Your FIRE or your house?

What if it was a decision you had to make?

Let me tell you a little story about John and Jack.


Both guys are 21, single and in the same class. Their net worth is approximately the same, a nice €100k. However, both have a very different view on their life. While John is testing his luck in the stock market and trying to build assets, Jack is watching movies and doesn’t care all that much about financial literacy. John believes he can make returns of approximately 8% the coming years and decides to work towards FIRE. Jack, however, puts his money on a savings account so he can buy a house in the near future. Both seem feasible options.


Start of life

The 2 guys undertake actions to reach their goal once they graduate. John decides to rent a modest 1-bedroom apartment for a couple of years to grow his stash and net worth. Rent is estimated at around €600 (yes, cheap rent in Belgium). The portfolio keeps on accumulating.

Jack decides to go house hunting and finds a decent place, fitting his needs and those of a possible family. There is no big luxury, consider it a very normal house.
Total cost: €300,000. (Yes, Belgium is expensive considering real estate). Jack uses his €100,000 savings to pay up front and signs for a €200,000 mortgage. This results in monthly payments of €1,000 at a 2% intrest rate for a 20-year period.

Financial implications

John’s cash flow: €2,100 (paycheck) – €600 (rent) – €750 (food, utilities, others) + €500 (bonus) = €1,250/month (+ dividends but those are immediately reinvested)

John owns assets and keeps buying them. Let’s look at the next 5 years.


So, John has a net worth of around €232,000 after 5 years.

Notice John’s new annual dividend income as well, almost hitting €6,000 of passive income!

Jack’s cash flow: €2,100 (paycheck) – €1,000 (mortgage) – €750 (food, utilities, others) + €500 (bonus) – €200 (costs because of ownership, big repairs…) = €650/month

Jack owns a liability. Let’s look at his future.


The above mentioned number is the estimated price appreciation of his house. We should adjust this number by adding his earnings over the last years. I won’t take into account capital appreciation as savings intrest is fixed at 0,11% and thus negligible.

So, Jack’s total net worth stands at €149,500 (= €110,500 + 5x €7,800)

This makes a difference of more than €80,000 in only 5 years!!!

Imagine this for a 10-year period… Spoiler: John has more than twice Jack’s net worth.

However both have above average Belgian saving rates, the end difference in net worth is huge.

So far for the story, now reality.

As I’m in a perfect position to observe behaviour of young people, something is very remarkable. When people start to have a (small) sum of capital, they buy a house, apartment… whatever. They drain their own funds and start paying off their mortgage. Around 50% of my class has already bought real estate to live in. Most of them still stay at work though. We don’t receive a fat corporate paycheck but we can’t complain either. After graduation, we will earn around €2,100/month without bonuses. In Belgium, this is a very nice amount considered our age range. This amount was used as a parameter in the calculations above by the way.

However John is the winner by miles, almost all people tend to walk Jack’s path. By now I hope it’s pretty clear that I’m more a John-type of guy. The opportunity cost is huge. Nonetheless there might be personal reasons as why to prefer buying.

In my opinion, one should grow his net worth until it’s big enough to take care for itself and then start considering buying something as probably family is going to need shelter and stability in the longer run.

With your current knowledge, would you do things differently at age 21? Would you prefer to be a John or a Jack?


12 reacties op ‘Your FIRE or your house?

  1. ambertreeleaves

    The way presented here, John is better off.

    What if Jack bought an apartment first and upgrades to a house later (Like I did) The apartment can create cash flow and be sold when the apartment is paid off. Just a thought… (You told me the issues on buying and switching site every few years…)

    Geliked door 1 persoon

    • When Do You Retire?

      That would indeed be a whole other story. The liability is turned into an asset, creating a significant amount of cash each month.

      Starting out with an apartment would be an option to me, depending on the mortgage. If it would be around or a little higher than the price of renting, I would seriously consider it.

      Geliked door 1 persoon

    • Claudia

      This is my case: first bought a small apartment, second a bigger one (200.000) so no touch of the saves or first one (now paid, rented and returns already a 8%).

      Extra: fiscal deductions for the second one.


  2. mattias

    would need to see more clear on the numbers, but is the house appreciation on his equity in the house only or on the €300.000 purchase price of the house? it seems to be the former. Should also consider that the mortgage increases home equity depending on annuity. it may still be better to go for a stock portfolio obviously. other comment: if the average return rate on the stocks is assumed higher than the return on the real estate, stocks will always win. the question is whehter in reality the assumed difference is that big. Residential real estate would typically be less volatile than stocks, so that would also come into play. Rents will also increase with inflation in the long run, while your mortgage remains constant (assuming fixed rates). Also one should consider the 10% registration tax upon purchase of the house, which will make the story even worse for Jack

    Geliked door 1 persoon

    • When Do You Retire?

      I only calculated the house appreciation on his equity in the house. Otherwise Jack would have an advantage in comparison to John (appreciation on lent money). It is indeed true that rents will increase over time, but in the 5 year calculation I thought it was negligible.


  3. Team CF

    Hey WDYR,
    Nice comparison, but think the difference might actually be even bigger. The cost of home ownership is probably more than €200 for a €300k house. For maintenance you alone should already account for about 2%, including the additional costs like insurance/property taxes/sewage fees, etc. you would probably have to account for a total of €500-600/month (some of this will be in the form or reservations, so the cash does stay in the account!). But your point is crystal clear, it certainly is better to live modest and build that stash up as fast as you can. We started off this way, but then bought a 280sqm house…….. great living, not so great for the account balance 😉

    Geliked door 1 persoon

  4. Claudia

    as I already discussed with the FinancialFreedomSloth last week, I consider the investments are done emotionally and some needs some “touch”. So if Jack sleeps better in his house, that’s it 🙂

    In your invented case the wrong decision for me was that Jack puts all his eggs in one basket and in not the best one. A smarter Jack searches / negotiates / buys with 270.000 a house in the value 300.000, not uses all his savings, sub-rent to a roommate/or find some “returns” of the house, deduct all is possible, sell wise it when the market is good, and keep continue to save even after buying the how.
    Let’s look frankly, he replaced a rent of 600 with 1000, for first case the rent never ends, but the second yes, and the difference 1000-600=400 is exactly I “save” it from deductions.

    P.S. I am happy, until here the only expense paid was annual tax, and the assurance.


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