A reader (let’s call him Martin) wrote to me with an interesting scenario about his decision to upgrade his home:
I am in my late 40′s and bought a home 8 years ago in a modest neighborhood and will have it completely paid off in about 10 years. My mortgage payments are around $470/month. I live by myself as my daughter is married. However, since I bought the house, I graduated from law school and am now working as an attorney. Consequently, my income has increased drastically and will continue to do so in the future. I’m tempted to stay in the house since the mortgage payments are so small and put away more money towards retirement, travel, and other things I enjoy. However, as an attorney working for a small-to-mid-size law firm, I’m supposed to market the firm and my own services, and my current neighborhood probably won’t generate much, if any, new clients. It’s blue-collar and most of my neighbors would have little use for an attorney. I’m wondering if it would be better for my career if I moved into a more upscale neighborhood that would help to develop a client database of white-collar individuals and/or businesses.
I know it’s a weird problem and the frugal part of me says to stay in the house I’m in now. So that’s why I’m emailing – to see if there would ever be justification for moving up in value when there’s no actual need for space.
So, let’s look at the important factors here:
A major boost in income Martin’s income is much higher than it used to be, which makes his monthly mortgage payments quite easy to make. It also means that he could easily handle higher mortgage payments.
A change in career – and thus new associates Martin is now associating with a different crowd of people and also trying to cultivate them as clients. His current neighborhood doesn’t facilitate such client growth, so there is some degree of a career advantage in moving to a new neighborhood.
A frugal desire to stay in the current house Martin’s current income enables him to do a lot of enjoyable things – and the low mortgage payment makes these possible. Moving would cut down on these options.
If I were Martin, I would ask myself two questions:
How important is success at my career to my life and values? The email mentions both an enjoyment of traveling and other things that are enjoyed, but obviously he made a mid-life choice to become a lawyer, which indicates some serious interest in cultivating that as a career. Which is truly the top value? Obviously, it doesn’t mean that you should abandon the other stuff, but one or the other should have the top importance.
How much house can you afford? Obviously, living alone means you don’t need a monstrous home, but if you move into a white collar neighborhood, your home will be much more costly than where you’re at now. You’ll probably be looking for a relatively smaller home in an upscale neighborhood, so I would target a few neighborhoods and see what the prices are on target homes in that area. Given the current housing market, it may be a good time to actually move up with so many people moving down.
The real key, though, is where your values lie: do you want to turbo-charge your career or do you want to enjoy other aspects of life more? That alone will tell you whether you should be moving or not.