"I Want to Buy a House and Have Four Kids— Is My $130K Enough?"

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2:16and applicable terms. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

2:32Today's guest is a fellow financial nerd in the best way possible. She's a CPA, she's in her early 30s, and she and her partner are crushing it with no debt, strong savings, and they even own a rental property. But like so many of us, she's wondering, are we doing enough? Are we doing it right? And how do we afford the life we want without falling into the trap of financial FOMO? Today, we talk about how to save for the future without sacrificing your financial present. And because we get pretty real in this episode, this listener wanted to stay super duper anonymous. She didn't even want her voice used, which I am always happy to make work because talking about money can be hard and I want to make it as easy as possible.

3:08So in this episode, you'll hear my side of the conversation with the money rehabber. But instead of hearing the guest's voice, you're going to hear my producer Morgan. Morgan pulled the transcript from the conversation and then recorded her reading the lines from the money rehabber. So it's my audio from our actual conversation with the guest and then audio that Morgan taped after the interview smushed together movie magic style. I get that money dysmorphia is a scary thing to talk about, but it is so common. So if you've ever compared your spending to a friends vacation photos or found yourself spiraling over whether you can afford a home or kids or a Birkin, this one's for you.

3:46Rose, welcome to Money Rehab. Thank you so much for having me. I'm so excited to talk to you. Yay, I'm so excited to talk to you. Normally, I ask my guests to tee up their questions, but girl, you have so many. I'm just going to walk the listeners through them. But I think the big picture is if I can gather this, you have a great financial foundation. Now you're wondering how to maximize for your future, but you're feeling like a little bit keeping up with the Kardashian, I guess, Kardashians instead of Joneses these days. But you don't want to feel like that comparison is holding you back right now.

4:21Is that? I think so. And I think like getting validation that we can start a family and that we can like buy a house and still live how we want to live with the means that we have. And yeah, the comparison and lifestyle creep is huge with me. And I know that that's just going to ruin any joy, but it's hard to divide that out. For sure. It is hard, despite the, you know, saying that comparison is the thief of joy. It creeps up and it thieves a lot. So basically you've said to us that you want to start a family, but you also want a tennis bracelet. So is that a fair balance that you want to strike?

5:00Yes. So before we get into all that, I want to bring up something that you told our producer. You said, I feel like I'm constantly comparing our financial situation to our friends who are very successful in their careers. Can you tell me more about what that looks like? Because you are also successful in your career. Yeah. So I feel like my friends are in corporate America. they've been climbing quote the corporate ladder and so watching them have those successes really feeds into me feeling like we're not where we should be or personally I'm not there. I've moved around jobs and so I haven't been at like a job for eight years right out of college like some of my friends and so I think that feeds into maybe like money dysmorphia in a way where it's like you think that somebody who's been at their job for so long has all these responsibilities they have the compensation to go with it.

5:51And then our friends are always talking about extravagant trips or purchasing this or that, or we're talking about homes right now. And everyone's looking at like million dollar plus homes. And so that feeds into it. Do you know how much they make? Or are you just assuming? So for one couple, yes, we do. And then just sort of assuming based on discussions. So tidbits I've learned. And it's definitely like you don't know people's financial situations. They could be in debt. But from conversations with friends, it doesn't seem like they're carrying credit card debt. So I mean, but we don't know.

6:25We don't know. No. Where roughly are you guys at? I think W2 wise, we're around 230 as a couple. And we're right around the couple that I know what they make. I think they're right around there. So wait, you're you're comparing yourself to the couple that earns the same amount as you guys? But maybe like$20 ,000 to$30 ,000 more than us. Okay. Not talking a huge difference here. No, I guess not. I mean, I think a little bit of competition is healthy. It actually could motivate you to make better financial choices. So I'm not knocking that. I think money dysmorphia, however, has become a thing. And that is not healthy.

7:09Money dysmorphia is this phenomenon where this heightened sense of comparison makes you feel financially insecure, depressed in some cases, anxious without a real basis in reality. So do you feel like you struggle more with that? Yeah, I think so. And I think especially it's like I try to cut back on our spendings in different places, which can be healthy. But it's also like my husband will be saying, well, we can do this. We're financially able to do this. Like, let's do it. Whereas I struggle with that. And I know like growing up, I saw that in my parents too. That's where it is. Let's double click there.

