Am I missing anything from this budget?


If I’m reading this correctly, your budget is equal to your income. In addition, you are talking about spending your entire cash reserves on the house. Both of these are mistakes, in my opinion.

Taking out a mortgage, as was suggested in a comment, does not help your situation, because then you would have a monthly loan payment that you have no room for in your budget. If you are going to buy this house, it doesn’t make sense to borrow money now that you don’t need now. If you do pay cash for the house and need money later, you can get a mortgage/home equity loan at that time.

Better than that, however, would be to get a less expensive home. If you limit yourself to $1.3 million, as you suggest, you will have $500k left over in cash and no mortgage payment.

You have an incredible income and have done extremely well saving up to this point. If I were you, I would be very careful before making such a drastic shift in spending.


Things that I see are missing:

  • Gym membership or fitness related activities
  • Entertainment
  • Clothing for the adults
  • Car maintenance (I assume you pay cash for cars, which is awesome if you do)
  • Other insurance including life insurance for you and the spouse, and probably an umbrella policy
  • Charitable giving
  • Tolls
  • Disposable income you, and your wife, can spend without accountability. Even for those with high debt this should be some amount of money, small but some.
  • Savings
  • Retirement savings

My only editorial comment is that 9k per year is a lot to spend on baby stuff. For example my wife went shopping for our granddaughter this weekend. She purchased a couple of pairs of shoes and 5 cute new dresses. She spent less than $50. I would think half that would be way too much.

Also you do not have to estimate property tax, they have the records online. Also you can probably get a quote on the home owners insurance that is very accurate.

I am a massive fan of being able to purchase a home for cash. If it was me, I would go for the less expensive home for cash rather than taking out a small mortgage. There is a cost of taking out a mortgage and you lose some negotiating power. Please consider it will be emotionally taxing to go from 1.8m to zero, or even in the case of the less expensive home from 1.8m to .5m. That would generate some strong feelings in most people no matter how wise the purchase.


A few observations:

The property tax is a knowable item. My town has a tax of 1.8%, so the $1.8M house is $32,400 per year. A friend in another town 20 minutes away has a tax rate about half of mine, as his town has a lager commercial base, raising enough tax revenue that their homeowner property tax is far lower. In hindsight, choosing a town based on the great school system was not a wise financial move. For us, also with the one kid, we'd have saved enough in property tax to fund paying for private school. We also wouldn't be so eager to downsize from our now too-big house.

Home repairs - Over the 23 years we are in the house, we've replaced the roof ($27K), the first floor HVAC ($12K) and recently, the second floor HVAC & Water Heater ($20K both). If you are buying a brand new house, and not just new-to-you, these are time bombs you should be aware of. Your $18K house maintenance is a good number, so long as you save some of the left over funds each year. However you account for it, the concept is called a 'sinking fund'.

The food seems high. A couple years ago, I tracked food. The three of us totalled $10/day/person, with restaurant meals included. If a large portion of this $20K line item is eating out, you don't account for a sitter.

Others have mentions Car. This is another sinking fund item. A new car has a large cash cost, an older car might have a bit more maintenance. If that $1800 is for 2 cars, that feels very low to me. Our insurance alone is more than that. A car rule of thumb is 50 cents/mile times your miles driven per year which is a number you should be able to estimate accurately.

The way you've presented the numbers, $145K take-home, is curious to me. In my working days (I am retired) I was always aware of my gross income, and never thought 'take-home'. When we bought the house, it cost 2.5X our gross. We financed 80%, and had a mortgage twice our annual income. If your gross is $200K, you are proposing a home purchase that's 9 times your income. Your budget should reflect your values. The 9X number tells me your priority is to have a large, beautiful home. The budget total for house related items is $62K, just over 30% of your gross income, with no mortgage. You make no reference to where the cash came from. Whether it was a one time windfall, or saved from the last decade of living frugally. This is just an observation.

Keep in mind, the neighbors may be in a similar situation, or they might just be doctors/lawyers/VPs of company making $500K+ per year. You may quickly realize you are not able to afford the cars they drive, clothes they buy or vacations they take. Even if we help you look at the numbers, which may work just fine, the social issues shouldn't be ignored. I offer this from my own experience. My wife and I drive the least expensive cars on our street. 5 of the 6 neighbors belong to a country club. 3 have second homes.

If you fill in some missing details, you'll find answers here might be edited to address.