Property - dream home? Or stay put, save, enjoy, persue FIRE

[twinkie100]

Hello wise people.

We are a family of four living in a house that suits our current needs. It is not a dream home (!) as it has a couple of minor (and one considerable) drawbacks, but is 4 bed, nice extended kitchen, driveway, nice little garden, a walk to the kids school/park/lots of amenities in an up and coming area.

We bought at the right time, and the property price (current value) has increased by 49%. Our mortgage is 15% of our net monthly income, so no stretch.

We have some savings in Nutmeg and ISAs, and savings for the kids. We have all the various insurances we need. But not much in pensions which we are addressing.

We could make a significant upgrade - double the value of our current home. There are some things about our current house making us want to move, but we are undecided about it all.

It seems to be the done thing to stretch yourself for big dream homes among many friends - but I'm starting to question it all. Perhaps the right thing is to stay put, overpay mortgage, make substantial savings/pay into pension, enjoy holidays, have more flexibility and choice around work.

I've also been reading into FIRE which is fascinating, and making me question all the material choices we make.

Any experience? Advice? Did you go for your dream home or stay put?

And I posted quite hastily-I was not saying don't plan ahead financially etc but just don't let it be the whole life goal

I’m going to look into FIRE but if covid has taught me anything is that you got to live your life and make it a fun one, just existing is not enough!

the only investment making any money is property. And that is very unlikely to change in the medium term, if not longer.

That's really not true, the stock market has had an incredible 10 years and if the OP is interested in FIRE then I assume she's looking at low-cost equity trackers, which have been growing at c25% pa recently. Of course no-one knows what will happen in the future and lots of people can see the potential for a crash in property and shares in the near future. Over time there's a reasonable argument that shares out perform property (www.thisismoney.co.uk/money/investing/article-5426101/Why-property-isnt-investment-think-is.html). Finally, putting one house at the heart of your financial planning is clearly risky because anything that affects the value of that one house can scupper your plans if you intended to rely on releasing equity from it for your future. People tend not to invest in just one or two shares in the same way.

Comparing the tax treatment is difficult without more information. It's right to say you don't pay capital gains on your residence but you also don't pay it on anything in an ISA, plus the costs of moving and maintaing property are high, especially stamp duty in the bracket that the OP seems to be aiming for. Presumably the OP is looking at putting quite a bit in pensions and depending on her income the tax relief on that could be significant. The big difference you haven't mentioned is that she'd presumably be leveraging any property purchase with a mortgage, which (I hope!) she won't be with shares. That can really amplify gains but also losses.

So altogether I don't think it's at all true to say that the property purchase is likely to outperform other investments over time, though it has the potential to depending on what happens...

FIRE for me is living for today, it’s not about being extreme and retiring age 40 but it’s having time freedom and financial freedom to look after family, quit a job you hate, travel or do work you love by making conscious choices about what’s important and not doing what everyone else is doing: debt, overconsumption, comparing to other people, staying in a job that’s making you ill because you have so much mortgage debt that you can’t afford to walk away. Am definitely FIRE-lite, I’m already mid-40s and will probably work till the normal retirement age or beyond as I enjoy what I do and I’d be bored without it.

I'm really sorry to hear of your loss mumsiedarlingrevolta and of course sacrificing life now for a future that might not come is a foolish thing to do. Some of the extreme FIRE people do seem to do that. But I do think there is a lot to learn from in the movement, even if you don't go all out for it. Part of FIRE is being mindful about spending, resisting spending on things because they are the 'norm' for your group and only spending where there is value for you in doing so. The OP doesn't say anything about how her dream house would enhance her life now. Perhaps it would and would be worth it but that's what I'd be focusing on if I were her.

@Brown76

FIRE for me is living for today, it’s not about being extreme and retiring age 40 but it’s having time freedom and financial freedom to look after family, quit a job you hate, travel or do work you love by making conscious choices about what’s important and not doing what everyone else is doing: debt, overconsumption, comparing to other people, staying in a job that’s making you ill because you have so much mortgage debt that you can’t afford to walk away. Am definitely FIRE-lite, I’m already mid-40s and will probably work till the normal retirement age or beyond as I enjoy what I do and I’d be bored without it.

Yes definitely this.

@Mia85 thank you

Great post-gives a lot more clarity to FIRE and how-like anything-it can be taken to extreme but sounds like from your posts that it has valuable ideals that make a lot of sense!!