7:47I feel like sometimes I'm a psychologist. All right. So what did you see in your parents that these conversations with your husband triggers? Being very frugal, it was always kind of pulling teeth to get my dad to go on any vacations because he had this scarcity mindset that we don't have the money for that, that we can't afford to do that trip. And my mom was the one having to be like, we do have the money. We can do this. So I see that playing out in my marriage, kind of. Where you are your father, basically. Yeah, yeah. And how do you think that manifests? You feel like you hoard more, you save more, you maybe binge sometimes on things because you've felt so deprived.

8:34How do you internalize it? Probably hoarding, wanting to save our money, but then definitely wanting to go on trips. That's where I spend my money. So a little bit of both. I mean, here's the thing. Your financial foundation, the reality of it is really solid. You shared a bunch of details with us before we chatted. You don't have any debt. You have juicy dual incomes. You have growing investments. You have real estate that you're investing in on the side. You're in your early 30s. All of this is a huge accomplishment, Rose. So what is exactly of that picture keeping you up at night financially?

9:15Is it more about affording the future or feeling like you're currently falling behind with some of the trips and some of the luxury purchases right now compared to your peers? I think both with the how are we going to afford life like we're in our 30s so we have the rest of our lives in a way that we have to financially support and knowing like we want to start a family and kids aren't cheap and how are we going to do that. I feel like I am just getting by with just a man and a dog and wondering how we add on humans to this. So I don't know if that's like a form of lifestyle creep, but that's sort of the one that I feel.

9:57Whereas you're getting older, you're getting all these responsibilities. So it's not necessarily the extravagant lifestyle creep. It's just sort of the life creep. I don't know. Yeah, listen, we will get to kiddos because I just had one and you're right, they are expensive. But when it comes to luxury, so let's just cross that one off the list. There are definitely smart ways to do it. There are not so smart ways to do it, right? If we're talking handbags here, you can either rent a bag, you could invest in a bag that actually appreciates in value, like an Hermes bag or a Chanel flat bag. I mean, let's be real.

10:35Like if you're going to do it, just be smart about it. Our producer bought Balenciaga triple S sneakers, the big, thick, chunky ones, I think. Those do not appreciate. Those depreciate. So when it comes to a luxury purchase, think about the ones that appreciate, not depreciate. When it comes to friends, I would do the same thing. I would think of the ones that appreciate and that the ones that appreciate you in the different sense and move away from some of this comparison toward aspiration. I don't think it's about being flashy around your friends or trying to keep up or show them what you can do or where you can go.

11:15It's about being really disciplined. And I'm sure your friends didn't get rich by acting like they're rich. They got rich by hopefully acting like they're not rich and living below their means. So let's talk about what something like that would look like for you? Do you feel like you have good friends? Yeah, yeah, I do. And I know like it feels like the conversations are happening more because everyone's like, it's so expensive to live. How are we paying our bills? We all want to buy houses. And so it's at the forefront of our conversations. And I think just how relevant it is, is weighing on me.

11:54But like previously, this wasn't a big deal with us. It's just become a bigger thing I've noticed. So if we're being honest, it's not really your friends. It's you. Yeah. Look, you know, the first step to any recovery is admitting you have a problem and having the self-awareness. I think it's really, really big of you to come out and talk about this honestly and be self-reflective because I think that once you name whatever this thing you're feeling is around money dysmorphia, you can finally attack it. So you have an issue of comparison. It's not that they're flashing it around in your face and making you feel bad about it.

12:37No, they're, I mean, not at all. It's just the picking apart, like, conversations of being out with friends and then coming home and just sort of ruminating on those conversations and being like, wow, they're doing this or that. It seems like they're so well off. It seems like they're doing such a great job at work and everything. So I feel like it's definitely a me problem. Okay. So let's tell the mean girl inside your head to try and sit down because you guys are doing just as well. It sounds like you and your partner take home about almost$13 ,000 a month. Your rent is$3 ,300. You're saving.

13:15You're investing constantly. And those are all huge wins. But you're also dreaming of a million dollar home. It sounds like all of your friends are in the same sort of life stage where you're buying homes and starting families. So how did you land on a million dollars for your budget? Just sort of looking at what we could get in our area, what's available. So looking at like a$400 ,000 house in the area of the suburbs that we're in, it's just sort of like a shack, to be frank in my opinion because I do like the higher things I want a nice house and so it's like okay where what like price range will give us the house that I would like and so it's sort of around the $800 ,000 range I think and then using like various calculators seeing how far we could push it and And so I feel like the million 1.2 would be our highest end.

