House upgrades - go big now or wait?

Our family is considering a modest home upgrade, and I am struggling to figure out what is a responsible amount to spend.

We are considering adding a second bathroom to the upstairs of our house, which is typical for houses in our neighborhood. We don't have plans to leave anytime soon, but I also dont think this is our forever home. We are not in an area that provides great public schools after elementary. Moving one day could definitely happen.

We are generally deciding between two paths:

Option A: Exercise patience, make modest upgrades to improve quality of life - $20K - ball out on home office, paint, new closets, etc. Right now our upper floor feels very "fixer upper" and spartan, but we dont think it would take THAT much to make it more cozy/inviting.

Option B: Bigger project, add second bathroom, totally rework bedrooms, etc. I assume this would be close to $100K.

What I am struggling with is - assuming we fund improvements in cash - if we can afford a larger project right now and what is the most you all would spend on a renovation?

Any financial takes, additional options to consider or life considerations appreciated!

- Married, both 39
- 1 kid (toddler), about to try for second (one reason considering additional bathroom)
- Dual income: ~$475K HHI - wife makes ~$125K very stable W2. My income last 8 years has averaged $350K but I work in a very risky, high commission sales environment. Potential for very down years (~$150K) and very big years for me ($650K). I can go 3-4 months sometimes without a commission check but some months can be huge - $100K - $200K depending on timing for deals.

Expenses: $180K annually - we track every dollar out the door (old habit)

- Mortage (incl taxes/insurance): $4100
- Daycare: $2800
- Car Payment: $500
- Utilities: ~$500
- All other spending (including business expenses for me that provide some tax relief but not much): ~$8000

Savings:

- Retirement accounts: ~$1.1M total (solo 401k + 403b + IRAs
- Brokerage / taxable: ~$805K
- HYSA: ~$525K (Feel free to roast but we are pushing as much into index funds as we reasonably can (had a big commission recently), given my irregular pay periods we keep more in cash at a baseline
- Home value ~$860k (bought 2021 for 860K, I dont assume any appreciation since then)
- 529: $25K (we have no strategy here, just sort of add whenever to get max state tax deduction

Debt:
- Mortgage balance ~$684k @ 3.125% (30 yr, pay biweekly
- Car loan: $6k remaining, 3.9% (payoff fall 2026 - 2023 Subaru bought new in 2023)