how to pay for home improvement projects

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Topic Author
txgolfer_19
Posts: 84
Joined: Mon May 18, 2020 8:46 am

how to pay for home improvement projects

Post by txgolfer_19 »

Hello,

We moved into a new house about 15 months ago, and I survived for about 15 months before DW decided she would like to make some changes. If we do everything she wants, we'd probably be at around the $10k range. An additional $10k would really get her what she wants (new kitchen countertops). The first $10k would include tearing out a built in cabinet, a new buffet to take the place of said cabinet, some painting, expanding our pantry closet, and some new cabinetry to store baby/toddler toys. We also have baby #2 on the way in mid 2022, so will likely need to spend another $2 or $3k on the new nursery.

I struggle to spend money--I'm naturally more of a saver and get uncomfortable spending money. Wife is more of a spender, but she's gotten better. The things we are looking at I'm generally ok with doing. I guess my question is how to people pay/budget for larger expenses like this? Do you generally keep cash reserves for larger expenses, pull from taxable accounts, or utilize a line of credit? I guess I'm also looking for some assurance that we can afford to do the improvements.

Here's a quick rundown of our picture, which has improved quite a bit over the past year. We paid off both cars and I took a new job which doubled my total comp (base + cash bonus) to ~$290k.

Cash: $20k

Debt: $495k mortgage at 2.875%, market value of~$725k-purchased fall 2020.

Tax Filing Status: Married filing jointly

Tax Bracket: 24%, 0% state (Texas).
His salary is ~$165k, plus bonus of ~125k.
Wife is sole proprietor averaging ~$6k/month net profit.

Age: 36 / 31

Current Invested Assets ~$808k

Taxable: 34%
His Rollover IRA: 32%
Her Rollover IRA: 1%
His Roth IRA: 6%
His 401k: 17%
HSA: 4%
Real Estate Investments: 6%

We also have $75k in a 529 for our 1 year old.

New Contributions:
$19,500 his 401k, plus 6.25% or roughly $10k from employer
$4k/month taxable
~$80k to mix of taxable/cash from bonus
Snuffycuts99
Posts: 207
Joined: Thu Apr 02, 2015 11:09 pm

Re: how to pay for home improvement projects

Post by Snuffycuts99 »

You can afford it. Take a few months from your taxable brokerage contributions and use it to pay for the home improvements. Happy wife, happy life. Good luck.
Ninjadoc
Posts: 25
Joined: Fri Aug 07, 2020 8:19 pm

Re: how to pay for home improvement projects

Post by Ninjadoc »

I would use combination cash on hand and line of credit (home equity if possible). Is 20k cash what you have for "emergency fund." What are your monthly expenses? I would be less comfortable using cash if you have a smaller emergency fund (< 3 months expenses), and more comfortable with HELOC if you have stable income. And as long as you are otherwise meeting your savings goals, go for it!
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: how to pay for home improvement projects

Post by Grt2bOutdoors »

You make $165K base and your wife pulls in $72K net yearly. Where is your cash going?
You can afford the $10K outlay, you can afford the new countertops too, but are you sure it's really going to cost all-in $20k? Are you handy? Finding qualified labor might be a problem.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: how to pay for home improvement projects

Post by stan1 »

Of course you can do this. There's a difference between being frugal and being cheap. Spending $20K to fix up a newly purchased $725K house is perfectly fine when you have over $350k/year in income, are saving almost $150K/year in various accounts, and $800K in investment accounts in your mid 30s. Enjoy your home with your young children.

The $20K number seems a little low for what you describe, but maybe you are in a very low cost area or have family/friends doing some of the labor. Even if it is more than that you can afford it.
Topic Author
txgolfer_19
Posts: 84
Joined: Mon May 18, 2020 8:46 am

Re: how to pay for home improvement projects

Post by txgolfer_19 »

Grt2bOutdoors wrote: Fri Nov 12, 2021 9:09 pm You make $165K base and your wife pulls in $72K net yearly. Where is your cash going?
You can afford the $10K outlay, you can afford the new countertops too, but are you sure it's really going to cost all-in $20k? Are you handy? Finding qualified labor might be a problem.
I feel pretty good about the $10k estimate for the cabinet and pantry work, but the countertops I'm less confident about. If they came in high we could put that off for a while until prices come back down.

As far as the cash...we used $30k to pay off wife's car a few months ago, and put $25K into a real estate project about 8 weeks ago. Wife's income is also pretty lumpy--slow in summer, periodic big events, etc.

We do also have a line of credit setup collateralized by our brokerage account. We don't use it, but it's available to draw on at 3.75%.

Thanks for the feedback!
hvaclorax
Posts: 598
Joined: Mon Nov 21, 2016 5:01 pm

Re: how to pay for home improvement projects

Post by hvaclorax »

I recommend cash. The contractors love it. Also pay on time for good quality work. Seems with this approach we never have trouble getting prompt service when needed. Even from trades we may never have worked with. Word gets around. Caveat is we live in rural lower cost area where everyone is honest friendly and well known.
HVAC
User avatar
galving
Posts: 380
Joined: Wed Oct 07, 2009 12:47 pm
Location: US Gulf Coast

Re: how to pay for home improvement projects

Post by galving »

txgolfer_19 wrote: Fri Nov 12, 2021 8:48 pm Hello,

We moved into a new house about 15 months ago, and I survived for about 15 months before DW decided she would like to make some changes. If we do everything she wants, we'd probably be at around the $10k range. An additional $10k would really get her what she wants (new kitchen countertops). The first $10k would include tearing out a built in cabinet, a new buffet to take the place of said cabinet, some painting, expanding our pantry closet, and some new cabinetry to store baby/toddler toys. We also have baby #2 on the way in mid 2022, so will likely need to spend another $2 or $3k on the new nursery.

I struggle to spend money--I'm naturally more of a saver and get uncomfortable spending money. Wife is more of a spender, but she's gotten better. The things we are looking at I'm generally ok with doing. I guess my question is how to people pay/budget for larger expenses like this? Do you generally keep cash reserves for larger expenses, pull from taxable accounts, or utilize a line of credit? I guess I'm also looking for some assurance that we can afford to do the improvements.

Here's a quick rundown of our picture, which has improved quite a bit over the past year. We paid off both cars and I took a new job which doubled my total comp (base + cash bonus) to ~$290k.

Cash: $20k

Debt: $495k mortgage at 2.875%, market value of~$725k-purchased fall 2020.

Tax Filing Status: Married filing jointly

Tax Bracket: 24%, 0% state (Texas).
His salary is ~$165k, plus bonus of ~125k.
Wife is sole proprietor averaging ~$6k/month net profit.

Age: 36 / 31

Current Invested Assets ~$808k

Taxable: 34%
His Rollover IRA: 32%
Her Rollover IRA: 1%
His Roth IRA: 6%
His 401k: 17%
HSA: 4%
Real Estate Investments: 6%

We also have $75k in a 529 for our 1 year old.

New Contributions:
$19,500 his 401k, plus 6.25% or roughly $10k from employer
$4k/month taxable
~$80k to mix of taxable/cash from bonus
Go after it.
I'm also a 'saver' and generally would prefer to hold before executing. . . though I have to admit I was wrong.
2021 has been an upgrade year.
AC
Garage re-do
Fireplace install.

We pulled a bit of cash from our investments, and we should have executed it these sooner.
I get a great deal of satisfaction getting out of the car to a clean garage. It's illogical, it's emotional and I should have spent that $$$$ years ago.
Good luck!
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