Podcast Summary: "Can We Upgrade Our House?" – Jill on Money with Jill Schlesinger

Release Date: January 9, 2025

In this episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger delves into the nuanced financial considerations of upgrading one's residence. The episode centers around a listener's inquiry about purchasing a more expensive home, exploring the balance between current savings, future financial security, and lifestyle aspirations. Throughout the discussion, Jill and her co-host Mark provide insightful analysis, addressing both the emotional and practical facets of such a significant investment.

Listener Call: Mike's Housing Dilemma ([04:09] - [13:47])

Mike from Wisconsin initiates the conversation, presenting his family's financial profile and their contemplation of purchasing a larger home closer to their preferred lake area.

• Family and Income Overview ([04:09] - [05:00]):

  • Mike: "I'm 42. My wife's 40. We've got three great kids and we've done pretty well thus far and built up a pretty good nest egg."
  • The couple earns approximately $325,000 annually, with potential peaks up to $400,000 due to Mike's sales role.

• Current Savings and Investments ([05:23] - [06:19]):

  • Mike: "In my 401k, there's about $965,000. In my wife's, about $465,000."
  • Additional savings include a $100,000 traditional IRA, $265,000 in Roth IRAs, and a $7.5 million brokerage account.
  • Their primary residence is valued at $700,000, with a remaining mortgage of $200,000 at a 2.75% interest rate.
  • They co-own a family cabin in Wisconsin, valued at $200,000, fully paid off.

• Housing Upgrade Plan ([07:17] - [08:04]):

  • Mike: "I'd like to live on the lake around where we live right now. On the low end, probably $1.5 to $1.8 million."
  • The plan involves selling their primary home, utilizing proceeds to purchase the new lake house while maintaining ownership of the cabin.

• Financial Strategy and Considerations ([08:04] - [10:37]):

  • Mike: "We're thinking of taking $500k from the sale of our primary home and $500k from the brokerage account to put down $1 million, then finance the remaining $800,000."
  • They anticipate continuing to save $120,000 to $130,000 annually, projecting substantial growth in their brokerage account over the next 13-15 years.
  • They've diligently saved for their children's education, accumulating $150,000 in 529 accounts.

• Insurance and Estate Planning ([10:37] - [11:08]):

  • The family holds 20-year term life insurance policies with 15 years remaining and has updated their estate documents within the last 5-6 years.

• Final Considerations and Advice ([11:08] - [13:47]):

  • Mike: "Is it totally unreasonable to make this outlandish purchase?"
  • Jill Schlesinger: "I truly believe that you can do this."
  • Mark: "That's what it's for. And they're still going to continue to save $120k a year. They're going to replenish this thing within five years."
  • Jill emphasizes the couple's strong financial foundation, consistent savings habits, and their ongoing income streams as key factors supporting the feasibility of their plan.
  • Jill: "I think you should do it. I love it. You have so much money saved for college already. It's very impressive."
  • The hosts caution about managing the brokerage account strategically to mitigate tax implications and encourage Mike to proceed with confidence, given his and his wife's enjoyment and commitment to their careers.

Key Insights and Takeaways

1. Balanced Financial Assessment:

   • Mike and his wife have meticulously balanced their income, savings, and investments, allowing them to contemplate significant financial decisions confidently.

2. Strategic Asset Allocation:

   • By leveraging both retirement accounts and brokerage holdings, the couple demonstrates a diversified approach to asset allocation, ensuring liquidity while maintaining long-term growth prospects.

3. Risk Management:

   • The decision to finance a portion of the new home purchase rather than depleting savings entirely showcases prudent risk management, maintaining cash flow stability.

4. Future-Proofing Financial Goals:

   • Continued substantial savings and investment growth position the family to sustain their financial aspirations, even with the added expense of a more expensive home.

5. Professional and Personal Fulfillment:

   • The couple's satisfaction with their careers and current living arrangements reflects the importance of aligning financial decisions with personal well-being and lifestyle preferences.

Notable Quotes

• Jill Schlesinger ([11:41]):
  "I truly believe that you can do this."

• Mark ([11:55]):
  "That's what it's for. And they're still going to continue to save $120k a year. They're going to replenish this thing within five years."

• Jill Schlesinger ([12:05]):
  "I know, it's going to be amazing. I think you should do it."

• Mike ([13:13]):
  "It's not imminent. It's more so waiting to see when the White House comes up because it's, you know, limited. It's probably going to wind up being a pocket sale versus on the market. And so I would say I'm targeting sometime in next 36 months."

Conclusion

In "Can We Upgrade Our House?", Jill Schlesinger expertly navigates the delicate balance between ambitious homeownership dreams and sound financial planning. By dissecting Mike's scenario, the podcast underscores the importance of comprehensive financial health, strategic investment, and personal fulfillment in making significant life decisions. Listeners are encouraged to evaluate their own financial landscapes holistically, ensuring that major purchases align with long-term goals and current prosperity.

For those inspired by Mike's story and contemplating similar financial moves, Jill invites you to reach out for personalized advice:

• Email: jillonmoney@gmail.com
• Website: jillonmoney.com

Stay tuned for more insightful discussions and actionable financial guidance on future episodes of "Jill on Money."