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Pay down mortgage or invest?

November 6th, 2015 at 10:26 am

Does it makes sense to pay down your mortgage or invest? For the most part it depends. Depends on your risk tolerance. Depends on your age. Depends on if you bought too much house. But honestly the numbers support investing first, especially in tax deferred (401k) or tax free (Roth IRA) accounts before you pay a penny in overage to your mortgage. The big reason being you can't go back and put the money from your mortgage being paid off into past years contributions.

What do the numbers say? I use round numbers because it's easier. Assume a couple with a stay at home mom, 2 kids, and an income of $100k and are 35 years old. Assuming Couple A contributes 15% to their retirement and the rest of their money to their mortgage. Couple B maximizes the retirement savings to 401k+Roth IRA and nothing to their home. They have a mortgage for $300k on a home worth $360k.

What ends up happening?

Couple A
$15k retirement/year, pays home in 15 years because they have an extra $10,500/year for mortgage paydown. They then divert $1551/month into retirement/taxable savings for the next 5, 10, 15 years.

Couple B
Saves $29k/year and pays less in federal income taxes. But they don't pay down the mortgage because all their extra money goes to retirements savings.

Couple A - using a 6% Return on Investment (ROI)
15 years retirement $358,462.00
20 years retirement $566,801.00
5 years tax/retirement $107,773.00
25 years retirement $845,365.00
10 years tax/retirement $251,998.00
30 years retirement $1,218,146.00
15 years tax/retirement $445,002.00
Total savings = $1,663,148.00, No Debt

Couple B - using 6% ROI as well
15 years retirement $693,181.00
20 years retirement $1,095,510.00
25 years retirement $1,633,918.00
30 years retirement $2,354,429.00, No Debt

Couple B has $691,281.00 more than Couple A after 30 years and a paid for home as well.

Couple B has been paying less federal taxes because they are using the 401k to lower their taxes. Because of this they actually after getting close a 40% bonus savings rate. How? Well they are saving $29k/year versus $15k/year for Couple A, but Couple A overall only had $10,500 extra to direct to the mortgage for extra savings. So almost a 40% bonus just from less taxable income.

But after 15 years Couple A is debt free. True, but Couple B likely are decent savers having put savings on auto-pilot. And whose to say either couple won't cash out their homes and downsize? In which case Couple B could in theory be debt free as well. But likely not.

Why you should save for retirement now...

October 30th, 2015 at 09:29 am

I have a lot of friends who are putting off saving for retirement. Many put off retirement savings for a house. They are busy trying to squirrel away money for their first home. Then suddenly they get into the home and it's MUCH more expensive than they expected. They weren't used to saving for retirement. Then suddenly they are 30 or 32 and haven't saved a penny for retirement. Or they are saving for retirement but they want to focus on paying off the mortgage in 15 years. Or start saving for college.

Here's what happened for us. We started in our 20s. As soon as DH got a real job it was #1 priority. We determined before we bought a house that retirement savings maximum was a line item before we determined what we could afford. It just was something that we deemed necessary since we at the time only had $4k saved for me. DH didn't have any accounts being a foreigner and honestly until then I only had a Roth IRA but we were busy paying off car loans, student loans, and living as graduate students on income very close to the poverty line. So saving for retirement was a pipe dream for us. Something we knew we had to do and we felt we had to catch up.

Well we started saving and all money went to saving for retirement, building an EF, more student loans for an MBA, and the house just took a backseat. We made our payments and lived.

When we turned around we had saved over $550k for retirement in 10 years. Using a retirement calculator if we don't contribute a penny more and retire at 55, using a 7% return we'd have $1.8M for retirement. This nest egg will last us at a rate of $80k/year until age 82 not including a penny of Social Security. We currently spend including our rent $65k/year. This means our nest egg will last until 89 without social security and assuming we are still paying $2400/month in rent/mortgage. Our expenses are a lot lower if we are done with a house payment by 55 (not unreasonable). Right now we could easily live on $40k without a rent or mortgage and we've got enough cash to buy our current house without a mortgage. So our nest egg $550k would be $2.8M when we die if we lived off of $40k now and never saved another penny or used social security. Assuming we worked until 60 we'd start off with a nest egg of $2.6M and we'd die leaving behind $1.0M for our heirs.

So by saving from 26 to 36 we basically funded our retirement. If we choose not to save another penny I think with something from social security and a paid for home we'd have enough to retire early at 55 with and income more than we live on now. If we waited until 60 it'd be ridiculous.

So don't put saving for retirement on hold. I know how easy it is to justify that you have other savings like a home, car, etc. I think it's something you just have to get used and do it. Every penny we save now I know will be worth less than we had saved it 10 years ago. But doing this calculation, my plan is that we will continue saving the maximum 401k, Roth IRAs until we retire. And the goal is 100% income replacement and being financially independent by age 50. This is a stretch goal i think 55 is realistic.

Not working and how it's going

September 18th, 2015 at 09:06 pm

It's interesting living a lifestyle eschewed by Mr Money Mustache. We're not "retired" but taking a break from working. We don't have enough to retire fully and live the lifestyle we want. We probably are close especially if we moved further out from where we are and lived very frugally. But the truth is my DH isn't willing to compromise and wants to work so we will continue on the hamster wheel. We just took a short break from "work" in the traditional sense.

It's been a month but a busy month for my DH and I. Since we moved cross country most of the month was spent unpacking, organizing, and just getting settled. For the most part we are close to being done and really getting settled into a routine.

