next five years and I have been thinking about how nice it would be to keep the current home and rent it out. I was wondering if you would consider an article based around this theme? I’m curious if you strive for a certain percentage of equity in the current home before moving and renting it out or if there are any other factors that play into that decision.

  4. Hi Sam,

    Long time reader, appreciate your insights into what often feels like another world, since I am really much below your target audience in terms of earnings/net worth. Just wanted to offer a perspective on this post and the topic at hand; ie, what constitutes being wealthy.

    We are early forties, three children, live in the Northeast and I make a median salary ($60k/yr). My wife brings hope an additional $25k/yr as a very part time RN. No debt, net worth around $1.2 million including aprox $450,000 in equity in our paid off house (bought 7 years ago, 1950’s, 4bd/3ba, 1/2 acre of land in desirable suburban location).

    My wife left a six figure FT salaried management position four years ago so we could homeschool our children, despite living in one of the top school districts in the state. It was one of the best decisions we have made. We essentially live on my income, and we max out her 403b, both our Roth IRAs, and I contribute 9% of my salary as well to my state-sponsored pension plan. My wife plans to retire at age 55, and I plan to retire at age 59. We should have a $4M net worth by that time, though our respective pensions would cover all our living expenses so we wouldn’t necessarily have to take distributions unless we wanted to.

    We are essentially middle class, but as a matter of trained perception, I feel incredibly wealthy. In fact, there is little we want or need. Our home is nothing fancy but is truly a home, as we spend most of our time there by choice (I work 37.5 hrs a week, and work from home 2 days/wk (in office 3 days), my wife and kids are home almost all the time). I have a small garden and orchard in the back yard. I have a 1 car garage where I can tinker with all my bikes and things. We are 30 minutes from world class medical care should we need it. We have 10+ year old cars which are paid off and well maintained. We got this way through careful frugality, but not being cheap. We give to families in need and our church. Our 2,000 sq ft house feels just right in terms of size, though we wish we could have more kids to ‘fill it up’ a little more but alas, nature seems to be closing that door.

    My father is/was a stealth millionaire, so a lot of those frugality muscles were exercised under his tutelage. He was not an especially generous person though, so that has been learned behavior for our family. Our wealth has come from the ‘human capital’ of our community (friends, faith community, other homeschoolers), being in good health, and not having to worry about how will pay for this or that bill, having the option to just write a check for whatever expenses come up. Paying off our home early did not make much sense financially, but we sleep well at night and the increased cash flow allowed my wife to stay home with our kids. Our idea of living it up is renting a small cottage on the cape each summer and treating the kids to ice cream and little things like that.

    Mostly, we actively work on cultivating a spirit of intentional gratefulness for everything we are given, living within our means as a deferment to greater freedom, taking joy in the little things, and being generous as a family in time talent and treasure, to the degree we are able. We do not feel any need to upgrade, as 2,000sq feet in a well designed, well maintained 70 year old house near family and friends suits our needs just fine. We feel truly wealthy!

    Thanks for the good practical, nuts and bolts articles on a wide berth of topics; although some I can’t relate to, I appreciate what you write, and wanted to ‘pay back’ in a small way with this comment for offer what may be a different perspective from an average-earning family. Take care!

    1. Hi Peter, nice to hear from you. You sound which to me! If you’re happy with your income in your lifestyle, that’s all that matters. This post really is a bad went to optimize spending the most money on your primary residence if people want to. And that’s when there are the most heartbeats in the house.

      Having a pension pay enough to cover all your living expenses is huge. You are one of the lucky ones as most people don’t have the same opportunities to receive one today.

      One thing I’m curious about though is your desire to homeschool while living in a great school district. What were the reasons and how many hours a day do you teach your kids? I’m interested in doing the same.


      1. We intentionally moved to our area for the good public schools, but after our oldest attended kindergarten for one year, we decided to try homeschooling, taking things “year by year, and kid by kid.” To be honest, I would never have considered it were my wife not friends with people we knew whose children were thriving while homeschooled. They were the living example that made us curious: well mannered and polite, well adjusted, socially engaged, active in sports and other activities, etc.

        My wife spends about four hours total for both the 9 and 10 year old per day (6 hours if you include breaks, etc). The 4 year old just plays. We use an established curriculum. In our state, homeschooled children have to take state standardized tests in grades 3, 5, and 8. Since our son was in 3rd grade last year he took those tests, and we were pleased that he scored at grade level for math, 5th grade for reading comprehension and vocabulary, and 7th grade level for language and structure. It was helpful in the sense that it assured us we weren’t too far off track in terms of metrics.

        Honestly, it is an incredible efficient method of educating in terms of time and effort, tailored to each student (kid) who gets loads of individualized attention, as well as independent time to work/read if desired. We do a lot of read-a-louds and try to instill a love of learning and develop a natural curiosity for how things work (for myself as a public school educated person, I never had that, school was always something I “had” to do). Many of the families we are friends with (who have 4-9 kids each) find it works well for family dynamics and cohesion as well as scheduling and efficiency. The family time is invaluable, and we often get comments on how articulate, polite, etc our kids are (which is pretty common for homeschooled children, assuming the parents are well-adjusted themselves). Our kids get an incredible amount of socialization (all of the homeschool families we know laugh when the question of “how do your kids gets socialized?” comes up) through co-ops, sports, etc, as well as moral formation. We almost have to scale back sometimes because of the abundance of opportunities for them to socialize!

        Our evaluator (whose children are grown) homeschooled all five of her children–a few PhDs, musicians, nurses, etc. All went to college, some on scholarship, all doing well. That was reassuring. We figured as we get into the older grades, we can always hire additional subject tutors, if necessary.

        I was dead set against homeschooling initially, but now in our fourth year I am a true believer, since we have seen so much good fruit not just in our family but all the families we know. I am very grateful to have the freedom and opportunity for our family to do so. You seem to care about your kids very much, are well educated yourself, and enjoy spending time with them–a good combination! Maybe give it a try…kid by kid, year by year ;)

        1. Very cool. Yeah, I am very interested in homeschooling and can easily spend 2-3 hours a day teaching them. Add on my wife spending 2-3 hours a day and we should have things covered. Other homeschooled parents say it only takes about 3 hours a day to cover an entire’s day of normal school.

          You mention your wife spends 4 hours a day. How about you? I had a lot of fun teaching my son soccer and Mandarin for the 15 months while he was at home after the pandemic began.

          I’m thinking of homeschooling when both are over 5-6 so we can travel abroad for long durations. This way, they will REMEMBER their travels. Should be fun for all of us!