14:15And also hopefully assuming that our incomes will continue to go up since we're only in our 30s and we have both said we would rather maybe stretch a bit knowing and hoping that our income will increase and then that monthly mortgage would be a smaller chunk of our expenses. Like my father-in-law bought one house and they've been it for 30 plus years and as his career progressed, he was like, I could have bought a better, bigger house because my financial situation changed. So that's sort of in the back of my head, too, that that could happen. Or you could sell your house and buy a bigger house.

14:51Like your story doesn't have to be your parents story. And I think that's part of the thing you're falling into. A lot of people are falling into it because you see a certain financial story. You know, we only live in one households growing up. So that's the story we know. And it's coming to a place where you realize you are the hero of the story and you get to decide or you could rent and use all of that liquidity to invest in other things like your rental side hustle, it sounds like, or something else. So you don't have to buy a house. You don't have to stay in that house like your father. If you do and you decide that you want to do that, great.

15:32But just remember that you don't have to do that. You get to decide. So if you do go this path, let's just break down the numbers, your mortgage, including property taxes, insurance, all that stuff is going to be hopefully no more than 30 % of your gross income. That's a sweet spot for living within your means. So that means based on the money that you guys are making, a safe monthly housing budget is around$4 ,500. I don't know if you're looking at buildings with monthly fees, homeowner associations, but don't forget to factor those in. With a 20 % down payment, that really pushes you up at your limit.

16:11It's not impossible, this budget. It's going to require some trade-offs. I think you are not super keen on trade-offs, if you're being honest. So you can definitely afford a beautiful home, but you're going to want to balance that out with some of your other goals, like eventually raising a family and traveling. So I'll pause there because I want to know your thoughts. Yes. I'm not good at trade-offs. That's very true. I definitely want to quote, have it all. I'm not going to compromise. So that's a little hard. And that also is sort of the reason that I'm struggling because I know we want a family and everything and it's, everything's just so expensive.

16:50And so that's like the loop in my head that how are we going to make things work knowing like, okay, we have a good financial foundation, but it doesn't feel like it when we look ahead. And maybe I'm looking too far ahead and I'm worried about the future that's not even here yet, but it's definitely causing stress. Yeah, because I don't think you've actually defined what that looks like. That's what's causing you a lot of this anxiety. You can have it all, sister. You just have to define what it all means and stop changing the goalpost on yourself. So what does having it all mean? The house that we want and then having the kids, hopefully, ideally.

17:32I used to say I wanted four kids, but as we've gotten older and seeing how expensive it is, I realized that probably won't happen. It would be more like two or three. And then being able to travel, definitely. That's where I spend my money right now. My parents took me on vacations to Europe as a kid, and I loved it. I want to give that to my kids. It teaches them about different cultures, and it's a funner way to learn about history. That's where my passion for history came from. So just being able to give our family that would, I think, be having it all in my mind. Yeah, and in that definition, you didn't talk about your job.

18:12So when you feel sort of comparison creeping in, you didn't define what having it all looks like as having a higher position or a bigger base salary. You also didn't talk about luxury purchases as having it all. So sometimes when you see somebody else having a thing, you have to remind yourself. It's really easy to say, oh, my gosh, I suck. What am I doing with my life? I don't have that bracelet or whatever. But then you go back and you look at your list and you say, hey, was that even on my list? Or am I veering from what having it all means? Because once you start changing the goalpost on yourself based on an Instagram you see or based on what your friend does, you're never going to win the game.

18:55So I think we have to just decide on what that looks like. What does success look like? And when you hit it, you've hit it and don't keep changing it on yourself. Another really smart question that you asked was whether you should keep your down payment in cash or if you should move it into the stock market. Great question. In general, the guidance is if you need your money in a year or two, keep it in cash. And by the way, I do not mean like actual cash. I don't mean in a low interest savings account or checking account. I think if your timeline is three years or more, you can consider putting some of that into a conservative mix of some equities, which are stocks or bonds, maybe a little bit of both.