I've noticed a couple of things. We curbed the eating out which is good since it's pricey. I miss it a little but we're trying to limit it to 1-2x a week. So far it's been 1x a week. Our cooking is getting back to where it used to be pre-kids. We have more time to put effort. Also we grocery shop more and look for sales and shop the circular because we're on a tighter budget. This month so far our grocery budget has been an excessive $700 but a lot of it has to do with buying stuff like spices, condiments, flour, sugar, canola oil, olive oil, etc. Things you need to start up your kitchen. Basic goods that all add up. It really was the first 2 weeks of moving in when we bought a ton of extra groceries and we don't have a stockpile either yet going. However we're also running lean and sort of buying enough for a week worth of cooking.

However we fill gas a lot less. So far this month we've spent $77 and haven't filled since the beginning of the month. We don't have cable just internet. The deal happened to be $50/month for 100 mbps and adding cable was an extra $20. Where we were cable was an extra $5/month because the "bundle" of local channels plus hbo was $84 versus $79 for just internet.

This lifestyle is pretty relaxing. I'm not sure if either of us could last long term but knowing we have 4 months of DH not "working" I think will go by quick. He went to a info session of his bootcamp and was told he has to get up to speed on Linear Algebra and Multivariable Calculus. So he's taking online classes to make sure he can ace it. So these 4 months should go by fast. He was also reassured that they had a 100% placement rate after the camp.

Guess it'll be interesting watching our savings dwindle and seeing what happens. We're starting off with $80k cash, $100k invested, and $350k for a house DP. I hope we don't tap any more than the $80k or at least that's our goal.

Staying the retirement course

May 21st, 2015 at 11:36 am

This is the third time I am trying to do this post. I keep losing it. Retirement savings isn't about amounts, but it helps to save more. What does help is staying the course. CCF mentioned savings, we've had a few good years but staying the course helped the most. This is our retirements savings 12/31/....

2005 - $6457 - only my IRA since DH wasn't eligible until now

2006 - $34,782 - $8k IRA, $15k 401k, $2947 401k match = $2378

2007 - $67,785 - $8k IRA, $15.5k 401k, $6079 401k match = $3424

2008 - $74,245 - $10k IRA, $15.5k 401k, $6172 401k match = -$25,212 (big loss)

2009 - $117,055 - $10k IRA, $16.5k 401k, $6951 401k match = $9359

2010 - $196,368 - $10k IRA, $16.5k 401k, $7438 401k match = $45375

2011 - $232,524 - $10k IRA, $16.5k 401k, $7385 401k match = $2271

2012 - $302,841 - $10k ira, $17k 401k, $8318 401k match = $35,009

2013 - $443,762 - $11k IRA, $17.5k 401k, $8099 401 match = $104,322 (best year ever)

2014 -$514,544 - $11k IRA, $17.5k 401k, $8967 401k match = $33315

2015 - YTD $577,571

Our contributions have been $94,493 IRA and $147,500 401k = $241,993/514544 = 41.89% contributed. The matches have contributed $62356/514,544 = 12% of retirement. So our "contributions" in all have been $304,349/514,544 = 59.15% and we've "gained" about 40% of our money from returns. I think that number will start to skew soon towards returns. Also the match is the only thing that kept us positive for MANY years. Even without it though we would have kept on investing aggressively and I think having the first few years our money go down made us able to buy more.

I suspect that having the market tank when we started investing was better for us. Now if we can "retire" and pull out when the market is going up and hitting a peak we'd probably have "Ideally timed" the market.

There has been a few good years but in the beginning honestly it was pretty flat. My contributions and that was it. I would say it would have been easy to stop contributing and say what a waste. But staying the course was harder and more worth it.

And MM - If we contribute nothing for another 15 years and "retire" at 50 with an average of 6% returns we'd have $1.4M. With our current investment amounts we'll have $2.2M. I think we should be set to not save more, but we probably will.

2014 a review and 2015 Ideas

January 15th, 2015 at 10:31 am

I probably should write goals but what I think we need to do are not really goals but ideas I'd like to see through. It's been a very interesting 9 years living where we live. Like Monkey Mama we've changed a lot. How much?

Net Worth
12/31/2005 $131,762.00
1/1/2014 $878,472.00
1/1/2015 $1,073,474.80

So in the 9 years we've lived where we are we increased our net worth 8 fold. This past year has been particularly good to us as we increased our net worth by 22% or $195k. It was a combination of decreasing our debt by $30k and I valued our house $50k more. We wiped clean the last of our student loans, we had around $8k hanging around at 2%, and $8k 0% CC debt. We also paid off one of our cars and the second car will be done in July.

Account 1/1/2014 1/1/2015
LAL IRA $62,327.00 $77,254.24
DH IRA $132,924.00 $148,527.37
DH 401k $244,399.00 $287,059.53

Fid Tax 1 $86,847.00 $85,389.30
Online Check $1,000.00 $8,642.11
Online Savings $42,510.00 $55,542.43
Fid Tax 2 $54,000.00 $50,959.49
SB 1 $10,788.00 $34,493.33
College 1 $11,239.00 $12,251.00
College 2 $6,369.00 $6,831.00
House $650,000.00 $700,000.00
Subtotal Assets $1,302,403.00 $1,466,949.80

Car 1 $7,900.00 $3,045.00
Car 2 $3,900.00 $0.00
Sallie Mae $8,000.00 $0.00
CC #1 0% $4,000.00 $1,867.00
CC#2 0% $4,000.00 $0.00
Mortgage $396,131.00 $388,563.00
Subtotal Debts $423,931.00 $393,475.00

Net Worth $878,472.00 $1,073,474.80

So we got close to my last year "goals" of increase NW by $200k, break $1M net worth, and break $500k retirement. But where does that put us?

Well my DH just came back from a job interview out on the west coast. We'll hear back in a month but they contacted him and said he hadn't filled out a formal application just resume and cover letter. So he's guessing they are going to do the background check, credit check, etc and are interested. He also has a second interview to be scheduled on the west coast.

We are still wavering on whether to move this year without a job or wait until 2016. If we wait until summer 2016 we'll have 18 more months of job hunting and potentially a lot more money saved.