          Related: Homeschool And The Decision To Teach Our Own Children

    2. Well done! You have the secret sauce. We did this too and it led to an early retirement and stress free/debt free /live free lifestyle. Love to read peoples stories that just follow simple “Dave Ramsey”/ Fin. Samurai advice and knock the cover off the ball. congrats.

  5. We upgraded in January, and we are thinking of upgrading again, mostly because inventory was trending thinner by the month when we bought and wanted to remain in the market. We like the home we are in, and completely fixed it up to increase it’s worth. However, we want something larger as we will start a family soon and my wife just received her Master’s.

    The major issue when we upgrade after we live here two years (for capital gains tax reasons), is that interest rates won’t be the super low rate we have now (2.5%, 30 years fixed, no points). It may keep people from ever selling again me thinks! Although Sam, if I’m not mistaken, I see you believe the general interest rate will remain trending low over time in the future. I suppose a re-finance down the road is possible if we upgrade in early 2023?

    1. Yes, although rates have moved up since 2020, and may go up further, I still think mortgage rates overall will stay low for a loooong time. I don’t see rates going up more than 0.5% from current levels.

      Mortgage rates may go up, but if income and home prices are up much further, higher rates is not a big deal. And I think rents, incomes, and property prices are going higher.

  6. Food For Thought: I see the point of your wife not inclined to move again so quickly, but I’d suggest relooking at moving to your “forever home” before your oldest hits Kindergarten or Grade 1 (sooner than 5 years). With the amount that you’ve shared prior, it seems you can afford it. Perhaps it doesn’t fit perfectly with your ratios, but as a mom who just had one graduate high school and another in Grade 11, it has been extremely nice to have the kids settled into the same public school line of elementary and high school with their friends – many from Kindergarten onwards. The side benefit is the richness of community and history it creates for your family with people that become lifelong friends – kids and their parents. I love your articles and blogs, and have learned so much from you. I pass this tidbit on to you hoping that you’ll take off the finance glasses and instead look at this situation in light of a different currency :).

    1. I agree with you and thanks for sharing your insights!

      My son will be going to kindergarten next year, so moving again would be too early. But if we move, it would be within the city, so nobody is really too far away. Best of luck to your kids!

  7. Sam, I have to say something about your post is inconsistent with the principles you have espoused, perhaps you are changing with kids and that’s fine. I’m nearly 50, two mid teens at home.

    Currently in our 4th home (eldest kid has been in all). Current home is designated forever home. It’s on the larger side for a family of 4 but when we built the house we emphasised it would have to grow with us till the very end. We have a lift and the corridors and main bathrooms are wheelchair friendly. We have a good sized games room which can be converted to a studio apartment when the kids are at college or if they want to stay with us in early working life. We have a large guest room for in laws when inevitably they need looking after and a secondary guest room if visitors come. Yes if it’s just me and wife, it will seem too large but we accepted that would be a disadvantage by staying in a forever home.

    I believe people don’t realise how emotionally difficult it is to downsize even if it’s a nicer smaller home. In majority of cases it means leaving a nice area you’ve made friends with, local grocer, local doctor etc. leaving memories behind in a family home too. Moving to a a more expensive suburb doesn’t mean it will be more liveable to your personal tastes. I’m a proponent of buying and moving as few times as possible and choosing very very carefully. In Australia buying and selling is costly with various stamp duties payable.

    Holiday home which is not rented out when not there is the worst use of money and is an absolute luxury. Use the spare money on international travel travelling 1st class in great hotels and it’ll still turn out cheaper. With a holiday home, you are always obliged to use it since you bought it and it can get boring after awhile (yes, been thru that scenario when kids got bored or just outgrew the holiday house area activities). I will admit though it’s great during covid lock downs but that’s a once in a lifetime occurrence.

    1. Hi Tony – I’m definitely changing over time.

      But can you point out my inconsistencies? That will help me investigate as I’ve always believed money is a tool to live our best lives.

      “I believe people don’t realise how emotionally difficult it is to downsize even if it’s a nicer smaller home. ”

      I address this in my post by writing, “If you don’t want to downsize, given moving is a PITA and you appreciate the sentimental value of your home, then you can logically just remain in your home. Over time, it should become a smaller and smaller percentage of your net worth. And if you pay off your mortgage, even better.”

      “Holiday home which is not rented out when not there is the worst use of money and is an absolute luxury.”

      Same. I wrote, “Buying a vacation property you seldom use is a total luxury and suboptimal use of funds. However, it serves the purpose of utilizing your wealth for a better lifestyle.”

      And also see, The Only Time You Should Buy A Vacation Property

      Since the pandemic, do you not have an incremental urge to live it up? With investments up so much, I would think it would be unusual for people to be richer and then want to live it down.

      I’d love to hear your financial journey story and where you are coming from. Are you retired?

      Here’s another post: Housing Expense Guideline For Financial Freedom


      1. Thanks for your reply Sam. I’ve been following you for several years now since starting my financial journey. I very much like your site as you stand out from the rest by laying bare your very personal thoughts as you grow and change. I love it that you don’t just tell people what to do and you often ask us for advice!

        A point of interest is that I grew up in Malaysia and my sis went to Garden School. I in fact have a few acquaintances that schooled there like you. Migrated to Oz. Medical field. At moment at crossroads very nearing retirement possibility after selling my practice few years ago and investing majority of proceeds in international stocks. Only tasted a little of real estate investment early on but found it didn’t suit my character as I prefer the simplicity, liquidity and hands off experience of stocks. Very much still on learning journey financially.

        When I said inconsistencies in my post I meant that the overall feeling I got from you was that you were in general, frugal and wished to live simply, based on your posts from several years back.

        Your tone about living it up now and buying more expensive bigger homes and a holiday house just seemed out of your original character but looking back I can see you were starting to taste the fruits once your kids came. Kids definitely do that don’t they! I can very much relate to that feeling as I went through that exact phase and it really reverberated with me. I didn’t mean to word it like a criticism but more an observation of general lifestyle creep, hedonistic treadmill experience that we are both going through once we reach critical mass financially. I find it so interesting that our psyche seem to match!

        Yes you’re absolutely correct by noting the urge to splurge post pandemic, stocks have really had a great rally for me. House prices blowing their top in Oz too. The people who are using that as their first benchmark into the foray unfortunately only need to glimpse back to 2008 to see what can happen though. Hence while I’m smiling right now, I know there’s absolutely zero chance this will last. I guess what I’m getting at is we can’t be blinded by the financial nirvana party we’re in right now and make big irreversible decisions like purchasing houses / holiday homes based on the sentiments.

