Should I trade up to my dream home now or work longer for financial independence?

Buying a dream home is a goal for many — but is it a goal that you should prioritize over financial independence?

This is a question that a Reddit user is trying to answer right now. His dream home would cost him a significant portion of his net worth, but since he is in a pretty good financial position, he’s thinking about making the purchase anyway. It would, however, mean his dreams of achieving financial independence would be delayed, so he’s not sure what the right move is. 

Dream home or financial independence — can you have both?

The Reddit user explained that he is 42 years old and he has $9 million right now. This includes $3 million in personal real estate, including a primary residence and a vacation home — neither of which has a mortgage. He also has $3 million in cash and investments in a brokerage account, and another $3 million in college and retirement plans.

In the next five years, the Redditor expects to earn between $2 million and $3 million per year, but around 60% to 75% of that amount is variable compensation. The poster wants to become financially independent as soon as he can, but he wants to upgrade his primary residence from a $1 million home to his $4 million dream home.  

In the short term, this would mean that the poster ends up with 50% of his net worth tied up in personal real estate. In the long term, buying the house would also mean that he would have to push out his retirement by three years.  He’s not sure if he’ll end up regretting that choice or if it would be possible for him to both live in his ideal place and have his perfect property. 

Balancing competing financial priorities is sometimes challenging 

The poster is in a pretty good position to buy his dream home, given the head start that he has on investing for retirement at a young age and given his earning potential.

However, spending so much money on a house is obviously going to affect his goal of achieving financial independence ASAP. As several people commenting on the thread pointed out, the original poster (OP) needs to consider both the short-term hit to his net worth and the additional long-term costs that he would be taking on. 

The Redditor stands to lose the investment gains he would have made on the money in the market that he pulls out to buy the house. Of course, he could take out a home loan, but mortgage rates are still pretty high right now, and borrowing for such a costly house could mean spending a lot of money on interest. 

Regardless of whether he borrows or not, he will be committing to new expenses that increase his spend rate, so working longer and saving more will definitely become necessary. As a result, a number of people commenting on the thread suggested the poster should really take the time to consider whether the new house would improve his life enough to justify the impact on his financial independence.

At the same time, though, the poster is young and does have the potential to make a lot of money, so if the home is important to him and he’s willing to trade a few extra years of his life to get it, it wouldn’t necessarily be a financial mistake. While a $4 million home is a splurge, it’s not that much of a splurge for someone at his income level, and people do need to enjoy their life even as they try to work toward financial independence. 

The best option for the poster, ultimately, is to talk to a financial advisor who can help him get very specific details about the extra money he’ll need to make, and the extra time he’ll need to work if he buys the house. The advisor can help him balance his competing priorities of retiring early versus buying a perfect home by making it easy to see what his life would look like depending on which choice he makes.  

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