19:40But since you're starting to feel like you're serious about buying in the near future, it sounds like, in the next couple of years. I would stick with a high yield savings account, some treasury bonds, CDs. Sounds like you're already dabbling in that. It's not going to grow much, but it's not going to shrink. And hopefully it will at least keep pace with inflation. Because if you're keeping it in a checking account that's making you 0.01%, you're actually losing money over time in your purchasing power. So we don't want to do that. And that's super key for near-term goals like a house. Does that answer your question?

20:13Yes. And then I guess part of like a down payment, when we're thinking about ours, we're not thinking about our equity investments and our brokerage accounts. Do you recommend people selling those and using them for houses? We're just sort of putting money into equities and just forgetting about it. I don't know. How much do you have in your brokerage? We have$130-ish. What brokerage is it? Vanguard, and we have it in a mix of like VOO, VTI, VFIAX, just different ETFs and mutual funds. No, that's good. That's the Vanguard mutual fund that tracks the S &P 500. And all the V stuff are Vanguard, which are typically low cost funds.

21:03So that's all great. You also said you're generally worried about we're worried so much. Listen, I'm a worrier too. So I get it. But you're worried about a lot of things. So you're also worried that you're too cash heavy right now. Is that right? You just read me your brokerage. Yes. How much do you have in cash or where is that sitting? Right now, our cash is sitting in the money market. Making what? I think it's like 5%. is the SEC seven-day yield. And we have$123 ,000 just about. And that's what we're looking at for the down payment. When we think about our goal to get to a down payment, we're only factoring in that$123 ,000 and excluding the equity of$130 ,000 in the other account.

21:56But so you're only factoring the 123. Yeah. I mean, cash is really great for short term goals or buying opportunities. Right. When we saw the market tank, you know, I personally wish I had more cash to take advantage of that opportunity. But too much cash in the long term means you're missing out on growth. So it is a balance. Your emergency fund should definitely be in a high yield savings account or a money market fund like you're doing. So, yay. It's the easiest thing you can do is to have a high yield savings account. Beyond that, maybe keep excess savings invested in a very safe, basic portfolio of stocks and bonds.

22:38If you are looking more for the long term, if you guys push out this time frame, think 70-30 or 80-20 with stocks and bonds, mix in maybe some international funds for diversification. But this is if you guys decide to push that timeline out longer. And the thought process, of course, behind that is if we have major fluctuations, you're not selling or using the money to borrow against when it's low because it happens. Lows and highs. We don't know when the lows are. We don't know when the highs are. So short term cash doing exactly what you're doing. It is a lot. So make sure that you are really certain that you're going to pull this trigger.

23:22So we have like the automatic recurring investment transfers out of checking and into our savings. What would you say knowing like we hope to buy in the next one to two years that we should be pumping that into the Vanguard money market fund so that it's sitting in cash when we're ready to buy? Or should we be putting more of it into equities. Putting it from where? From your paycheck? Yeah. I mean, I think you should be growing your brokerage more. I think you've gotten pretty much what you need, depending on what kind of loan you get out. But I would, and the breakdown of your brokerage sounds really safe.

24:08Generally speaking, it will yield you probably around 7 % historically. That's what those types of funds have yielded. So I would think about potentially beefing up some of your equity exposure. You guys are young. If it's just sitting in a checking account, just at the very least ask your bank if there's a sweeps account. So a sweep account is basically like they sweep your money away overnight. You tell them what amount you want to be available to you and the rest gets invested and then it comes back. And if you need more than what you say, so let's say you want$500 readily available and you have$20 ,000 in there, they're going to sweep$19 ,500 into this overnight.

25:01They're going to invest it and then you're going to get an interest payment once a month probably. Oh, wow. I'll look into that. Should we talk about babies? Yes.

25:14Hold on to your wallets. Money Rehab will be right back. And now for some more Money Rehab.

25:28You mentioned something that I hear a lot. Can we actually afford a family? It is a real concern. You're living in a big city. Babies are expensive. Trust me. I know. I just had one. Here's what I'll say. You don't need to have every expense mapped out before you start. But what you do need to have is a steady income check. You need to have your emergency fund. Sounds like you have that. Yes. So then the last part of this equation is really who's going to take care of this kid when you guys are working. So daycare in a major city. Have you looked into it yet? Very expensive. Very expensive people, like$30 ,000 or more, I've heard.