Author: Mr & Mrs DDU.
It’s a very important question that we are asking ourselves a lot recently.
On the planning spectrum of couples, we are big planners. We like to plan ahead about what movie we might see at the cinema, what shares we’re considering next, where we want to roadtrip next etc. Those are all short term plans and goals.
We also like to plan and talk about our long term goals. Having a baby, financial independence etc.
With most things we know what we want and plan how to get it.
Now that there’s a baby on the way we are reassessing and questioning ourselves about what we want out of life.
Ultimately, the goal is to be financially independent and live off the income that our investments produce. But when do we want to try to make that happen? 50? 40? 35? What are we willing to do to make that happen?
Every month we are saving money. In some months we have saved over 50% of our net income. That’s great, but what do we want to do with the savings?
We are putting a large amount of it towards investing in shares. But we are also contributing $200 a month towards our IVF baby #2 fund. We are contributing $200 a month towards our growing emergency fund.
Being pregnant has made us question where we want to live. Do we want to rent forever? There are plenty of FIRE bloggers out there who have never bought a house, built up their investments and made it work. When we didn’t have a baby on the way we thought we could go for 10+ years before considering buying.
Australians and Canadians can attest to how high property prices are. On a price to income ratio and gross yield on a rental property comparison, Australians have some of the ‘worst’ cities in the world. We calculated that our annual rent would be around a 3% gross yield of how much our current home would be to buy. 3%! That’s before interest and all the other expenses.
Do we want to try to compete with foreign buyers, investors and Keep-up-with-the-Jonses/leverage-as-much-as-possible-to-afford-a-house-s? It’s really hard to make that financial decision stack up when it seems like such an illogical move, particularly with interest rates starting to go up again.
Perhaps we should wait for this impending crash that may or may not happen. Even so, if we are to buy we would still have to put up a hell of a deposit to buy something. Any cash we put towards a house would mean less for investing and extend when we can achieve financial independence. First World problems eh? All this thinking is making us hungry, where’s some avocado on toast?
It comes back to the original question. What is important to us in life?
We want to reach financial independence, so we will keep contributing a monthly investment amount, currently at least $1,000, hopefully that monthly figure can grow.
We want a strong emergency fund so we can deal with whatever comes up. So we will keep contributing $200 a month and receive interest.
We probably will want a second child, so we are now adding $200 a month (and interest) to our IVF fund that we had after being successful with our first.
We probably want to buy a house at some point in the future. We have just started a new savings account and will start adding $200 a month as a starting point. Once we have stopped acquiring the expensive baby items and hopefully increased our earnings, we will grow this monthly figure to $500, $750 or perhaps even $1,000 in the future. We may end up having to decide if we want a house or second child first if an opportunity arises to buy property at a cheaper price in the next two or three years.
Lots to ponder, no decisions but we are saving and the money can go towards our goals when we want to action them, or at least we’ll be a lot closer to completing them.
This post wasn’t meant as a big reveal or anything like that. We started the blog to share our journey towards financial independence and having a baby. Where we live is a big part of our financial picture and we thought it would be good to share what’s been going through our minds recently, particularly as it’s a blog right?
Ultimately all this planning comes down to wanting a happy life and trying to make choices that will maximise our happiness. We are feeling very happy lately with the path our lives are taking, and that’s all we could ask for in the end.
Are you in a similar position where you are weighing up saving for a house versus investing for financial independence? What are your thoughts and the choices you’re making?