Home ownership for some is the ultimate statement that they have made it in life. And for many, it also represents a significant portion of their net worth. It’s an asset that can become an appreciating investment--or a financial albatross around their neck. This is not a discussion about whether to buy or rent, where you should live, or what a home is really worth. Instead I want to help you look at something often overlooked: what to do with your home when a family is growing or when two families combine into one household through marriage.
Here’s our example: A young couple has just recently married. He owns a large house, she a smaller one. They have five kids between them. Their initial thought is to sell both homes and buy a brand-new, bigger house customized to their liking. They also consider buying an older home, and just fix up the parts inside that are most important to them to make it fit their new lifestyle. Or is there another option? What should they do? What makes the most financial sense in this scenario?
As financial professionals, our real value to clients goes beyond investment recommendations; it is uncovering the questions that are often overlooked. We asked this couple if they might consider keeping the bigger house and selling the smaller one.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
They could put the proceeds from the sale of the smaller home toward upgrading the kitchen in the home they kept. Result: they can create the dream kitchen they saw in that new custom home. And with the bigger home they keep, there aren’t many unknowns with regards to upgrading or repairing the infrastructure (no bathtub falling through the floor).
The biggest unknown to this couple is what does a household of seven (parents and the five kids) really cost to run? A new budget needs to be planned, and proper allocation towards their education and retirement goals need to be assessed. Your own solution may have been different, but ultimately our goal as financial planners should be to give a family peace of mind and give them a life to enjoy on their new journey without felling trapped in their home.
Kevin Kaplan is a partner at Silicon Hills Wealth Management in Austin, Texas. He is passionate about photography, travel, pizza and live music.
-
5 Tips for Investing in the Trump PresidencyWith Trump back in office, expectations are high the bull market will continue. Here's how investors can prepare.
-
Where to Retire: Living in Portugal as a US RetireeLiving in Portugal as a retirement landing spot has abundant advantages, but do your homework and due diligence first.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
California Wildfires and Insurance: Looking for HelpLos Angeles-based insurance expert Karl Susman shares the view from his agency’s office as all hands are on deck to help their policyholders.
-
A Strategic Way to Address the Tax-Deferred DisconnectWhat you don't know could cost you a fortune. Here's how to make the most of a tax-deferred retirement account and possibly save your heirs a bunch on taxes.
-
To Insure or Not to Insure: Is Life Insurance Necessary?Even if you're young and single with no dependents, you may need some life insurance. Here's how to figure out what and how much you may need.
-
How to Organize Your Financial Life (and Paperwork)To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
The Wrong Money Question to Ask After Trump's ElectionIf you're wondering what moves to make with a new president moving into the White House, you're being dangerously shortsighted. Here's what to do instead.
-
All About Six Types of Auto Insurance CoverageDo you know what your auto insurance policy covers? Here's a primer on some coverage categories, along with examples of how each type of coverage works.