As it stands we have I would guess about 1 year in cash living expenses at our current budget and no income. After the sale of the house we stand at closer to 8 years without income, not touching our retirement.

I guess our goal is to continue saving and break $200k net worth increase this year and see if we can't make a big push in saving cash since we don't have to pay down $30k in debt.

I'll write more as the story about jobs unfolds.

So much to be thankful for and yet...I worry

December 7th, 2014 at 05:32 am

So much has happened since my last post. It was right before Thanksgiving and I was thankful for my family and I still am.

So my DH has three job interviews in California. Two are phone interviews this week but one he's passed on the phone and is flying out in January after the holidays. I am super excited and thrilled. I am however nervous and worried about San Francisco cost of living. But my DH says we'll deal with it when it comes. But honestly this might be it. I've had many highs and many lows, but I think this might be the break we need to move.

Now the low. I knew this day was coming but I didn't know it would happen so soon. My DH told me that he probably has to give up his driver's license and will be declared legally blind. He did not pass his field of vision test at the optometrist and will see his specialist in April though he is trying to move that up ASAP. He wants to know for sure what we are dealing with. His visual acuity is still 20/20 and he still has his vision during the day. And as long as I've know him nearly 15 years his night vision has been poor. But I suppose we both thought he'd be driving until his 50s. His mom has retinitis pigmentosa and still drives at 60. But he won't. I'm worried he'll lose all vision and not see our grandchildren one day.

Talks of having a third child are hard. He's feeling unsure because of this. When we had our first 5 years ago I guess he didn't care because he seemed fine. Now he's worried about the kids.

What does this means? We're not sure. But it means that moving closer to family would probably be helpful. It means that if we were to stay where we are it would also be helpful to move where commuting by public transit is easier for my DH. Where we are is great, but it could be better. It means we will likely be a 1 car family soon. It also means that my DH would prefer to move somewhere that there is more daylight, public transit, and less winter. I don't know what it means working wise. He'll still be able to work for a long time, his mother did. But we'll pay a premium to live very close to his workplace.

Previously I had discussed my DH desire to switch careers. Now more than ever he wishes to get a job working from home. I am unsure what to do about my job. I've always planned to go back part-time, but perhaps full time is better? Can I manage a third child?

Retirement obviously we talked a bit more. My DH does want to us to be Financially Independent sooner rather than later. This is imperative. Of course he will qualify if and when for SS disability. That affects our ability to FIRE. I'm not sure how but I think this means we probably could FIRE now if we wanted to. Majority of our bills would be covered. It's something we have to discuss.

Nest Egg

November 15th, 2014 at 08:27 pm

I've been contemplating what our number "nest egg" is. People always say 25x expenses or 4% withdrawal rate. Maybe 33x expenses or 3% withdrawal rate for early retirees.

So assuming we need $40k/year to live on, a little more than we do now, we need $1M or $1.3M to retire. I go back and forth on whether we should count SS as part of the $40k, especially if we retire early. Or should we just assume we'll have to provide all of that income in retirement.

Another assumption for us is that $40k is a paid for home. Right now that seems so out of reach, but if we moved we could very well have a paid for home.

So I guess the question is when can we retire? My gut says 10 years at 45. Why? Because I think our house will have appreciated enough and we can sell it for a lot more, while paying down principal. And we'll have had 10 years of saving and investing which might bring us to surpassing our nest egg number of $1.3M. Currently we are at about half that number but the next half should go faster since our investments will start to generate more savings and our income should increase to allow us to save more while we curb our spending.

What was your nest egg number?

In an aside it's day 11 of my detox/cleanse and it's been both easy and hard. Hard not eating out and preparing exact meals. Easy in that meal planning is done for me and the food is quite filling considering it's fruit and veggies mostly. I guess I'm done 7 lbs.

It's been awhile

September 19th, 2014 at 05:55 am

It's been awhile since I posted and I really need to write a bit more. Right now we are wrestling with whether to do a Roth 401k. It would mean we can save tax free but there is a 34% hit on savings. We'd have to save an extra $6k/year not a big deal, but I am more looking at the tax implications.

What if we withdraw it and it's lower? Should we have taken the tax break now? What if brackets go up? Obviously the tax brackets will get larger, but our deductions will go down as we age and the money will grow tax free. That means if we let it grow 15 years it'll double 2x by the rule of 7. So potentially we'll have another $750k saved or more. This is counting doubling of savings and assuming we are done working in 15 more years or by 50.

I'm leaning towards the Roth 401k for a couple of reasons. At most my DH has 2 years working for this company and where he moves to we may not have it offered. I don't know what the future hold but I suspect we might make more in the future since we are on one income.

Anyway though on a positive note our retirement accounts are at $515k so we reached our goal of the year to break $500k. Our taxable accounts have broken $220k and increased $25k/year and we've paid off $20k in debt. We paid off $4k car and $3k on the other (only $4800 left) we had the interest rate of 1.9% but decided we were tired of seeing the payments. We also paid off a CC we put my dental work on that was 0% $4k and still am paying on the lasik also at 0%. Both were on 24 months interest free but again I got tired of payments. Finally we paid off the last tiny bit of my super cheap 0.9% student loans $8k that I left hanging around.

Life is pretty good.

getting on the same page

July 31st, 2014 at 07:35 pm

I don't know if my DH are on the same page for "early" retirement. We certainly are more in line with spending, budgets, lifestyle. Although we aren't 100% in lock step but what couple is? I'd say he's naturally very frugal (bordering on cheap) but I'm not a naturally spend person period.

Example I got my Dyson he still thinks it's nuts to buy a vacuum cleaner for $300 versus he thought my budget would be $150. Now does the vacuum make my life easier? yes! My house does feel cleaner. So I say it's worth it.

