Capping your lifestyle

[johntomba]

It has been quite a while since I posted, but now with three small children computer time is VERY limited, sleep is such a commodity.....

Anyway, my husband is taking a new job in a few weeks. It represents a 20 to 25% pay raise. We live comfortably without the raise thanks to good planning and budgeting. Right now our plan is to save the increase, about 1k a month. In preparation for keeping the right perspective on things I read a finance book given to me a while back that talked about the concept of capping your life style. The basic jist of it is you self limit what you spend on your life style so that you have a nice savings margin as you advance in life. I really liked the idea of not letting your spending grow with your income.

We currently have a starter home I've owned know for 12 years. It has 20K-ish worth of equity in it even after the fall in real estate values and we make extra principle payments on it every month with a 3% interest rate. Our tentative plans are to save the 1k for 4 years, so approximately 50K for a down payment on a larger home. By then we should have the last of our planned 4 kids and be ready for a bigger home. Honestly, I will want it before then, but I am going to wait so I can do it without stress. So we use the money for the DP, move over the course of a month, fix up the older home a little after over 15 years of one owner and then replace our 1 yr EF with the sale of the old house. Does this seem a reasonable approach? Do you see any pitfalls I am not seeing?

My objective is that the payment on the newer house will be about the same as we are currently paying on this one. Thus, not increasing our lifestyle spending.

Thoughts?

Bo

I like this plan. Pay off that home!