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Old 03-07-2017, 04:34 PM
 
5 posts, read 3,280 times
Reputation: 15

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My husband and I are looking to build a home. It has always been a dream for us but we are kind of playing that head game now of what to do. We are wanting to move to be in a good school district. This is also the most expensive district in our area to live. We currently send our kids to private school which is costing us $700 a month. If we make the move we would most likely put them in public school but want to have the ability to still continue with private school if we decide to go that option. We would like to upgrade in house, it is something we like and value. We both work from home full time so we are in our home all the time. Our gross income is about 154,000/year. We take home a combined 8K a month net. We both have pensions and an additional thrift savings plan we are contributing to with employer match. Our current house payment is about 1100/month. What we are looking at building would come in around $2400-$2500 month including taxes and insurance so as you can see this would be a huge jump for us. We will have no credit card debt (last one being paid off in next two months) and no car payments now but I will be needing a new used car within the next year. After utilities, food (groceries and dining out) , vacation and Christmas savings, car gas, annual personal property taxes, and medical miscellaneous expenses our budget is showing that after a payment of $2500/ month we would have about 1900 leftover including the private school tuition. If we send the kids to public school we are at a positive 2500 per month after budgeted expenses. Now we also need to consider car replacement for me. My last car was around $360/month... we buy low mileage cars around 2-3 years old. On paper it all works. I think where I am having trouble is that it is such a huge jump in house payment that I can't wrap my head around it. It's like even though we have a significant income I am having trouble wrapping my head around that number. We have about 10K in liquid savings currently. If one of us lost a job we would need around 2500K extra to cover the current expenses. The 10K would give us 4 months of coverage on that. We plan to add as much as possible to that during the building process as we will be living rent free in a family owned property. I have no idea what normal is for leftover unbudgeted money per month for most people. We try to strike a balance of spending on things that we value and enjoy and still be conscious of budget and the need to have a decent retirement. We think we would really enjoy the home well and it would make it possible for us to take our kids out of private school and put them into a really great school district (and yes I'm aware I could find cheaper ways to do that). What say you??? Would you be comfortable with a budget surplus of 2500 (if we ditch the private school) or 1800 if we don't and knowing we need to replace a car?
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Old 03-07-2017, 04:45 PM
 
Location: Fort Benton, MT
910 posts, read 1,071,211 times
Reputation: 2730
I can really only comment on my own family decisions. We just recently purchased a home. Although we were approved for a much more expensive property, we found one with everything we needed, but at the bottom of our price range. An existing home can be upgraded to what you want. We also looked into new construction, and it would have added 75k to the price of the existing home we purchased, just for it to be new. In the end we decided against it, because a new home is only new for a short while, and a mortgage is a 30 year process.


My advise would be to find an existing home that meets all of your requirements, and save the money. You can use the money you save to upgrade the kitchen, bathroom to what you really want, but you won't be paying interest on those upgrades for 30 years. Remember, the property is the only thing you can't make bigger. We got the biggest yard available.
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Old 03-07-2017, 05:00 PM
 
24,509 posts, read 17,974,587 times
Reputation: 40204
If you can't pay cash for a car, your personal finances are in no shape to be building a home. You are already spending what you make and not saving.

From a personal finance point of view, a home upgrade is 100% discretionary spending. The only exception is moving to a town with the best school system. You're not even confident you'd use that school system so that's not helping. For most people, the conventional advice is to buy the cheapest possible house that will work for you in that town with the gold plated school system. Other than some corner case exceptions like the recent price run-up in the high cost of living cities that are a once in a lifetime thing, you always do better in the stock market than you do owning a home.
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Old 03-07-2017, 05:23 PM
 
Location: Portal to the Pacific
8,736 posts, read 8,612,435 times
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If your take home is $8,000 that means you're saving more than 25%.

The issue is what will your costs be in the future and what if you don't like the public schools? I think even though you can afford both the house and the private schools you will still feel uncomfortable and constrained.

