In speaking with individuals and families over the years, I’ve found that how they handle big-ticket items, particularly the home, is a reliable indicator of how well they are preparing for retirement. I’ve talked with numerous singles and couples up and down the income ladder who by middle age have accumulated a lot of retirement money, both in and outside of their retirement plans and have little or no debt. The vast majority of them have one thing in common:  the value of their homes—or the amount of their rent—is way below what they could currently afford. There’s no reason why anyone has to own a home commensurate with his or her income. Warren Buffet and closet millionaires in your community don’t have to own a mansion or drive a designer car. Despite a growing income, the notion of buying trophy homes doesn’t even enter these millionaires’ minds. Rather, they’re quite content living well beneath their means. You probably know some people who take the opposite tack – serial homeowners. The upshot is that by the time they start thinking seriously about retirement, they’ve probably built up some equity in their houses over the years, but that equity pales in comparison with the buildup in their mortgages. That’s why last decade’s housing crisis, initially affecting low-income families, also afflicted higher-income homeowners who began the crisis with little equity in their expensive homes and found themselves with negative equity.

Whatever your housing situation, financial decisions you (and your younger generation family members) make will have a big effect on your financial security. Devotees of what I like to call The New Affluence will prefer a more unpretentious lifestyle including owning a perfectly wonderful home that is modest in relation to their financial circumstances.