        If you find you need the space for your kids to utilise, you may have under bought your current residence. You have the financial means to upgrade but with kids I’ve noticed I often have over estimated what they need or want. It’s difficult to predict their personalities at this young age. I recall very nearly purchasing a holiday home at a beach locale about 2 hours away which they absolutely loved to visit during holidays. At that time my wife and I could only see ourselves in holiday heaven, going up there on weekends and school holidays. Only by pure luck, we didn’t buy it due to other financial commitments investing and building my practice and we were slightly sad that we would have to “settle” for renting there whenever we holidayed. Guess what, merely 3 years later, both kids declared they didn’t want to go there anymore as they had outgrown the activities there. My wife and I were incredibly relieved we didn’t make the mistake of buying as when we rechecked the price of the house we wanted, it had gone down by 20% due to fact that other newer holiday homes had been built in the area to cater to popularity and demand. There’s usually lots of available land to be developed in holiday beach areas unless you go very top end where property is scarce in number. As an investment, it’s suicidal but I accept that some don’t intend to sell, ever, and recognise it purely as a luxury. We instead holiday in different local and international spots each holiday to provide the kids as much variety and they seem to prefer that…..for now anyway.

        I still consider myself an intermediate novice in life but just wanted to share with you my observation that kids and needs change so quickly in their growing up years, we need to stay flexible and not try to predict the types of homes we think they may require. It can be a costly error.

  8. In regards to kids. I ditto the “Ellie Factor” and would add that living closer to anyone who is a beloved part of your village( family, neighbor, friend ) will have not just a higher happiness ROI, but a higher financial ROI. knowing how to connect, give love, receive love, set boundaries, take care of yourself and others will take any kid farther than any space they live in. When they hit the teens their village and your ability to understand how to create an environment for a teen to feel loved, grow self worth, follow inner compass, purpose, kindness, acceptance, self learning will make or break you financially and emotionally. The house you live in won’t even be a factor unless your choices destabilize your kiddos support and true needs being met.

  9. My wife, three grade school age kids, and I moved back to the NY suburbs 5 years ago, to be near family. We now live in the same public school district that my wife and I both were fortunate to graduated from.

    We bought a 3,000sqft $1mm fixer-upper from an estate sale. It was the least expensive house we could afford in the district, on a good street, and with an association beach. The district is top notch in our area so we jumped on it in fear of missing out despite it being a very big stretch for us financially, 100% of our NW with very little financial safety net. Our home costs today accounts for 34% of our total take home income, combined we take home $220k net.

    We made needed maintenance improvements over the years: roof, driveway, walkways, electrical, plumbing, and a ton of cleaning up the outside…to make it more livable. We still have a long way to go before we invest in meaningful cosmetic renovations like kitchen, baths, closets, flooring, doors, trim. While I’d LOVE to make these desired improvements, I seem to always gravitate toward functional improvements over cosmetic, such as finish the basement for kids space to play and now finishing a portion of the garage so the kids and I have a place to workout over the next 10 years.

    Our kids are super active in multiple sports every season, and spend half the summer at sleep away camp, so clearly we prioritize kids spend over all else. We find is so difficult to set a budget for spending on kids and I often feel like it’s out of control. However I justify that we’re all having the time of our lives and we can’t get this time back, so we spend here without any hesitation on all things “experiential”. Our total kids cost today accounts for a whopping 28% of total take home income.

    Truth be told, if I had a chance to do things all over again, not sure I would have three children. Cost aside, the madness of scheduling around one very active child is enough to make anyone crazy, let alone three! My wife and I both work full-time and my wife has a side hustle too…so family sit down meals and events are not the norm. Nevertheless, I take comfort knowing/hoping that all the kids be there to take care of each other throughout life and appreciate the sacrifices we have made for them and place a similar value with their time and money with their future families.

    At this point, I’d love to further improve my net worth ratios but feel I am a bit stuck at the moment, balancing an amazing childhood for my kids with advancing my career which would take on more responsibility and focus alway from kids…the latter of which I wont accept.

    Anyways, loved this post and will try and work smarter to improve this ratio with existing house before I invest in those desired cosmetic home improvements. Thank you for another benchmark guide.

    1. Thanks for sharing your thoughts Chris. I hear you on the madness. I have two, and it’s a lot of shuttling around and coordinating already. But, they will eventually grow up and we will miss them.

      “Truth be told, if I had a chance to do things all over again, not sure I would have three children.”This is quite honest. I’ve thought about having 3, but we’re pretty darn old now.

      If one of you were a stay at home parent, do you think life would be less chaotic?

      “Our home costs today accounts for 34% of our total take home income, combined we take home $220k net.”

      The cost of owning it yeah? B/c if it is the cost of the house, which you said was $1M, then 34% of $220K doesn’t make sense. Once you get that cost down under 20%, you’re going to feel great.

      Check out: Housing Expense Guideline For Financial Freedom

      1. One stay at home parent wouldn’t meaningfully make things less chaotic. What would is having a third driver to get the kids to all the after school activities. All three kids have similar start and end times in different locations.

        Even then, a driver only helps solve the need to be in different locations at same time. It doesn’t address solving for the time spent together. If one less kid, chances of more time together increases. I accept and I am happy with my decisions in life, but sharing for those they may be considering so they may go into it with eyes wide open. Two is much more manageable from a logistical standpoint and togetherness, if trying to accomplish both.

        On annual cost of home ownership, HELOC was leveraged for needed home improvements, driving up the higher than desired cost ratio. I could pay that off entirely with stock equity today, but I just don’t have it in me yet to sell. However I do plan to pay down significant portion of HELOC with bonus payout in Q1. Especially now with no HELOC tax benefits.

        I definitely stretched to get into this house, but I can see the light at the end of the tunnel and feeling less stressed about it everyday. Thanks for the added motivation to get it below 20%.

  10. Loving this article. I know you like to measure the house by total net worth, but I like to look at it by Total Mortgage. For us at least, our Mortgage is 10% of our Net Worth. I’d like to keep it that way, so that even if we decided to “Upgrade” I would want the Mortgage to be a negligible portion of Net Worth or fully paid off, if we decide to try to lower our expenses even more.

    But all that said, we built our really amazing home 4 years ago. The one thing we didn’t get from our wish list was a view. Now that is the one thing I regret. Spending more time at home, I’d like to spend more time outdoors, looking at my view…yet we have none. We are very close to our neighbors. I can literally see into 3 other houses that back up to us.