Are you planning to pay for college tuition for the kids?
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Old 03-07-2017, 07:00 PM
 
5 posts, read 3,280 times
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Kids have decent 529 plans established for them, it won't cover it all but the better part. We want them to have something invested in their schooling as well. I don't want them graduating with tons of debt but I want them to work and pay towards something. My husband and I both did this and while our friends were partying and dropping out or making terrible grades, we were more invested bc we were paying for part of it.
I should also mention that our budget is based on two pay periods per month but we actually receive 26 per year so two full pay periods of 4k each are unaccounted for. We typically use these to complete a project around the house, vacation, or giving, etc.
Another bit of background, I have received about 40K worth of pay raises over the last two years. This income is new to us. We went through some major financial turbulence about 5 years ago coupled with very bad financial decisions all around in the years leading up to that. We have grown a lot over the years, our credit card and car debt was out of this world before this. We have worked very hard to pay them off over last several years. So while I understand that on the surface it may appear that we have this huge surplus of monthly income and never saved anything, what I hadn't disclosed was that over the last two years I have worked my rear off, got a great job with a very stable employer and received two huge promotions after basically starting my career completely over and we have paid off a ton of debt. Within the next month we will be debt free. But we are not opposed to being in debt for our home and one, reasonable, low mileage used car if need be. Another factor, in the area we wish to move to there are no what I call middle of the road housing options. You are either purchasing a very old 2 bedroom in town around 125-150K or a larger, newer home in a suburb type neighborhood around 300 and up. The ones priced from 300-350 are usually pretty dated, huge but built in the 80s 90s and finished in that period. I would want to be making a lot of changes. I can build in that school district outside of town but in a suburb neighborhood for 350-400K. My head is playing that game of I can find something for 325 to 350 that I will want to completely renovate over the years or go up a bit and have exactly what I want. I and I totally get this is a huge WANT and not a necessity but I also believe in enjoying life. For some it's traveling or nice cars, for me it's the house. My husband and I make very good money for the area we live in and I want to enjoy some of that after all the years of struggle and work to get in this position. However, I don't want to feel smothered either.
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Old 03-07-2017, 07:48 PM
 
7,687 posts, read 5,081,684 times
Reputation: 5479
Quote:
Originally Posted by loriville View Post
My husband and I are looking to build a home. It has always been a dream for us but we are kind of playing that head game now of what to do. We are wanting to move to be in a good school district. This is also the most expensive district in our area to live. We currently send our kids to private school which is costing us $700 a month. If we make the move we would most likely put them in public school but want to have the ability to still continue with private school if we decide to go that option. We would like to upgrade in house, it is something we like and value. We both work from home full time so we are in our home all the time. Our gross income is about 154,000/year. We take home a combined 8K a month net. We both have pensions and an additional thrift savings plan we are contributing to with employer match. Our current house payment is about 1100/month. What we are looking at building would come in around $2400-$2500 month including taxes and insurance so as you can see this would be a huge jump for us. We will have no credit card debt (last one being paid off in next two months) and no car payments now but I will be needing a new used car within the next year. After utilities, food (groceries and dining out) , vacation and Christmas savings, car gas, annual personal property taxes, and medical miscellaneous expenses our budget is showing that after a payment of $2500/ month we would have about 1900 leftover including the private school tuition. If we send the kids to public school we are at a positive 2500 per month after budgeted expenses. Now we also need to consider car replacement for me. My last car was around $360/month... we buy low mileage cars around 2-3 years old. On paper it all works. I think where I am having trouble is that it is such a huge jump in house payment that I can't wrap my head around it. It's like even though we have a significant income I am having trouble wrapping my head around that number. We have about 10K in liquid savings currently. If one of us lost a job we would need around 2500K extra to cover the current expenses. The 10K would give us 4 months of coverage on that. We plan to add as much as possible to that during the building process as we will be living rent free in a family owned property. I have no idea what normal is for leftover unbudgeted money per month for most people. We try to strike a balance of spending on things that we value and enjoy and still be conscious of budget and the need to have a decent retirement. We think we would really enjoy the home well and it would make it possible for us to take our kids out of private school and put them into a really great school district (and yes I'm aware I could find cheaper ways to do that). What say you??? Would you be comfortable with a budget surplus of 2500 (if we ditch the private school) or 1800 if we don't and knowing we need to replace a car?
Your salary and left over money each month is similar to my situation.

