optimising cashflows vs safety, homebuying

[housepoor]

My wife and I both work stressful, but high paying careers in a HCOL city.  For the past few years, after taxes, healthcare, max ROTH 401k, etc. we've been taking home ~400k/year (roughly equal split).  We spend ~175k/year.  We currently have 1 child (hopefully have a second in the next 2 years) and a dog in a 3rd floor walk up.  Houses that meet our commuting requirements currently costs ~$1.8-2m, but require major renovations and are sold as-is.  My wife's job is at a startup, so funding is basically year by year.  However, she has a PhD from a top 5 school in her field, has been very successful moving up at her current company, and is in a male dominated industry.  I think if this company fails she'll most likely find another job easily, the uncertainty is if the compensation is the same.  My job is performance based, so while the company will most certainly be here 10 years in the future, for me it's hard to plan more than 3 years out and getting another gig would be much more challenging.  However, I have some deferred comp coming due and expect to receive an additional slug of deferred comp this spring that is not listed below.  If we play conservative and keep lugging the car seat up and down the stairs and our jobs keep rolling, then we will have excess cash and could have had a more comfortable life in the interim (this is of high value because our jobs are stressful).  If we play it conservative and one or both our jobs blow up, then we'll be fine because we have a nice bit of savings.  Basically, how big would you all go on your mortgage and tapping the cash?

current assets
~700k in cash/taxable account (limited unrealized gains)
~475k in retirement accounts
~225k in deferred comp that vests linearly over 3 years
~condo (800k redfin estimate/350k mortgage)

basic fixed expenses/month
3k in mortgage/taxes/hoa
2.5k in daycare
1k in doggie daycare

[ysette9]

How the heck are you spending $175k per year if your mortgage is only $350k? Stop and fix that problem before debating over whether to buy more house or not.

Look, I get that things are more expensive in HCOL areas and that certain sacrifices must be made for careers that bring in the bacon like you do. We live that same life. We made about what you did last year and our house cost $1M and you are still spending $70k more a year than we do (with two kids for that, just added a third to the brood).

More to your point, I think you don’t make enough to be buying a $2M place and even if you did, if you think one or both income streams might be a bit shaky then you definitely should not. What is wrong with your current place other than the lack of an elevator? You know you could just get a convertible car seat and leave it in the car instead of hauling it up the stairs.

[affordablehousing]

Ditto to Ysette. I don't think you make enough to afford a $2MM house. I think you can probably get a job that makes more money and try to upgrade then. I mean, a mortgage lender would say you can afford it, but, how much you save is up to you.

[wellactually]

yikes at $1000/month in doggie daycare. I don't think you should change anything until you sit down and see where your money is going. You talk about how not buying means you could have a more comfortable life in the interim. What does that mean? Spending 175k a year seems pretty comfortable.

Are you lugging the car seat down the three flights to put it into your own car? If you are willing to try, I'd suggest leaving the seat in the car and then just taking the baby up the stairs. You're adding ~15 pounds of weight to that trip up the stairs by lugging the whole seat.

[cchrissyy]

you spend about 15k pr month but your big fixed expenses of daycare and housing are only 5k. that's amazing!

this situation is crying out for a careful look at where the money is really going. do you have Mint.com or some other way to categorize your expenses? it's worth the work.

in your case, I would probably pay off the mortgage. it's small relative to your cash on hand.  I would definitely not upgrade to a more expensive housing situation until I had a good grip on where the money has really been going. I would look at the price of a dogwalker who comes to your house vs using the doggy daycare. And I would stay in that condo until the 2nd child came. You can make a lot of progress financially in the meantime even with that big daycare bill as long as you figure out where the waste has been going.