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As recently as a few years ago, I dreamed of having a house so big that some rooms would only see use when large groups of friends or family visited at the same time. “We aired out several rooms in the south wing to get them ready for you,” I imagined myself saying to a future guest over the phone.

Visiting huge mansions that had been turned into museums let me picture myself stealing down a huge spiral staircase on the 15-minute walk between my palatial bedroom and the cavernous kitchen for a late-night snack (from the grocery store-sized, stainless steel refrigerator). Bed and breakfast stays sent my mind reeling with great ideas for themed rooms. It was easy to picture sneaking away to a far-off and quiet part of the house to take a nap or read a book.

What changed wasn’t the world around me because if anything, it’s become more worldly and materialistic. You’d probably be impressed if I were to say that I had an epiphany one day and realized that there are much more important things in life than having a huge house and expensive cars, but that wouldn’t be 100% accurate either.

Frankly, it was reality. The fact that I wanted to take an active approach to increasing our net worth meant measuring and analyzing our personal finances. What would help us achieve that goal? Conversely, what would be an obstacle?

Boston Gal’s post was a great one and you can really feel for those people in the Boston Globe article she references. What a shame to be presented with such a predicament. Actually, what a shame that those people made such a (probably) poor choice!

When you really think about it, there are some very compelling reasons to buy an appropriately/conservatively/modestly-sized house.

Mortgage

A larger monthly mortgage payment is the most obvious downside of purchasing a big and/or expensive house, but it’s not the only disadvantage. In IT the term “Total Cost of Ownership” (TCO) is used to describe a way of accounting for all the expenses relating to owning an item. The initial purchase price isn’t the only thing that will cost you money. For that reason I’ve outlined below a few of the other aspects of TCO.

Property Taxes

Part and parcel with an expensive house is high property tax. It’s worse in some parts of the country than others, but the higher the property value, the greater the property tax.

The other evening we went for a walk in an expensive neighborhood in town. The houses are gorgeous, spacious, and the landscaping and furnishings are really something to behold. They’re so expensive though, that the annual property taxes alone are almost as much as my families total housing costs!

If someone were to give us one of those homes for free, we could barely afford to keep the town paid, let alone address any of the other expenses associated with home ownership.

Insurance

The greater the value of the house, the more it costs to insure. Additionally, the larger the house, the more “stuff” you can accumulate inside. And it must be properly protected, too (against theft, loss, damage, etc.).

Furnishings

The larger the house, the more space you must fill with furniture. Whatever you bring with you from a previous residence may be adequate for the in-law or au pair suite, but what about the rest of the house? You’ll spend lots of time and a tremendous amount of money trying to make the place to feel like home.

An elegant home can’t be furnished with budget or inexpensive furniture (let alone thrift stores or yard sales) — that would at least partially defeat the purpose of having a nice house. Because Ikea and Target won’t do, you’ll be spending copious amounts of money on depreciating “assets” that will eventually need to be replaced because they become too worn or outdated.

Extras

Big homes have rooms that are designed with specific purposes, and each requires attention. What can you do with an exercise room other than fill it with expensive exercise equipment? How can decorating feel complete if there’s no pool table, ping pong table, pinball machine, foosball table or retro full-size video game in the game room?

Big family rooms require big TVs, and all the other rooms will need TVs too. If you have a lot of money, how far are you really willing to walk to watch your favorite shows? And an HDTV would be a pretty silly investment if a broad assortment of high-quality programming wasn’t piped in from a satellite system.

Large back yards seem a little bare without an in-ground pool, hot tub, wooden deck, pool house, and outdoor kitchen. All of those amenities require their own proper, costly care.

Cleaning

Keeping even a small home clean can be a real challenge, and a larger home takes even longer. Unfortunately there’s no real economy of scale when you’re talking about home square footage.

The only options are to let the house go, spend all your time cleaning, or pay someone to clean it for you. These approaches are neither attractive nor likely to enhance your net worth.

Utilities

It goes almost without saying (though I will anyway) that the more space you have, the more it costs to adequately light, cool, and heat.

Landscaping

An expensive property would look pretty silly if the landscaping wasn’t up to par. Don’t forget a sprinkler system, in some places a private well, and chemical treatments to keep the big lawn thick and green. Then there are bark chips in the gardens, pruning the trees, trimming the bushes, raking the leaves, planting the annuals, painting the fences, and so on.

You’ll need to put in the required time or pay someone else to do it for you. Either way, there are probably other things you’d prefer to focus on.

Maintenance

A larger house requires a larger roof and more money for repairs when they’re needed. Painting, siding, windows – they’re all part of the maintenance picture, and big houses need more money and attention to keep them in good shape.

Security

Protecting your possessions is always important, but it becomes more of a priority and more expensive to do so the more you have.

Appearance of Wealth

For better or worse, you’ll look like you have money if you live in a large house. People make assumptions about you based on your house. If the goal is to impress clients, then that can be a good thing. If you don’t want coworkers or your employees to think you’re exploiting them, a large house will probably send the wrong message. I’d imagine that looking like you have a lot of money would also make people more likely to try to get your money though a number of different means including lawsuits.

Entertaining

What’s the sense in having a big, beautiful house if you don’t get to share it with family, friends, coworkers, and clients? And when they come over, you can’t very well skimp on the food and drinks. The expensive-looking house will lead them to believe that you’re going to go all-out on the meal(s). If you don’t, they would reasonably think you’re holding back.

The Dang Joneses

Expensive houses are usually in expensive neighborhoods where people display wealth in various ways. Whether the people are genuinely rich or just trying to look like it, living in that kind of neighborhood will put pressure (even if it’s subtle) on residents to “keep up with the Joneses.”

Opportunity Cost

If you’re like us, you haven’t reached your net worth goals yet. Why would I want to have my money tied up in (or worse yet, wasted on) assets and expenses that don’t have the effect of increasing my net worth. Money in furniture, paintings, and services (cleaning/landscaping/etc.) doesn’t generate dividends, pay interest, or appreciate (usually). At the very least, it’s not very liquid.

Too Spread Out

You may also be worse off personally. In a house with a lot of space, there’s less of a chance to interact with the members of your family. Room for people to enjoy quiet, personal time is one thing, but too much room can detract from the most important relationships in your life.

Conclusion

Ultimately, it’s your money so you can make whatever decision you’d like when it comes to the purchase of your next house. Qualifying for a huge mortgage doesn’t mean you should take it. Maybe you do have more money than the average person, but high net worth and a really expensive house are mutually exclusive for most of us.

As for me and my family, we’ll keep our house adequate but not excessive. We prefer to spend our time together rather than trying to maintain (and pay for) more house than we really need.

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