Anyway my DH recently had me borrow book on tape "four hour work week." I was surprised. When I've brought up living frugally, moving somewhere cheaper, buying a house cash he's freaked out. The idea of retiring with sooner because we live simpler I think he's coming around. My DH was mustachian before it became a "word".

But reading Mr Money Mustache retired with $800k in 2006 with one kid, meant the reality set in. I think he's thinking about it, wondering if we could do it. Expenses without our mortgage is very much "mustachian". So where do we need to be in five years? What if we could move buy a home cash with our equity and then live on what we've saved? We'd right now be close to Mr MM. But a few extra years with our extra kid or two?

I hope this is a turning point where my DH starts to believe we can do this. That don't need to work forever. It also helps I recently made a friend whose a single mother, who retired from private equity and supports herself royally. And she herself has said by living "simply" ie $100k/year she can still manage by watching her spending. She eats out, pays for preschool, etc. Life is about choices.

My mom laughed at me

July 13th, 2014 at 06:39 pm

My mom laughed at me. Yep that's right I said to my mom we plan on "retiring" at 55 or at least being financially independent. She laughed and said no way is that possible. She said that people can't accomplish that anymore. Even with pensions mostly for government or public workers they have handcuffed many to retiring at 62 or 65. How did I expect to retire at 55?

My response? By saving money. She said what about medical? What about college? What about having enough? You can't save enough to retire, you have to wait until medicare and social security.

And yet my mom retired at 55. But she herself will tell you it's because she worked for the state during the golden ages. She retired with 70% of her salary, free medical for her and my dad for life, reimbursement of their medicare premiums (she's not old enough yet), pension is COLA, and two paid for homes. She also had $70k in a Roth IRA and $220k in a 457b. She didn't really save until in her 40s/50s and even then she invested in a money market in her 457.

She mostly knows other state workers and most can't retire until SS kicks in because they can't live on what they make. They weren't in the old generous plan of 2%/per years of service, while she contributed only 7.5% during her working years. She out spent her pension contributions within 5 years (I calculated for her that she'd use up her "contributions" within 5 years) and is now living off the state the rest of her life. They offered her a cash out of her contributions like $200k and a lower monthly payment. She took the maximum monthly payment instead.

That should be another 30 years (i'm not kidding my grandma is still alive and well at 86 and my great grandmother was 101 and her dads side we'll lets just say her aunts are in their 90s). My grandfather only passed at 77 because he was a 1-2 pack a day smoker who died of COPD. Otherwise both sides average age is 90+. As for me? Should be the same with genetics.

So to my mom she's confounded how anyone can retire without a pension. Her sisters who don't have pensions have always talked about retiring when they die. Everyone she's worked with has only retired at 62 or later with the pension and medical. EVERYONE always talks about how lucky she was to be on the "old" program and retire at 55.

So she truthfully said "how do people retire without a pension?" It was dumbfounding that people could actually save money themselves. That being completely self-reliant and having the expectation you'd do it without a pension seemed insane.

But more than money, my mom asked me what we would do? That my dad is still working at 83. That she would still be working if not for an eye problem (macular hole). And still desires to go back to work. Actually my parents have enough money to have retired years ago but believe it virtuous to work. That without work life would be pointless.

I don't know how to answer that. I don't know how I come from such hard working stock and don't desire to work as long as possible. Or to not worry about long term care? I don't have an answer.

Do you think you'll retire before 65? When? What are you planning on doing?

Making Choices

July 7th, 2014 at 05:59 am

We visited with some friends this weekend at their new house! Huge, perfect, lovely. They got the lifestyle they wanted! It's 2400 sq ft house with 4/2.5 ba, attached 2 car garage, and unfinished basement, all for the rock bottom price of $650K! Amazing deal. So what's the catch?

Well they commute a solid hour without traffic and if they had to work rush hours it'd be closer to 1.5-2 hours. They live about 45 minutes from me without traffic. So it's not an easy commute and they admit that. But it's the lifestyle they wanted and they got the house they wanted at a price they could afford. We talked about it, they work close to where my DH works. And the truth is with 2 kids and a stepchild they make huge commuting sacrifices and even seeing her stepson less (he lives in the city with his mom and prefers to stay weekends to hang out with friends). But they now have a bedroom for each kid and space they didn't have before.

So my DH and I were in lust. Yeah as we looked at the brand new construction we sighed. Very cute. We agreed the sq ft and use of space was perfect. I'd change only a couple things, full bath on first floor instead of half bath, and open floor plan instead of dining room and nix the office. But size wise the house felt super large and there was tons of closet space and storage. Honestly it was more than adequate for us we both agreed.

So now I know that 2400 sq ft is more than we'd need, I suspected around 2000 depending on layout but most people I know with new construction have 4000+ sq ft, and yes it's over $1.7M. So I couldn't accurately gauge what a smaller new house would feel like.

I'm so happy my friend got the house of her dreams and the life she wants. She got everything she wanted and it is worth celebrating. I hope I get to that point as well where everything falls into place. They even managed to sell their other two homes without losing their shirts! CHEERING!!! They had been carrying one of them and shelling out $500/month because the rent didn't cover the mortgage and they were about $75k underwater. They did it! Consolidated and got something perfect they wanted. The success for them is great.

But life is about choices. And my friend said they consciously decided to live far from friends and work because they liked the quirky nature of the town they bought in, the house and lot was rural and private, and the lifestyle on the weekends of being in nature. No they are not retiring early or anytime even close to soon and this commute will be happening I would guess another 15 years. But if they decide it's too hard they can always change their minds. BUT they seems super happy with the house so I doubt it! I applaud their brave decision to go do something different.

I kind think that's the best case. If you want to change your life you do it. Life's about choices. And when it's not working you change it. And if it's still working you change it again. The only pitfall? You have to live with the choices you make.

