Hi Money Minder,
So, I found this awesome house listed at $1.1 million, and I’m thinking of just paying it off in cash. Here’s a breakdown of my financial situation:
- House: $1,065,000
- Emergency Fund: $500,000
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Brokerage: $500,000
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Retirement Savings: $1.5 million
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529s: $100,000
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Income: $200k-$400k (depends on the year)
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I have two kids, ages 5 and 3, and we live in a high-cost-of-living area with great public schools
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My monthly expenses are around $9,000, which includes property tax, childcare, health insurance, utilities, and some extra costs that will go away in 2 years when my kids start public school
So, what do you think, Money Minder? Should I go for it and pay cash for the house, or should I consider taking out a mortgage or maybe look for a cheaper house in a different area?
Thanks for your advice!
Response from THE MONEY MINDER:
Hello There,
Congratulations on finding a house that you love! It sounds like you have put a lot of thought into your financial situation and the decision to pay for the house in cash versus taking on a mortgage. Given your income range, two kids, and expenses, paying off the house in cash may seem like a significant financial commitment upfront. However, it is important to consider the long-term financial security and peace of mind that comes with owning a home outright.
One practical approach to consider is to evaluate your emergency fund and brokerage account balances. It might be beneficial to allocate a portion of these funds towards the purchase of the house while keeping a comfortable cushion for unexpected expenses. Additionally, reviewing your retirement and 529s savings goals can help ensure that you are on track for the future while making a large cash purchase.
If paying for the house in cash would deplete your emergency fund significantly, it may be worth exploring other options such as taking on a mortgage or looking for a more affordable home in a different area. Balancing your financial goals, family needs, and personal preferences is key to making an informed decision. Ultimately, the best choice will be the one that aligns with your long-term financial plan and provides stability for your family.
All the best from THE MONEY MINDER.