    So we would love nothing more than to eventually upgrade in our neighborhood, but spring for the house with a view and keep all else equal. We’ll see. We’ll see.

    1. Gotcha. Using mortgage is a more aggressive way of looking at it given most people’s houses are worth more than their mortgage.

      Once you have a home with a view, it’s hard to ever go back. Especially if you have an infinity view that just keeps on going forever. There’s something about a view that helps relax the mindset and bring more peace and happiness, in my opinion. Of course, it depends on what you’re looking at!

  11. Thank you for these housing articles – very timely for me. Also, if you’re looking for another topic, the pros/cons of new builds could be one. (Definitely selfish reasons, but not sure about locking in a new home contract for a period of time and then selling if the market turns.)

    Anyway, back to your article. Another reader touched on this, but one thing to consider is the age/size of the individuals. We are planning to move at some point with our three kids, but especially want to maximize the space for when our kids are between 10-25. Teenagers and young adults home from college / grad school will definitely need space. So our plan is to move in 2-3 years when the oldest hits 10 (and the youngest is out of daycare!). We can also enjoy being together in our smaller home while the kids are young.

      1. Thanks! I would more or less agree with this. Right now with the young kids we are at an ideal size for three, so we’re definitely feeling more and more of a squeeze with five.

        I do agree with your comments about flat land. Our hill is much more of an inconvenience with kids trying to run around in the yard. Also, as someone living in a city with snow, I appreciate facing SW. The sun shines on the driveway all day and does most of the work. Saves my back from shoveling!

  12. Love this, similar route in 2016. North of 200%+ value to NW (second home) but we had some investments maturing and for personal reasons (aging parents) the timing was right. 5 years later the value is down to ~40% of NW WHILE the home appreciated nearly 50%!

    Now, though, we decided on an international assignment to London to provide the cultural experience for the kids (9, 11). Rented our house. Overall I estimated this move will end up costing me 200-400k over 2 years in missed earning (after the stipend). Having nicer stuff is great but this experience is priceless. Knowledge is wealth.

    Sam, happy to elaborate on my learning from moving the family abroad. Lots of moving parts and many lessons that I continue learn along the journey.

  13. long time lurker, first time poster. i have $8mm. 46 yrs old. will use $3.5mm of the $8mm for retirement. according to your 30% rule, i should only spend $2.4mm on a home purchase? that leaves $5.6mm and i dont need that much for retirement so why not spend the “excess” (any amt above $3.5mm) on the home?

    1. Julian, you are free to spend your money how you wish! 30% is just my guide for what I think is optimal exposure for enjoyment, financial comfort, and risk minimization.

      What is your house valued at right now? And what about shooting for a $11.7 million net worth before getting a $3.5 million house? That’s the way I’d look at it.

      1. right now my current home is worth $733k but i’m looking to sell and purchase another home.
        i’m just curious about the tradeoffs and justification here. i’m single, no heirs, and no desire to leave anything behind. what i do want is a great home. at $11.7mm NW and a $3.5mm home, that leaves me with $8.2mm for retirement which is far in excess of what i im trying to understand the benefit of having far more money than i need at the cost of having the home that i want. not disagreeing per se, just trying to understand the logic. the way i’ve looked at it is that i have $8mm total and i need $3.5mm for retirement so i have roughly $4mm to spend on a home. you disagree with that perspective?

        1. Hard to say. Maybe you can elaborate on your personal situation more.

          Thoughts on being single versus looking for companionship?

          How about giving money to nieces, nephews, or the needy? Setting up 529 plans is one idea for younger relatives.

          What do you plan to do living in a $3.5+ million house by yourself? Or are you looking to buy a house with lots of land?

          What drives you to continue to work given your net worth and low expenses?

          Maybe we can do a guest post about your unique situation!

          1. Sam/Julian, would love to see this guest post. I am particularly interested in Julian’s idea that he “only needs” $3.5M for retirement. I am 40 with slightly over $4M and debating whether I need to pass $5M to safely RE (this would mean ~3 more years of my demanding job). My expenses are low, but you can’t predict a health crisis or other black swan event.

            I am single and my needs are pretty basic, so $5M seems like overkill to me on some days.

              1. Haha, Sam this is THE post that drove my choice to stake my number at $5M:) I figure that “barely enough” with a family is plenty for a singleton.

                Exhaustion might get me to hang it up closer to $4M though. I am young enough that I could take 3-5 years off, see how I roll, and then maybe jump back into the work force as needed to boost my assets over another 3-5 year period – so back into forever retirement before turning 50YO.

  14. Is the 30% recommendation for the cost of the home or the amount owed? For example, two million net worth and one million home is 50%, but what if you only owe 300K on the 1 million home. Is it considered 50% or 15% of net worth?

  15. Alternative is dual city living.
    Two 250k condo, etc.
    Go east coast/Europe, west coast/Asia.
    When not at the second home, Airbnb it to make it cost neutral.
    Use points for free flights. Amex/chase.

      1. Sam, definitely, each unto his own. FYI… I wasn’t referring to retirement, but to anyone with remote work. For example, since you are west coast, you can easily run this blog from Singapore 3 months out of the year. As for children, thank you remote learning!

        1. Ah, yes indeed. I’m thinking about working out of Taipei or China for 2 months a year once both kids are over 5. Would be good for their language skills. But for now, we are staying put for routine and consistency.

      2. Obviously this is highly personal but my main motivation to retire on the earlier side is precisely so that I am still capable of traveling. I want the freedom to be able to travel when/where I want and this setup actually sounds great. Split the year between places in two different parts of the world that you can use as bases for travel.

        1. It’s a good motivation to have! How old are you and how many more years do you have left to go?

          I grew up overseas, moving around for the first 13 years of my life every 2-4 years. Then I ended up traveling to about 60 countries until 2017, when our son was born. So we are pretty traveled out now. But we’d still like to see Jordan and the Pyramids one day!

          1. 37 now, no concrete goal in terms of timing but ideally would shift to something part-time that would allow more flexibility sometime in my 50s. For now my wife and I just save aggressively and are seeing where it gets us. Currently live in Europe with a 1-year old, and have been here about 5 years. Prior to the pandemic we traveled quite extensively while also working long hours (but that’s the benefit of Europe—you can actually take 4+ weeks of vacation here even when working in a demanding profession), but neither of us feel remotely close to burnt out on traveling. The forced break could be part of the reason for that, but we also often talk about how wonderful it will be to re-visit places with our daughter and experience them again for the first time, in a way, through her eyes.