The plan part IV

July 6th, 2014 at 05:38 pm

Another reader pulled out the negative comments on the MMM post and many did say get on the same page. But at the same time more than few also said happiness needs to be felt by everyone.

So I decided to address a few things. I know that I will be happier living by family and friends. I know that I will be happier not sitting on a plane 12+ hours. I am not unhappy with the kids but I know I can be happier.

Second, the 3rd kid we are still wrestling with it. I showed him the post and he had to admit we can afford the third child and he needs to stop using finances as a defense. He isn't sure anymore. He was sure last year and I wasn't ready. He doesn't want another now, we've hit the sweet spot, and I am ready. It will be a conversation we keep having. We haven't done anything drastic so I figure we're in limbo. I don't know when we'll know if we are done, but that's something I can concede without feeling unhappy. IF he's really done then we're done. I've always said "a no outweighs the yes". But at the same time we haven't done the permanent change to prevent kids. So I think we're on the fence. Perhaps I'm wrong, but he's always agreed we'd do the snip when we were done. And we haven't done it or planned on it. I would really like a 3rd child but if he doesn't have it in him, it's okay. And perhaps he may change his mind in another 12 months but I'll be the no again. We had always been ambivalent on the number of kids we'd have. We said we'll see how it goes and when it felt right we'd stop.

Third, when I did the case study we had talked about moving but hadn't examined what it would take to move without jobs. That case study was a wake up call about whether we even could retire early. That was never in our "agenda" we just assumed we'd work until at least 55. Now the reality is it's possible and we both think so.

And if we had an update on the case study? The most interesting aspect I think is that my DH didn't get his promotion in March. He is pretty unhappy with his job and wonders if it's meant to be. He doesn't know if he'll get a promotion in March 2015, and feels he deserves one. If we weren't in the process of moving, but decided we'd stay he'd right now be looking to jump ship to another company.

He likes what he does. However he feels it took him 5 years for his first promotion and that was a very long time. It's now been 4 years and due to the length of the first promotion, he's definitely on the "high" end of where he should be. On the pay scale of his pay grade two more years and he'd be "maxed" out on his scale which makes him unhappy. This we calculated about 2 weeks ago.

I haven't influenced these comments, yes I'm not thrilled, but I certainly didn't say his job was bad. He's disappointed with his career trajectory and wonders if he needs to switch. And that more than many other things has given him a huge push to agree we should move.

So the question rose why stay where we live if he isn't happy in his job? What is holding us here? Nothing. Would he be happy if he had a promotion? Yes. But it didn't happen. If it doesn't happen next year, I think that's his reasoning behind moving next June 2015. I believe he'll be so disappointed that it'll be hard to endure working at his job.

Also in the past 4 years he's had reorganization 4 times and this time he doesn't like his direct supervisor. He doesn't feel they have the same vision. He certainly didn't feel that way in 2012 with a different boss. He was happier. Now he's not. They had another reorg, and he wasn't reassigned and not thrilled with the fact he expected to be.

So like everything in life, things change like the wind. He loves what he does. But he's not exactly thrilled with the situation he's in now. He used to love it more, and perhaps he could again. But if we were in a different circumstance he wouldn't be staying with his company.

So all signs point to exiting where we live. Right now I am about to contact another realtor because we had a realtor contact us about selling our place. They want us to come up with a number and I don't want to "lowball or be unrealistic" about what I could get. This would be hard selling and renting, but at the same time we'd be locking in equity and gaining flexibility.

And I think we need to stockpile cash like MM said. I don't know how long until we find jobs if we are unemployed when we move. That makes me nervous.

the financials

July 4th, 2014 at 11:15 am

So I just checked today and our retirement savings accounts passed $500k, yeah goal!

Retirement - $505,286.
Taxable Investment - $160,881
DD1 College - $12,118
DD2 College - $6,758
Cash - $64,540
Checking - $5k, one month float

I've been contemplating that we keep increasing our cash position and I think our "emergency fund" is becoming a little excessive. But at the same time we are planning on moving in 2 years and we don't know what cash we'll need. Plus if a job came up we've been worried we'll be forced to sell and bring cash to table or something. If we did get a job and had to relocate the cash would be useful in relocating. Perhaps my DH and I should discuss investing half? Thoughts?

Second I sold my baby walker for $20. So far my money towards Dyson is $120. I am doing swagbucks, but I won't use my CC rewards for buying the vacuum. I feel those are more cash back. Hoping to sell a bouncer, boppy pillows, diaper bag, and cloth diapers. I still am keeping a lot of stuff but trying to streamline it down.

And tonight dinner? Homemade smoked pulled pork, coleslaw, potato salad, and corn all home made. Yum.

the plan part III

July 4th, 2014 at 11:05 am

I've talked about LBYM not being easy and it's not. And I've said that we've put certain things on hold because it makes financial sense. What I haven't discussed is the why.

So in 23 months we'll be shaking the dust from our boots of where we live and moving without jobs. If we had a job offer we'd move sooner. It would decrease the uncertainty and make moving palatable.

But why? To buy a house? To gain a king size bed? Nope.

The real underlying reason that Another Reader (yes I'm calling you out) is to be closer to our friends and family. Another Reader are you 3k and 6k miles away from family and friends? Are you not withing driving distance of any family? Have you ever had a child and knocked on a neighbors door at 1 am to watch older child and made it to the hospital with 20 minutes to spare? Have you ever take a cab to the hospital with a sick child so one parent can stay at home with the other in the middle of the night? Have you ever panicked and realized that if anything happened to you, the soonest a family member could get to you is 12 hours maybe?

We live at least 1 connection flight away from either sets of parents. My step-siblings are flights 4 hour flights away, my BIL is 5-6 hours cross country flights away. Grandparents at least 24 hours. That's dropping everything and hopping on the next flight.