We save about 1500 or 1800 a month.


How secure are your jobs?


Our mortgage and taxes are exactly 2300 a month. We have plenty of excess cash
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Old 03-07-2017, 07:55 PM
 
7,687 posts, read 5,081,684 times
Reputation: 5479
If your jobs are stable I would build and spend a bit more.

Its ok to have a nice house and as you said you will still have over 2000 a month if your kids go to public schools.

Also a car payment for a needed safe reliable car is a necessity. You have no credit card debt or other debt too right?


You could save 1000 and put an extra 1000 per month on the principal of your home. You could turn that 30 year mortgage into a 15!
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Old 03-07-2017, 08:18 PM
 
Location: Portal to the Pacific
8,736 posts, read 8,612,435 times
Reputation: 13006
Well, it sounds like it's a good path for you and you're thinking it very well through.

It's hard to get adjusted to a new reality. Maybe give it just a little bit longer and sit with it before you make a decision. Actually, what I would do is make a plan to make a decision... maybe it's one month, or six months or a year. Set a date. Maybe it's your anniversary, your birthday or New Year's Eve. Just plan to make your decision by whatever day you think is best. By that point it should be pretty clear what your path should be.
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Old 03-08-2017, 05:28 AM
 
5 posts, read 3,280 times
Reputation: 15
Quote:
Originally Posted by westcoastforme View Post
If your jobs are stable I would build and spend a bit more.

Its ok to have a nice house and as you said you will still have over 2000 a month if your kids go to public schools.

Also a car payment for a needed safe reliable car is a necessity. You have no credit card debt or other debt too right?


You could save 1000 and put an extra 1000 per month on the principal of your home. You could turn that 30 year mortgage into a 15!
You are correct, debt free as of next month besides a house, no cars, no cc's, no student loans, it's all gone! Our jobs are very stable. Without going into too much detail, they are federal. Both of us are under the same employer, which normally I consider risky, but different branches, different fields of expertise. We are on a graded pay scale, increases annually for me, every other year for him if we stay at same positions but we both have growth potential and are eligible for further promotion should we decide to pursue them. Our budget excludes the two 'bonus' pay checks we get the two months there are three pay periods so that is extra money not accounted for as well. Our budget also contains quite generous food/dining out amounts, Christmas, and vacation monthly savings and "miscellaneous" for gifts, baseball cleats, a new basketball, whatever...
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Old 03-08-2017, 05:35 AM
 
5 posts, read 3,280 times
Reputation: 15
Quote:
Originally Posted by flyingsaucermom View Post
Well, it sounds like it's a good path for you and you're thinking it very well through.

It's hard to get adjusted to a new reality. Maybe give it just a little bit longer and sit with it before you make a decision. Actually, what I would do is make a plan to make a decision... maybe it's one month, or six months or a year. Set a date. Maybe it's your anniversary, your birthday or New Year's Eve. Just plan to make your decision by whatever day you think is best. By that point it should be pretty clear what your path should be.
That is a very good idea, we will be moving into a family owned home as soon as our current home closes. We have time no need to rush, we will also have very little to no expenses during that time, just utilities. I think you hit the nail on the head, new reality is hard to adjust to. It's a dream thing for me, and I feel like it's like a dream come true to be able to do it but I almost can't believe we can even though the we have the $$ to support it. I feel very thankful and grateful it's even a consideration but I never want to be "house poor". I have friends that say save it and travel! And while I understand that they may love that, we have two kids in school and a few weeks vacation a year. We are content with a week long vacation and a few long weekends a year which we can still afford with our monthly vacation savings.
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