This Is Why Ramit Sethi Believes People Are Obsessed With Big Houses -- and How It Can Hurt Your Wallet

How much house do you really need?

For many people, owning a home comprises a big part of the American Dream. This isn't so surprising, especially if you've long been a renter and want to put down longer-term roots somewhere (and are a reluctant moving expert). You might also want more space at home, which may be a likelier prospect for you as a homeowner, especially if you're able to buy a newer home.

American home sizes have fluctuated in recent years, but are on the rise as more people work from home as a result of the COVID-19 pandemic. Data from the National Association of Home Builders (NAHB) found that for Q4 2021, the average size of a new single-family home was 2,537 square feet, with the median size at 2,312 square feet. Finance guru Ramit Sethi believes a desire for a larger house isn't a purely practical consideration, however.

Ramit Sethi's position

Sethi recently noted on Twitter that while people may say they want a larger home to have more space for say, a home office, in reality, many people want a big home because they believe that's what successful people have. In short, it's a classic example of "keeping up with the Joneses." While buying bigger isn't bad in and of itself, it's worth thinking about what you truly need from a home before rushing to get a mortgage. Here's why aiming for a larger home regardless of your finances or needs can cost you.

A bigger home = bigger expenses

You may not have considered how much a larger home can magnify some of the costs of homeownership. It pays to really consider all of these potential expenses before rushing to make an offer on that 2,500 square foot home so you can get out of your 1,250 square foot rental.

Likely a larger mortgage and higher taxes

Starting with the mortgage, you could be looking at a larger one to pay for your dream home. Currently, rates on 30-year fixed-rate mortgages are above 6%, so you'll be looking at expensive interest on top of the larger principal cost for that house. A larger home could also be assessed at a higher value, resulting in higher property taxes.

More money to clean, maintain, and power

Not only will you be paying for the home itself, as a homeowner, you'll be responsible for cleaning and maintaining the larger space. While spending more time cleaning your home may not seem to cost you money, it will cost you time, which could translate to money. If the time you spend cleaning is time you'd normally be working, you'll lose out on income.

And when it comes to repairs and maintenance, a larger home could translate to more expensive problems. For example, if you need a new roof, a larger one will cost more. Plus, you'll be looking at higher utility costs to heat and cool your giant home.

More space to fill

Finally, if you buy a larger home and transition from a smaller space, you'll likely find that your existing furniture isn't enough to fill the space. It'll be easy to talk yourself into spending more money to fill that space with more stuff -- a larger couch, or a dining table that seats eight instead of your current one that only seats four.

Consider your needs and wants before looking at homes

It's okay to aspire to think bigger if you're looking to become a homeowner. I'm hoping to do so myself in the not-too-distant future. And while I know I want a few hundred more square feet than my current apartment, I've also thought long and hard about my actual needs and wants. I work from home, and so a dedicated room for a home office is a major priority for me and my livelihood. I like to cook and entertain, so a large kitchen is on my list.

Your needs and wants are likely different from mine, so I encourage you to sit down and make a list, and take into consideration the needs of any people who live with you as well. Discuss those needs with your real estate agent, so they can be mindful of showing you homes that meet your size preferences. Don't fall into the trap of thinking a bigger home makes you look more successful, because struggling to keep up with the cost of a large house will definitely change your mind on that.