I am not selfish, I am talking about the reality of being alone. Of being a SAHM and sick and calling my DH to come home because I'm vomiting and unable to walk my dog and am too dizzy to walk. I worry about my two kids and because I'm sick I can't ASK another mom friend to put herself and her kids at risk of being sick. And YES they've said no they don't want to catch what I or my kids have had.

I've experienced living with family, my BIL lived with us for 4 months during a period of job hunting. It was great to have help and family around. I've got family and friends up and down the West Coast and so does my DH. We'd be a flight away from his parents and mine. Actually my in-laws just visited before the 4th and they said it would be easier if we lived on a direct flight from where they lived, said wistfully not accusing or demanding. Say what you will but I would love to be closer to them and that is the driving desire to move.

The house, bed, etc is all material things that will occur when we move forward with our lives. If we choose to stay put we would buy those things and get a more permanent home. But we've decided that's not the plan. And it's possible we're moving to the SF Bay area even more expensive than where we are, and will be stuck with a townhouse or a more expensive mortgage.

But at the same time we'll have help from our families with our kids. We would have less worries about something happening to us. Our children would know their grandparents intimately and extended family; and if the price is living in an even more expensive COLA so be it. We'll make it work and make sacrifices. I'm NOT willing to make those same sacrifices to live where I LIVE now. There aren't the same benefits to living in a HCOLA for a job. For family? Yes. Just for a job?

I've had a case study on MMM. The advice was MOVE. http://www.mrmoneymustache.com/2014/02/23/reader-case-study-going-west-for-early-retirement/

Ideally we'd like to live in Seattle or Portland. My DH's top two choices. I'd prefer San Diego or SF, but finances play a role and that bumps those lower. He missed the seasons when we lived in San Diego. I don't care for seasons but I like the cost of living in Seattle and Portland.

This move might be tough for us financially but I truly believe it'll pay dividends in the long term. My DH agreed to it without a JOB, because he knows companies are fickle. He was laid off from his job where we are 3 months after we moved from San Diego to the East Coast. So companies suck and have no loyalty.

But we decided jointly in April 2014 that we were really going to buckle down and start to save to move. We were going to try and cut expenses more and take the risk. My DH was willing to go June 2015, but I decided that we could afford to sacrifice and endure our situation for 2 years to buffer our financial position.

The few things I want and am saving for, I'm starting to think as little rewards as I wait to settle down permanently. As I wait for the opportunity for us to put down roots and really settle.

But we're ready for life's curveballs. We decided if DH ever lost his job again we'd sell our house and be off in a bloody minute.

So the plan? List house in Spring 2016. Sell it no matter what. Move with job to west coast or move without and hope for the best. Job prospect 1 is post-doc for me. Prospect 2 i am hoping to become an enrolled agent and do taxes as a career change. Prospect 3 for DH take an entry level business position. Prospect 4 take any job.

Fearful? Yes. Trying to accomplish goal? Definitely. Perhaps it is selfish to move. But at the same time nearly 10 years ago we agreed we'd live out west by our families. We decided this move was temporary or we'd have ended our relationship. It was a very deliberate decision and one that we did not take lightly.

And Snafu point about leaving a job you like. What job do you love forever? I have only pointed out the truth to DH. We are stay put for him to like his job for "now"? He's already this year dissatisfied without a promotion. He feels he's been put over. His reason for moving next year? If he doesn't get a promotion he'll be very unhappy. If he's unhappy then he should look for a job where we live? Or should we just move and take the risk? My opinion? Leave. We aren't staying for anything other than him liking his job. And what happens if he doesn't like his next job? We stayed for what?

LBYM = Nothing to show

June 29th, 2014 at 11:50 am

Yes living below your means often means you have nothing material to show for it. Often times it means passing on a fancy car, cool vacation, eating out, fancy groceries, branded clothes, or even furniture. It is hard and in some ways I think it gets harder as you get older.

When I was in my 20s with DH none of our friends had money or things. They weren't buying houses, they weren't driving luxury cars yet, they were getting of school, getting careers started, paying back loans, etc. Most people were young and broke and starting out. But then the 30s/40s hit and people began starting families and making a real salary instead of entry level earnings.

I recently turned 35 and started blogging again and began reading posts about getting out of debt and turning over a new leaf and LBYM. There are many posts about the monotony and struggle of savings.

I'm about to admit it's HARD. Right now and probably for the past 4 years we've been on cruise control. We've been cruising along saving at the same rate and pace actually putting more aside in our taxable savings, but accruing some debt (car loans I want gone this year). But this year a couple of things happened. I realized that we are potentially early retirees or financially independent couple. But at the same time I realized we also haven't upsized our lifestyle at all in a LONG time.

We bought our townhouse with plans for having kids and we had them. We have the same furniture pretty much we bought in our 1 bd condo, $100 dinner table, $20 coffee table, $50 desk from IKEA, $40 dressers from IKEA. We haven't bought any really adult furniture, except our foam mattress from costco 5 years ago. We did upgrade our cars to 4 family sedans instead of compact cars we had, but base model and used for the other. So in little ways our life has improved but nothing noticeably drastic.

So I'm going to buck the "mustachian" trend and ADMIT that I do find it hard. I find it hard to stay the course and LBYM. I find it hard to not compare and wonder what it would be like to buy a couch that cost 4 figures or a dinner table that seats more than 4 people. Or lusting after a mininvan but hesitating because even used it's a lot.

So no it doesn't get easier after getting out of debt. According to Mr Money Mustache saving 15% of your income only gets you to retirement in 43 years, saving 50% = 17 years. I can agree because I recently calculated our savings rate at around 50% of "net" = 17 years and that's about dead on for when I project we'll hit "Financial Independence" at age 45, perhaps sooner.

