Practicing Home Ownership

Posted in Home, Retirement on


Earlier this year I answered a question on This is a modified version of that Q&A which talks about “practicing” home ownership as a way to prepare to buy a home. It also touches on other personal financial items to consider when starting a family and how to balance all this with retirement savings.


My husband and I are recently married and are hoping to purchase a home in the next year or so. We live in the SF Bay area and anticipate needing at least $150K for a down payment. In addition to our goal of homeownership, we are looking to ensure that we’re on track for retirement, that we’re able to begin saving for our daughter’s college fund (she will be born any day now), and that we’re making our money work for us as best we can to build wealth overall.

Current Financial Snapshot

Cash reserves total $230,000 of which $75,000 is in an emergency fund (8 months of spending). Non-retirement Investments: $85,000 (mostly index funds). Retirement Account Balances: $460,000. Annual combined income is approximately $250,000.


First off, you’ve clearly been diligent savers…keep up the good work! The following will help you improve your overall financial picture!

You have the down payment saved for a new home and this pool of funds is in cash and NOT exposed to market volatility. This is critical because you’re looking to purchase in a short amount of time (1 year). The next step is to practice saving the amount the home will cost you (mortgage, insurance and taxes). Essentially, carving this amount out of your monthly budget. This is the approximate amount of your new mortgage plus property taxes plus insurance (averaged monthly) minus your current monthly rent.

With a baby and new home (as well as the moving, repairs, and additional furniture that come with it) expenses will change or be in flux. Your emergency reserve of a little over 8 months worth of expenses seems appropriate to me. Try not to let it dip below 6 months. You could even raise it to a years worth of expenses until you are settled in your new home and then invest excess reserves, for the long term, at that time.

Establish a 529 plan as soon as your daughter is born and max out contributions. Encourage grandparents and other family members to contribute, if they are able to do so.

To balance these goals with retirement, max out your 401(k) and IRA contributions. Target approximately 20% of your income to add to accounts you’ll use for retirement. This includes your 401(k) and IRAs as well as a brokerage account that you designate for retirement funds and invest those monies accordingly (for the long term).

Another thought or two that come to mind is to review and maximize your employee benefits. Also, consider risk management (particularly life, disability and umbrella liability policies). This will help protect what you’re working hard to accumulate. Additionally, putting estate planning documents in place is critical because of your new baby.

I hope this Q&A helps you address the specific goal of homeownership as well as other financial best practices when starting a family. Practice home ownership or any change in spending so you can accomplish your goals and continue to SaveUp!

This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.

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