I’m not sold that the American Dream of a white picket fence is the wisest financial move in the grande scheme of things. But, at 34 and pregnant with my first child, I long for the stability of a home with at least a small backyard and just – space.
Even though my networth is $540k, I’ve never felt stable enough in my career to purchase property. I thought by now I would – but I don’t and I don’t think I ever will. Given my husband is going back to school and will be starting over with a job making $50k, if we’re ever going to own it’s pretty much all on me. We can certainly rent a house – but when my child gets older, I’m afraid of having to downsize due to losing a job. I almost feel better about staying in a one bedroom apartment with the kid, and saving for as long as possible. Plenty of people do it, why can’t I?
I keep trying to figure out what the net worth number is when I finally feel ready to buy property — given a starter home here costs $1.3M, I’d need a $260k downpayment, plus enough cash to cover a year of mortgage payments + tax and insurance ($6662 x 12 = ~$80k.) So theoretically if I had $340k in cash, I might be ok to invest in home ownership.
But – that’s assuming I could get a job within one year that pays enough to pay a $6662 a month mortgage & fees. Even now, I don’t have that job. Sure, my husband’s salary would help out a bit (he could probably pay $1.5k-$2k a month of that) but I’d be left with $4662 a month that has to get paid… meaning if I lost my job, it could be easily devastating to us. It feels like I need a lot more money than $340k in order to make this work. Maybe it’s a net worth of at least half the amount of property value PLUS a 20% down payment… $910,000 will be enough in net worth for me to feel ok buying a $1.3M house. That’s pretty much the point in which I’d feel ok…(owing about $390k max) on a property. At that point, the mortgage should also be paid of in about 7 years, leaving only taxes and insurance of about $1.5k per month to be paid in perpetuity.
Or, we stay in our rent-controlled $2350/mo 1 bedroom apartment, and deal with it. For a few years, for a lot of years… for life. It’s not like losing my job would be ideal at any point in the future, but we can clearly survive at this rent amount on less than we jointly make now, even with his new career.
But — I am still aiming to have $1M in net worth within the next four years. So, the good news is that IF I get there… then that is really putting me over the $910k I need to buy that $1.3M starter home. In four years, that $1.3M starter home may be worth a lot more (in which case, fruck) – but, maybe that’s the answer. I get to $1M by age 38-40, and then I find a house and get that 30 year mortgage that will be paid off by the time I’m… 70.
By then (in four years), my first child will be ready to go to school (and we’re sending him/her to public school), so we can focus on buying a small but nice home in a reasonably good school district. Or, maybe we move just far enough away that houses aren’t quite so expensive, because I don’t need to work a full-time job at that point, or I can find a job where I’m allowed to telecommute, and I can earn less by have way more flexibility (heck, there are houses in the far, far out east bay that cost $500k still.)
I guess that’s the answer. I stop having house envy and I focus on somehow making this job work for four years. The plan is to save $4k per month from income plus get 50% of my bonus ($16.5k before tax) and 100% of RSUs (~$54k before tax) so that’s about $83.25k a year, or $333,000. Four years of growth on my current basis at 5% YoY gets me to $607.7k, or $107.7k growth. That’s $440,700 saved in four years, added to my current networth which puts me just shy of $1M ($980.7k) by the time I’m 38. With a slightly higher bonus performance and/or RSU value increasing, the “million before 38” thing is definitely doable…
And then, I have a 4 year old and am ready to buy property, which seems to be good timing anyway. The only thing is to achieve this goal, we need to stay in this one bedroom until I hit that $1M networth – i.e., until my kid is 4. That might drive me absolutely nuts — BUT it will be worth it, if I can reach this goal. My 30s are all about saving and building for the future. At 38, I’ll hopefully have or be pregnant with child #2, and we’ll be more than ready to find a place of our own. All I have to do is succeed in this job for a solid four years. That’s the biggest challenge of all. But I know what my goals are. And I really hope I can stick this landing.