            Not sure if we’ll stay in Europe long term, which is part of the reason behind no concrete retirement goal. If we moved back to the US, we could probably move our retirement goals up given the generally higher salaries, but it’s a balance because Europe is a much more convenient base for travel (especially with a kid, being able to hop on a train and be in another country in a few hours is great) and raising kids here seems appealing for a variety of reasons.

            Of course, if we stay in Europe there might be less need to move our retirement up because we’ll already have more flexibility to take vacations and travel while working, and many places are much less of a hassle to get to than from the US.

            Pyramids and Jordan are two places on our list as well! We were planning to go to Egypt in Spring of 2020, but… that didn’t work out.

        2. Our goal as well. We intend to start with a big truck and a camper and cover North America for a year or two, parking it in temp storage and taking occasional side trips. Then we might keep the camper or not, depends on how we still feel about it, and buy our upgrade home (not necessarily a lot bigger, other than in how much storage it has and how much land it sits on).

          Then we are taking the show on the road overseas, with the aim of spending 3-6 months abroad every year as long as we are easily able (at least a decade or two, we figure).

          The whole idea is we will be free to go anywhere for as long as we like it and even change travel plans as we go, if necessary. We have both been office critters for far too long, always constrained to be back at our desks within two weeks of vacation start.

          But we still do what we can in the meantime, despite that. Go to Scotland and live in a castle on Loch Ness for ten days, go to the West Coast and rent a beach house next to the Malibu Pier for a week. Cruise the Med. Explore Newfoundland and Iceland. Rent a car at Heathrow and try to tour every castle in Wales. One or two like that every year, while still making time for visiting parents, siblings, and kids (and grandkids). But always having to be back at work within two weeks is a still a bit limiting.

    1. I’m curious where you can find a livable condo for $250k in any of the places you mention. I’m in the Midwest and that would be impossible.

      1. Here is a townhouse in Charlotte, Carolina for exactly $250k

        Prefer the ice?
        Levis is a quick ferry ride across from Quebec City. $279k at current exchange rates.

        Most know Milan, but I prefer Turin with its green open spaces. $226k at current exchange rates

  16. Interesting Replies.

    My first home was easily 200% of net worth. Probably more. Just out of college (22) and bought a home. Never paid it off. Sold it
    Second home was 50% of net worth. Bought at 30 years old. Paid off in 6 years.
    Third and probably last home is 12% of current net worth. Bought at 45 years old. Paid off in 4 years. The wife loves this home and we just spend 200K+ remodeling it. It holds a lot of memories and you cant put a value on that.

    In between have bought/sold a few rental properties.

    1. Can you explain how you bought a home at 22 just out of college? I saved like a mad man for 4 years until I was able to come up with 20% down on my $580,000 condo at age 26. And I also had a lucky investment gain that provided a large windfall.

      1. Hi Sam,

        Similar to Jeff I purchased my first condo at 23. 121k 10% down, had been working close to a year. It probably made up 90% of my net worth at the time. It’s much easier to have a roommate at that age. Without this purchase I never would have been able to buy my first house 4 years later. It all worked out. Current house is below 30% networth but if you have a good job I think you should be more aggressive when you are younger. It keeps you from spending your money on depreciating purchases.

      2. Worked my A$$ off all 5 years of college? Paid for college and saved about 20K. Used that for down payment on 180K house.

  17. We moved from a condo into our duplex in 2019. We lost a great view, but we gained a bit more space, a nice backyard, and a basement. The area is more walkable too.
    I guess we could have purchased a nicer home, but I’m still a bit too frugal to splurge.
    Our next-door neighbor’s house is worth twice as much as our home.
    We upgraded so we’re pretty happy. Let’s leave a little room to shoot for next time.
    Oh, we move every 10 years or so. I don’t mind moving, but the family hates it.

    1. I dunno Joe. 1,000 sqft for a condo with two adults and a kid seems pretty frugal for a family with a ~$3 million net worth. But, if you’re happy with your living arrangements, that’s all that matters.

  18. Wife wants to downsize when we retire. My thought is the place isn’t half the size of the house I had in Florida for just me (which was in a gated community, on a golf course, with beach access) before I moved to Westchester County in New York to marry her.

    I’m working on convincing her that we can keep the number of rooms down (other than guest rooms) but make them a lot bigger. Bigger rooms (providing you don’t just fill them up with even more stuff) are easier to keep clean, and that the biggest difference between regular houses and the much better ones (other than location location location) is tons of storage. Walk-in closets everywhere and tons of additional storage also make it easier to keep a house tidier, while keeping things accessible, and storage space doesn’t require the same level of maintenance as living space.

    I don’t think she is completely convinced yet, but I still have a few years left. Getting her to accept we should have a regular cleaning service is going to be another bridge to cross.

    1. I’ve used cleaners for the last 8 years. At first it seemed like an splurge, but after awhile you realize the time efficiency. I currently have 11-14 depending on the season service contracts on my house. Between cleaners, grounds keepers, lawn care, sprinkler services, etc. there are just better things to do with my time but if these things didn’t happen the home wouldn’t be worth it.

  19. Canadian Reader

    I have the opposite feeling. After renovating my dream home and moving to a beautiful new city, I have decided I would rather practice stealth wealth again. Everybody here wants to know our story, but since all detached housing is so expensive there is no plausible story I can make up. Other parents I’ve met live in co-op housing, or apartments or townhouses. Telling people the truth that we worked really hard to retire early and that my husband is a mathematical wizard just isn’t something people can relate to. Also, lying to people doesn’t really bode well with making any meaningful new relationships.
    I want to move back to my hometown and get some crappy standard house in the suburb where my old friends and step sister (who has little kids) live. I want to have a 3rd baby which will be a lot easier to do with family and friends around. I want to get a part time job at the health unit and have our house be an open door for free child care for our friends and family who are working full time. Mostly, I just wish to blend in again. I want to do all of this before my kids go to school and become cognizant of our wealth- so in the next 3-4 years.
    Only problem is I have to communicate and convince my husband of these plans! Haha.

  20. With our third on the way, we moved from an 1,100 square foot home to a 2,600 square foot house. The new house is so much nicer in so many ways, but I actually miss the coziness of the old house. It forced everyone into the same spaces. Especially as the kids get older, there can be a tendency for everyone to retreat towards their own private screens. There’s also just a warmth from noise filling the entire house.

    More size is also more cleaning, more maintenance.

    I guess my point is that something like a deck with a beautiful view is an awesome amenity you’ll really enjoy. Or gardening space for someone who loves to garden. Or a pool, or whatever. But bigger and better and more expensive doesn’t necessarily make a house a better fit for a particular family.