It's hard to save monthly without seeing any returns. To look online at other people's posted budgets even and realize that people "take home" more than we do but also feel like they have nothing to show for it. I feel like we live a very frugal middle class lifestyle because our money is siphoned away into savings before I even see it. Yet I also know mentally truly "middle" class aren't able to save anything.

So no it doesn't get easier. To quote Dave Ramsey "you should be debt free in 7 years is Bull SHIT!" Saving 15% puts you on the path to retire in 40 years. You still have other expenses to save for. You are living like no one else because you are living with a safety net. But to be truly financially free takes a lot more time and sacrifice.

What keeps me moving forward even when it sucks? That I'd rather be where I am today in less debt than I was yesterday. Everyday and choice moves me closer to the goal and though it feels like I'm treading water, I'm still ahead than digging myself into more debt.

So have a little faith fellow LBYM. It's not easy and we often lack material goods or experiences. But would you rather be here or where you were 3 months ago?

Was graduate school worth it?

June 16th, 2014 at 05:58 am

So I left STEM (science, technology, engineering, math) when I had my kids. At least the academic side. I'm not sure I want to go back to what I did for a private company. Both my perspective has changed and what I did is changing.

Science phds in many fields often take years (I can attest). Overall it's a cushy job and one that is often easy to fall into the trap.

You get paid $33k/year. Yes that's it. When my DH started in 2000 it was $18k/year. I started in 2003 at $22k/year. So it's gone up but it's not exactly a living wage. However you get student health insurance, aren't required to pay tuition, and while you work long hours there is a lot of job flexibility. Realize I also lived in very HCOLA and went to top institutions. According to the NIH, the average graduate student stipend is $22k. So people living elsewhere pay less. Also being in STEM means a stipend, those in liberal arts and humanities well they go into debt.

But in my experience after you finish your long slog you go into post-doctoral training. The NIH again says the starting salary is $42k. When I stopped in 2010 where I was it was $35k. Now how do you suppose they get around paying less? Well the post-doctoral funding is not through the NIH but other funding entities and thus professors are able to pay less than the NIH recommended going rate. But $42k? And it goes up to $55k after 7 years. You are probably thinking not bad. Not way. Truth is most post-docs don't get that sort of raises after 7 years. And while they are covered by medical insurance, they often lack access to a 401k. That means they aren't saving for retirement.

So you are 30 when you finish your phd, start a post-doc and if you are lucky done in another 7 years and 37 with no retirement or any savings unless you were super frugal. Which many are. But you are still far behind your peers who was working since 22 and saving. My DH and I were super frugal savers and bought a condo as I mentioned during graduate school. But we were the outliers I believe and not the norm.

So what happens after post-doc? In theory you get a position as a professor somewhere. But nowadays it doesn't happen. Why? Well NIH and other entities are cutting funding. Getting a position is easier now than getting a grant. But getting a position is next to impossible. The joke is someone needs to die for a position to open, which in many cases is true. Because schools have to budget not just money but space for a new professor.

Do I know people who are still post-docs? Sadly yes MANY. Many have been "post-docs" on 7+ years. They work full time, very hard, very long hours and make honestly very little.

I have a mom friend whose career track was similar to mine. She does her post-doc with two kids and I ask her if it's worth it. She has been a post-doc since 2007. She said she hopes so one day. She still dreams of a position. It doesn't matter that she pays to work (daycare costs more than she makes). I can see the financial part of the equation being negligent long term, daycare is a short term expense. What I don't get when do you give up the dream? When do you accept that you won't get a professorship position you desire? 10 years? When you hit 50? I also know 50 year old post-docs who have been there for 15 years and call it their "career" to work for someone else but still dream.

I don't know what the answer is. DH's best friend is another STEM post-doc since 2007. He is at a crossroads. Does he give up? Or does he keep trying? He really is in turmoil because at 37 he's recently married (cheap wedding post), hoping to start a family, wants to buy a house and car, and is finally getting serious about saving for retirement. But what if a job pops up and they have to move? What if he doesn't get a position? When should he give up? He talks about it with us, since we're all in the same field. My DH said give up now. Me? I'm not so sure.

Personally I left the post-doc on the table for myself. Never did one and probably never will. I don't want to work and pay someone else to watch my kids when they are small. And if I wanted to go back, I still wouldn't do one because I don't want to work the long hours anymore. Even without kids I think I would have done something else because even before I finished I knew I personally didn't have what it took to be a professor. I wasn't successful enough (ie published enough). And going to do a post-doc isn't going to change that.

So I'm taking my time now to look at other options. Was it a mistake? Yes, but the mistake I made was way back in undergraduate not considering then what I wanted to do long term. Graduate school wasn't the mistake.

What would I have done? Probably become an actuary or accountant. And now? I am looking into becoming an enrolled agent or accountant/bookkeeper. This way I can work but not full time and enjoy number crunching.

Did you go into what you majored in college? Do you like it? Was it what you expected?

Good and Bad

June 12th, 2014 at 09:15 pm

Well my day yesterday started off eventfully. My younger kiddo rolled off the bed and cut her face. She needed stitches. She's fine thankfully but boy it was a lot of blood and screaming. This is my accident prone kid. Oh well.

So my issue? The american health care system. We called the pediatrician and went in at 830 to see the nurse practitioner. She says you need stitches go to the ER. I ask why not do it in the office? Or do you refer out to a different dr. Nope the ER. So we go to the ER for sutures. SERIOUSLY? She said the dr don't have the right equipment and don't do it enough to be comfortable doing sutures. Okay then. We go there at 8:45.

I thought I keep reading about all these people who use the ER as care facilities driving up the cost of healthcare. I am now one of these people and I WENT to my supposed "gate keeper" pediatrician and got sent to the ER! Okay how can they say the prices of health insurance is out of control because people don't use primary care dr when the primary care dr don't know what else to do? Besides the fact I was annoyed I could have gone straight to the ER, but I "thought" I was doing the right thing.

