Reply to Huge raises (for us)- no idea what we can afford for remodel

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[quote=Anonymous][quote=Anonymous]DH and I have always lived very frugally. We both just got major raises in the last couple months and now I feel like I can't even fathom actually spending some money.

We bought a large 1964 home in 2016 for $335k. It has the original kitchen and I am DYING to tear it out. That thing is the bane of my existence. It will be a significant project including removing a load bearing wall and likely redoing the full bath next to the kitchen (we are going to have to move plumbing anyway so it just makes sense to do it all together).

Here's our general finances and FWIW, DH and I are 30yo with two small kids.

-HHI $250k + bonus (likely 20k). Still shocked. We have had a HHI of $120-140k for the last 5 years.
-Mortgage, taxes, insurance, etc $2200/mo
-We have $8k in student loans left and no other debt
-Childcare: $1400/mo (in 2024 will go down to ~$800/mo and both kids will be in public school by 2025)
-We are behind on retirement but hope the catch up quickly with the raises (currently have $80k)
-529s have $5k and $3k in them currently but kids are only 3yo and 1yo- will up this with raises

Can we afford to do ~$100k renovation? Should we take out a HELOC? We bought at $335k, current appraisal is $460k (obviously not in DC- we're in Chicago).

[/quote]

Couple of thoughts.  Congrats!  But I would not tie up 20% of the house's value in a renovation that doesn't add square footage.  I also wouldn't put two years worth of your raise toward a home project when you're behind on both retirement and 529s.  You plan to catch up with the raises but you're also spending the (post-tax) raises for the next 18 months - 2 years on one desired but not necessary project.

If I were you I'd pay off the student loans and put money into 529s first.  Set both of your retirement accounts to max, and see what your take home looks like after that.  Then bank the raises - either in savings or investing during this downturn until both kids are in public school.  At that point you can look around and decide whether it makes sense to do a big renovation or to move to a house that works better for you.[/quote]

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