    I’d also suggest that letting years and years of memories form a sentimental patina in a space is nice benefit to staying put even if you can move.

    1. True. Although, I strongly believe once you have your 3rd child, you won’t be able to go back to 1,100 and you will love having 2,600 sqft! Bookmark this post and come back to it when your baby is 3 months old!

      – Stay At Home Dad

      1. I wrote that in a weird verb tense: we moved last October and our third son is already 9 months old!

        3 kids in one bedroom would definitely have been pushing it. I did that for a while as a child with my two brothers, and it was tough not having your own space. It is nice to give them their own rooms, and it was great having a new home to explore for them through the winter (Covid limiting other options)

        I stand by the idea it’s a tradeoff, though. Sharing a room as a child was tricky sometimes, but I also think made us closer.

  21. Nathan Kemalyan

    Seems to me, the right house at any phase of life is the one that fits your lifestyle. A sizeable enclosed yard makes the most sense when you have kids and pets who need a safe space in which to be outside. If you have a 80 hour/week career, gardening space isn’t all that important. If you truly love entertaining, or have the executive position that demands it, then go for the trophy home, to the extent you can afford it. Bigger is most definitely not better, if all you do is stuff it with more stuff. My wife and I left our trophy home for an old rambling lodge-style place on some acreage with plenty of space between us and the neighbors. It’s a rural refuge in the city, a neighborhood where you can walk a mile without encountering a car. The dogs can mark up the softwood kitchen floor and simply add to the patina about it. We can live like hermits if we want and not apologize to ourselves or anyone else that we’re “wasting” it’s potential. It fits our lifestyle, which makes it better than the entertainer’s house we left behind.

  22. Paper Tiger

    Well Sam, you single-handedly managed to somehow justify what I had, up to now, always considered one of my biggest investment mistakes. In 2004, we decided to buy our forever home in a popular sunny SW location. We bought a home with 6 bedrooms and over 6200 square feet for a family of 3. Our daughter at the time was 5 years old. This house represented 50% of our Net Worth when we purchased it.

    Now, our daughter is 23 and on her own and the house represents 18% of our Net Worth. We converted 1 bedroom to an office/library and another bedroom to an exercise room so we get pretty good utilization out of most of the house and still have 2 extra bedrooms for our mothers if they need to move in at some point as they are both in their mid-80s.

    I’ve always felt we stretched too far for this house but we have loved being here the last 17.5 years and look forward to many more. The next move, if it ever comes, will definitely be a downsize but not anything we have planned in the near term and maybe never. We only have 3 more years of mortgage payments if we don’t pay it off sooner.

    Thanks for making me feel better about a very scary decision at the time!

  23. I wanted to share from my point of view. We are currently renting in a 4BR 2,100 sqft house in NW DC suburbs for $3,200. This is cheaper than a mortgage by far, where our current home would go for $1.2M in this market. I don’t have kids, but my boyfriend does, and the first of his three kids is leaving home Sept 2022. I think it will be easier to buy a forever home with just two kids at home, instead of 3 (as you said, when you “downsize” you can buy a smaller but higher quality home). So, I am thinking of purchasing when we have the pressure of one less kid at home, and then the other two are not far behind for leaving. Buying when there are still 2 kids at home will mean that a 3BR place with a den or a furnished basement would be financially possible and also big enough. However, I cannot afford, and don’t see a need long-term for a 4-5BR place, so I’ll be waiting to purchase.

  24. Everything in life is about time, once that window closes is never the same, enjoy your kids and buy whatever makes your happy, I moved to my dream home when my daughter was 5 years old, she went to the best public school in broward county and is an attorney. I still lived in my beautiful home and have no plans in moving out, this is my forever home. Why worry about inheritance taxes.

  25. My parents moved us around a lot when I was young. But I don’t remember those that much because I was under five. I only remember two moves, one around age 5 and another at age 8. Then we stayed in the same house until I went to college and my parents are still there today.

    It wasn’t a fancy house by any means. But the consistency was nice and so was our neighborhood. And frankly my parents couldn’t afford anything better.

    I remember we rearranged the furniture a lot though. That was a fun and cheap way to make things feel new and different over the years!

  26. I feel like you wrote this article just for me. I’m fifty years old. I have owned 2 houses in my life. Our current house we’ve lived in for 17 years. The house is 4 percent of our net worth and we are in the beginning stages of a major remodel that will jump it up to 6 percent of our net worth and I’m freaking out about spending the money. Holy shit, I need to relax.

    Thanks for the reminder to enjoy some of our hard earned gains!

  27. Sam,

    You have grown accustomed to moving. Think about your childhood and moving every 3-4 years with your parents careers and then you going off to college, moving to New York and then SF.

    After spending over 25 years in the military and moving every 2-3 years the same thing happened to me after being retired for 3 years. Fortunately I bought everywhere I was stationed in the USA and am riding and benefiting from this recent rapid appreciation.

    1. You make an astute observation. I am definitely a custom moving every 2 to 4 years, if necessary. The thing is this time around, all likely just be moving within one city, not to a different country.

      As a result, I just don’t think it’s that big of a deal to move anymore. But packing and unpacking really is a pain in the butt. But if you find that awesome house, I say why not put a little bit of effort delive your ideal lifestyle.

      1. I agree! I’m always looking for another place! I had 4 homes to choose from when I retired back home in the Olympia/Tacoma area. When I was buying my rentals I was single, so all are starter size 3 beds/1.75 baths. I got married 2 years before I retired and I stepped up to a much bigger home! Happy I did!

  28. See, that’s the thing. If you have the means, I do believe a person ought to do what they please. People earn the right to move their money in whatever direction they desire, but the message I took away from your post is that there’s nothing wrong with the current home. The only driver here, according to how I read it, was upgrading for the sake of upgrading. To me that feels at odds with the rest of the messaging on your site that advocates for being resourceful and efficient with investments. No, I don’t think you should act in a way that runs contrary to your philosophy. I don’t know. Something about this post just went down the wrong pipe, but I fully acknowledge this could just be a me thing. I look forward to reading other comments and enjoying future posts.

    1. I think I might not have explained my reasoning properly then. Because I’m not saying to buy a nicer home for the sake of buying a nicer home.

      My true meaning is to question why are you working so hard and saving so much and taking investment risk if you are not going to spend your money on a better lifestyle. If you don’t spend them, you should take things easier instead.

      And my other desire, as a parent, is to provide for the best housing arrangement possible while our children are still at home. Further, having more people live in the house amortize is the cost of the house. I try to explain this as the main reason why we have a 20 year window, but it doesn’t seem to be registering.

