backstory is that the wife and I purchased a house on our combined income, but she is now a stay at home mom. I can only contribute 8% (company match) to my 401k to barely break even each month.
We have changed our ways by cancelling cable/phone and our gym membership for a savings of $2,775 per year. We do have a car payment $370 per month @ .09% APR - no point in really paying this off right now as interest expense is less than $70 per year (we still owe about $6,619.97).
But the main issue is our house. Our Mortgage/Insurance/Property Tax/HOA is about 48% of our monthly take home pay, which is a very tight squeeze with the car payment. Luckily we were able to establish an ok reserve fund of ~$13K and she worked part time the spring semester, but she this is not a guarantee each semester - as she is not working this summer.
We are both obviously understanding our shortfall on one income and have begun to sell all the crap we filled our 3,000sq ft house with during our "single years" and have made about $500 on ebay and $500 on craigslist, but we have been discussing making a bigger change - moving.
I told her if we are going to do this over, we are going to be smart about this. I want to contribute 18K to my 401k, which is about 25% of each paycheck. I then want to get a 15 year mortgage in which Principal/Interest/Insurance/Property Tax/HOA is no more than 25% of my monthly income. We have about 182K left on our current 30yr mortgage and house house should be able to sell around $285,000. Obviously this is going to be a far cry from where we are at right now in the burbs, but I think it is something that needs to happen if we want to position ourselves for retirement - not even early retirement, just retirement in general.
I have also planted the seed of possibly renting. I brought it up about a month ago and thought I was going to be sleeping at a buddy's house based on her reaction - lol. You have to understand my wife does not understand much about finance and how loans/mortgages work. She had no clue our interest alone each month is ~$650. Once I showed her how much principal vs interest/tax/insurance we were paying she is warming up to the idea of possibly renting. My angle on this is that if I am able to get her to agree to rent it will free up about 100K from the sale of the house. Now, I like to consider myself handy and have tons of saws/nail guns/paint supplies and the know-how to start buying rental homes and this could 1 day replace her income (hopefully)
Wow that ended up being a lot more than I intended to write
TD;RL
Purchased a house based on both incomes. Wife became a SAHM. House payment is now 48% of income. Should we sell and move to a house with a 15 year loan based on 25% of my monthly take home pay after contributing 18K to 401K? Or am I going to extreme with moving from a nice big 3,000sq ft house to a less than 1,000sq ft house (with a 7 month old)
Also, another possible option is sell the house free up 100K equity - rent a place and start investing in real estate as I have the tools/knowledge to repair/maintain houses.
