Remember Zhu Rong’s comment about my simple furnishing in James Madison #25-12 ?
I visited several Chinese middle class home in the U.S. and Singapore. My home pales in comparison so I seldom invite friends over such as YLZ. I have always felt negative, a bit ashamed and inferior. This sentiment is natural immaturity. Most of us are immature. I think my dad would tell me to relax and let go.
Main focus today is the U.S. context. To a lesser extent, this blogpost also applies to Singapore. My wife envies those families living in luxury private housing.
— Brbr Principle : pay for what’s important to your true self. Guard against mindless peer bench-marking and lifestyle creep
- I pay for UChicago degree.’
- I pay for well-connected location with short commute
- I pay for frequent family reunion flights.
- … but I don’t pay for a big, nice home just to show other people.
As national leader, LKY followed many unconventional principles.
In my case, this is another of my unconventional principles in personal finance. This and other principles underpin my Brbr, Fuller wealth, cashflow high ground, and bare-bones but growing ffree.
— rental yield is underwhelming in the fancy homes :
- newer buildings
- higher floor
- bigger homes
- bigger backyard
— fancy home as investment?
Like my sister, many middle-class families would justify their home purchase as something unlike a lavish vacation. Home purchase is an investment. Really? Such a big home entails burn rate burdens due to maintenance, mortgage, and taxes. Rental yield is discussed above. As investment, the saving grace is windfall appreciation.
As explained in big discretionary spends4Chinese middle-class]US and other blogposts a big home could entail up to $6k/M burn rate. Heavy burden.
— immigrant’s American dream — DeepakCM’s point. I think many immigrants come from developing countries. Even a middle class in the home country won’t have such big homes. So when they come to the U.S. they want to experience this part of the American dream.
— financially struggling family living in an expensive home, inherited or purchased
I think this scenario can be realistic — say, a family of four earning $7k/M living in a home worth $1000k.
Would they rather live in a $500k home (half the current home value) with the other half of the money invested somewhere producing $1000 to 3000 monthly rental income?
Answer depends on many factors such as home size, location, floor (the higher the more expensive), but I think if they are struggling financially, then they can trade those nice things for a simpler yet safe and comfortable home + steady income. Remember Ms Cheng’s Bayonne home?
So a big nice home is kinda unneeded and wasted, like a massive lifestyle creep.
Q: Between current income vs windfall appreciation, what’s more important? I guess for a struggling family (me?) income is.