      Do you have kids Joe? I think this might be the biggest reason why you are not empathizing with my post’s logic here.

      1. As a parent, I fully get what you mean about wanting to provide the best possible living arrangements and lifestyle for our kids. So I’m going to guess that Joe does not have kids, because it is very apparent in this post.

        1. I am a parent however I understand Joe’s point . As a long time reader , you have always espoused practicality over sentimentality as a road to financial freedom . This post seems like it’s based on the latter . Anyways , I have always believed that we all make decisions and then find reasons to justify them so shouldn’t be taken as a criticism . In the same vein, extend such understanding to someone who may decide to spend more on cars or sail boat , items you may not value as much as you do a home .

          1. I agree. Which is why it is interesting to see Joe’s criticism about Sam wanting to spend more money on a nicer home while his children are still living with him. To me, it makes absolute sense.

            I can understand how if one does not have kids, it is easy to focus on super frugal living and trying to save as much money on housing as possible. After all, we’ve all been there.

  29. Manuel Campbell

    I’m not there yet (30% ratio), but working on it. When I surpass this number, my plan is to do home improvements and turn my house into the dream house.

    I like the ratios that you’ve come up to. They are easy to use and helpful. But, I think the main ratio to focus on is the maintenance costs of the house. When including all the budget items (travel, entertainment, food, etc.), one should not exceed 2-3% of total investment portfolio (stocks, bonds/cash and real estate).

    The “30% ratio” is a good estimation. But it doesn’t take into account that some properties require a high level of maintenance, whereas some other properties could have a higher price but very little maintenance. I think that’s the case when you pay for a better location (w/ ocean view or beachfront property for example), the maintenance cost may not be higher than a regular house even if it’s – let say – twice the price.

    The reason I say 2-3% of total portfolio is that this % allow the portfolio to continue to grow while at the same time being less vulnerable to extreme adverse market events, like a market crash or a very long bear market.

    The 4-6% of total portfolio is too high imo. It assume depletion of the investment portfolio over a very long period of time – like 30 years. This is ok for someone who is in “normal” retirement, and don’t plan to leave anything behind. The FIRE movement like to use the “4% rule”. But this ratio imply you will live in a “danger zone” for the rest of your life (ie. a zone where the possibility of runing out of money still exist). Not a confortable situation to be in.

    Anyway, those are just my thoughts. Hope your wife will want to move. But I think she won’t. Maybe you are already both in your dream home and don’t realize it yet ? ;)

    1. Could be! The richest person is the one who is happiest with what he has. I look forward to getting there perfectly one day.

      I’m going to have to disagree on the maintenance cost metric. For sure, ongoing maintenance cost something to estimate and consider. That’s the beauty of my 30% rule. Once your house is under 30% of your net worth, whatever normal maintenance cost that comes your way won’t really matter. It likely won’t be large enough because you’re passive income and your savings and investments will easily cover it.

      One percentage to rule them all!

      1. Manuel Campbell

        Maybe that always work for “regular houses”. But for houses that have “very low value” or “very high maintenance”, the “maintenance cost ratio” is essential. :)

        If you don’t care about maintenance costs, this house could be the dream house for your wife : ;)

        The US government bought it for only $1 in 1977. It’s gorgeous !
        But the challenge is to maintain it. I don’t even want to imagine how much it may cost…

        1. It’s just not something I found we worry about once the ratio is Achieved. It’s kind of like the 1/10 rule for car buying.

          Once I started buying cars less than 10% of my annual gross income, whatever expense that came up didn’t really matter. Some of it was covered by insurance, well most of it was just paid out of pocket. It’s not like a roof leaks every year or a heating system burns out every five years. A lot of the maintenance work can be planned out in terms of preventative maintenance for homes.

          And at the end of the day, to each their own!

          1. I don’t think about my maintenance cost either. The media makes it seem like our house is a house of horrors. But if you buy the right house and do the proper upkeep, things are generally fine.

            1. Manuel Campbell

              Yeah, you are right. The house in my example probably require a full-time staff of 20 people or more (gardening, cleaning, etc.) in order to maintain it properly.

              Probably not the right house for an individual … And certainly the reason why the government ended up buying it !

          2. Agree generally that for most Americans, keeping housing values under a certain percentage of net worth will correlate with maintenance costs.

            However, there are many instances, esp in HCOL areas where the outlay is costly and should be a consideration.

            I believe you were interested in a NY apt. I can share that the ever- increasing maintenance payments for co-ops and condos in NYC are a SERIOUS drag on your cash flow. Current avg maintenance for an Manhattan co-op apt (includes property tax) is about $2.50 a sq ft, which works out to $2500 for 1,000 sq ft apt, or $30K a year — many other properties are much higher in maintenance. Then there are all the doormen and super you have to tip and give holiday bonuses. Just pray that there aren’t additional assessments for repointing or any major capex. Many buildings have a flip tax of about 2% or purchase price you have to pay on your way out.

            We love our vacation home out in Southampton, but that comes with a whole slew of costs, especially connected to pool maintenance, electric (to run the pool filter, heat it), landscaping, and heating during a particularly cold season. Insurance is expensive and almost impossible to get out on the South Fork — we were down to only one insurer who would take us. Tradespeople are in high demand and charge accordingly.

            Not a complaint, as we are lucky to have both properties and enjoy them but I’m at a point where we’re ready to jettison Manhattan apt and downsize or keep a pied-a-terre in Brooklyn which has fraction of the costs. Manhattan’s just not worth it.

            For us we are at 16% of our NW for those two properties but it really does drain a lot of cash so it doesn’t feel quite as comfortable as it should.

            1. Great insights! It does cost a lot to live a good life style. We don’t have co-ops here but TICs or condos, and pay the HOA. The HOA goes towards maintenance outside of your unit.

              I’ve enjoyed running my rental condo since 2003. I got the emails about things going wrong here and there, and the homeowners association takes care of it. So for me, paying the HOA has been worth it.

  30. Julie Middlemas

    I love your blog and have been a fan for a few years now. This particular topic is dear to my heart because my husband and I have gone over and over whether to buy a bigger, nicer house. The house is about 23% of our net worth, but has been as low as 19% before the latest housing boom in our city.

    We have stayed put because of what we refer to as the “Ellie factor” which is this: each of our three girls has had a best friend just 3 or 4 houses away so they have been able to walk to their friends’ houses for playdates. All the friends’ names were variations of Ellie (Ella, Ellie, Eliana) which is why we call it the “Ellie factor”. There have been other important factors too, like the neighborhood and public schools are great and it’s close to work. We could have purchased a bigger, nicer in the same neighborhood but even moving 5 or 6 blocks away would have changed this playdate dynamic, so we have stayed put.

