Is downsizing the answer?

November 20, 2011 

Dear Dave,

My wife and I are about to have our first child. She'd like to stay home with the baby after it's born, so we'll be losing about half our income. We've looked at our budget, and we can stay in the house but things would be very tight. I'll make $42,000 this year, with a potential bonus of $23,000 at the end of the year. Our house payment is $1,550 a month. Do you think we should downsize to a smaller home and live more comfortably?

- Mike

Dear Mike,

I hate it when people have to leave their homes. It can be a hurtful thing to the heart and spirit.

If you had $65,000 as a steady income the house payment wouldn't be a big deal. But you can't count on a potential bonus, and from your guaranteed income, more than half your take-home pay will be wrapped up in a house payment. You'd probably have to take a part-time job, or save any bonus you get to subsidize your income just to have a realistic chance of making ends meet.

I'm all for mom staying home with the kids – especially a little baby – whenever possible. But when it comes right down to it, Mike, you and your wife have to decide if it's worth the part-time work and budget hassles to stay where you are.

Moving is no fun, especially when it's something you're forced to do. But you don't want to be a slave to your house payment either!.

- Dave

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