    Our oldest left for college this fall and the house feels more right sized for the two kids that are left at home. They still see their neighborhood friends almost daily, so I think we are going to be here for a while longer. I think when they are grown, our girls will remember the good times they had with friends, not that the house was a little too small.

    1. Ah, such a wonderful and heartfelt rule! Our children having great friends close by is such a blessing. If we stay in our city, nobody will be more than a 30 minute drive away.

      I’m pretty sure most kids won’t care about how fancy their house is if it is of minimum standard. Of course, if it has a pool and a lot of amenities, they will appreciate it most likely.

      I’m thinking more about the vacation property now, and having one while kids are over five years old provides a much better return on investment.

    2. I grew up on the same street as my two best friends. I have endless memories playing with them and their siblings, roaming the neighborhood, checking everyone’s house for who had the best meal that night. I am 34 now and barely remember the homes I grew up in, however, I still have my childhood best friends. We were in each other’s weddings, are Godparents to each other’s children, and their parents are like a second and third set of parents. These friendships are precious and hard to replicate later in life.

      My point is do not move. The Ellie factor is way more important that a physical house.

  31. Well done, really interesting post! I am having trouble with this exact situation… I am in my mid-30s with two children under the age of three. We live relatively frugally, but want to indulge a bit regarding housing. I have a net worth of approximately 4 million and I’m currently saving about 250,000 a year. The catch is, I am only paying <4k a month for rent and nice homes where we want to be cost a minimum of $2.5 million.

    Unfortunately, we moved to a new area recently and places where we are now are up essentially 100% since pre-Covid levels! We are just trying to stay patient and praying that a home in that 2.5 range comes up… I feel like I am even pushing it at that level, given my income is less than 700K and net worth is only 4mish… I am fairly bullish and comfortable on my income trajectory though.

    1. Assuming an income of 650K, it appears you should be able to buy a 4MM house with 20-25% down. Why restrict yourself to 2.5MM?

      1. Income right above that and I imagine I would be able to get approved for a
        higher number than 2.5M, just don’t want to push it too much… I also would be inclined to put zero dollars down and just pledge assets in Lou of putting down a down payment… If I can borrow 30 yr paper at sub 3%, seems silly to put any capital down. I just don’t Want to be hit with such a large housing expense, especially after our rent is less than 4K a month currently.

  32. I don’t know, Sam. I think this article missed the mark for me, but I think it may’ve been more of a way to help me better understand the target audience. Upgrading your home for the sake of having a nicer home seems at odds with the general tone of helping people save money.

    If your current home only accounts for 15% of your net worth, doesn’t this mean you’d have that surplus to make more investments? Again, I realize I am not the wealthy crowd for whom the article may have been written. Still, something about the article feels exceptionally privileged, which is a term I generally despise given how polarized it has become.

    I’ll keep raising my glass to your success overall, but this was the first time you came off a little snobby. :)

    1. Sorry to miss the mark Joe. It’s hard to be all things to all people.

      I do appreciate the feedback that I sound snobby. Any specific suggestions on how I can come across less so?

      I have been more reserved over the years in sharing details due to responses such as yours. I don’t want people to feel bad for the things I’m thinking about. But when I read feedback that it is OK to take from the poor to give to the rich with the 5.9% COLA Social Security announcement, I thought a page had potentially turned.

      Do you think it would have been better if I spent a much larger percentage of my net worth on a home and gone through the journey of paying it down publicly? I noticed that people get into lots of debt and pay it off are often more celebrated than people who never got into huge debt in the first place. It seems like it would be strategically better, from a perception standpoint, to do what more people do than less.

      It’s just harder for me to not live what I believe. So I don’t.

      If you have kids, I’m actually kind of surprised you can’t empathize with this logic of wanting to provide a better home for our children. Do you have kids?

      You may enjoy this post:

      Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult


    2. Manuel Campbell

      Hi Joe !

      I’m in the same situation you are. Still building my wealth. But I don’t feel the same as you reading this article.

      I think you’ve just got the math wrong.

      In the beginning, it’s normal to spend as little as possible in order to build a sizable investment portfolio (stock, real estate, whatever you like).

      Then, at some point, you cross a mark. When your annual expenses cross the 2-3% of total investment portfolio. At this point, your portfolio is still growing even if you spend some of it.

      You are then face with a choice :
      1 – Increase your annual spending at the rate of growth of your portfolio (if your portfolio grow by 15% in one year, you increase your budget by 15%);
      2 – Leave the budget untouched, and see the withdrawal rate fall from 2-3% to 1.5%, 1%, 0.5% and eventually even lower …

      That is the reality of exponential numbers.

      This is the situation Financial Samurai is in. I find that very cool and inspiring. Make me want to save even more money to reach that status even faster. But, we have to be patient and let time do it’s work. After all, gardeners can’t pull on plants to make them grow faster. It’s the same with our investments.

  33. You best hide the internet if you don’t want her to see the new compromise!

    Your post is helping to push me to a decision. I have desires to finish out the attic, basement, and build a another 2 car garage with living space at out new house. the attic will add a movie theater, and another bathroom and bedroom. The basement will get a workout room, bar, and play room. Then the 2 car garage and loft will add another living space as well.

    The desire and funds are there but the motivation to spend the money has been lacking. Also, the current lead times are a bit depressing. However, your point about living the best life with young kids makes me want to move forward faster.

    So perhaps, I’ll revisit the effort, and look towards the renovations starting in 2022.

  34. Damn Millennial

    I am in agreement with you on this one. We are on a similar route in Denver.

    We had our first child this year and found an amazing house walking distance to a big park in Denver proper for a good price! It is 2700 sq feet and we can enclose the patio for another 350 sq ft and update the kitchen living room. It is on .25 acre of land we are super happy about it.

    We plan to do that and then just enjoy it for a while. I could see getting to where you are though if we both continue to work as hard as we are we could upgrade. If it makes you happy and you have the funds…why not.

    I could see us really love that place though and just upgrade it over time to what we need. I would rather use the funds to buy a condo in San Diego and have another place to snow bird down the road vs just a bigger house.

    Who knows where life will be in 10 years…that’s part of the fun.

    We also like you are renting out our last place and have another rental.

    We are filling up buckets for income prior to 60 where we will live off the traditional retirement sources and whatever else we have acquired!

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