And besides the fact that we were there waiting for sutures and didn't leave the ER until 2 pm! 5 hours! really? It wasn't busy we were like the only people in there but we had to wait for staff to come on? The inefficiency left me incensed. But my kiddo is fine and I am not sure if I should have taken her to a plastic surgeon or surgeon office where it could have been done in the office and faster. Arrgh.

On a positive note I made $150 on a focus group about taxes. Granted my money went straight to our ER copay. And I didn't learn anything. If anything I learned that people really don't save money.

There was a real guy standing up in front of the class showing us his financials. Here they are married with 1 child.

Income $112k
Paid Federal Taxes $10,700
SS $6900
Medicare $1624
State $4750
401k $4480 (4%)
Health Insurance Premium $6k (HDHP)
HSA $2k
Mortgage/Property Taxes $16k

Federal Taxes owed - $7700, refund $3k

Not a big deal, but seriously this guy is living on $6200/month and he can't save more? I don't think he was saving for a Roth IRA. I sat there wondering why wouldn't the guy be saving more? Isn't he worried? Where is the rest of his $4400/month going to after he pays his mortgage?

It's easier to trim a dollar in the budget than to try and save more. But it was very eye opening about how people are trying to save for retirement in this country.

Different Choices

June 9th, 2014 at 06:56 am

My neighbors both work and have 1 child, 3 months older than my 4 year old. They play great together and she's a lovely girl. I enjoy watching her and she's a truly great kid. My neighbors are nice people. They both have MBAs and are a couple of years older than my DH and I. We live connected by a wall and my 4 year went to school and once said "the little girl living behind the wall, I play with her all the time," to the teachers. When I explained we all had a good laugh.

So you can imagine this family probably makes double what my DH makes. At least that's what my DH and I believe. So $400k/year? Probably but at the minimum $300k.

So what happened is I volunteered to keep their daughter 2 full days next week while they work because they don't have childcare. Their private montessori school is out and they can't find a camp to send her to. The other three days they are going to use backup care agency and have a nanny they don't know come to their house. I feel terrible whenever I see that happen because I know the nanny just sits there with their daughter in the house. And she's pretty bored. So yes I always offer during school vacations or days off to take their kiddo with mine. I've been doing this for years. I can't do everyday of the week because of other obligations but I do try my best.

The same problem will occur at the end of the summer when the week before school they were "waitlisted" for the camp they are in the rest of the summer because they didn't register early enough. They registered in January. I'm not sure I'm ready to take her on 5 full days, so I suggested half day camp for the week with my older kiddo and I'll keep her the rest of the day. I have to find a camp I can afford however.

Right now I've signed my kid up for one camp @ $90/week for half days, and I feel super guilty spending that much. I know they could take vacation but they are taking 2 weeks in July when their parents come to visit and have used another week during spring break and more during Christmas. So they do take vacation to care for their daughter, but this is a lot.

But what stunned me? The price of her camp. Okay her montessori school is ridiculous enough at $35k/year. But the camp? Well try $1200/week. Yes a week! Seriously what they are shelling out in camp is about what my family lives on with our extremely expensive mortgage a month!

To be fair they make double what we make. But even doubling our spending to $10k/month when half of it goes to camp? They shop entirely at whole foods and probably never price compare. I know they dress themselves and their daughter in great name brands and they get boxes daily delivered from online shopping. They never shop in real stores. So even while I assume they are saving a lot, they also spend a lot. Their monthly overhead has got to be high.

But on this forum we always talk about spending and money. So I discussed with my DH if I went back to work and we had all this extra disposable income. Every penny would be disposable obviously since we can survive on his now minus childcare. Yes I may pay right now for childcare but that is a transient expense. So would our lifestyle change? I would hope not.

But the real question is would I be able to spend that freely if I made that much? If we were making $30k/month gross and were saving $5k, taxes $10k, and had $15k to spend would I? I think I would be saving every extra penny and would shorten our time toward financial independence.

I realized no I wouldn't. I can honestly say I can see the exhaustion on my neighbors faces. I can see how they can barely play with their daughter. Their actual comment "we are trying to cut back her tv watching." They never go out on the weekends except to eat. They'll send her to the playground with us but they don't join us. The fact that they are struggling to be able to cover watching her because they are already using all their vacation days. Every day they are on the hamster wheel. So perhaps my DH and I are giving up FI and early retirement, but we're also enjoying our life now. We'll get there eventually but it'll be slower.

What would happen if they were on 1 income? Or two part-time incomes? Right now they give their daughter the best of everything. She'll probably go to college of her choice paid, paid wedding, house DP, etc.

I wonder if perhaps it's the catch-22 of the "upper middle class" dual income lifestyle? The people making enough that they feel they should afford everything but can't. And somehow manage to spend an enormous amount on just "bare bones budget" because their choices force them into needing so much money? The cars, the big mortgage, the private schools, etc?

Recently I've definitely made peace with our lifestyle. In the sense before I wondered if I wasn't "achieving" enough. I am not contributing to society by working. I am not using my degree. I am not producing as a fully functioning adult "should" be. I feel inadequate compared to the many high power dual income couples I meet and know. Where I chat with the nannies rather than moms since I know them better.

But this year I've made peace with it. I've made peace with my decision to stay at home. That I do not need to work to validate myself. That even if I chose to work, money doesn't rule my life. So whatever I chose to do I know our lifestyle will be okay. If my DH loses a job we are not going to crash and burn and never retire.

Rather we could possibly "retire" now. Now I feel secure that I do not need $3M at a minimum to retire. I think $1.5M is adequate if not less. And I don't feel pressured that we have to work until retirement or else we'd be shunned for being lazy.

Money can bring great happiness. But rather being content with what you have is more important.

So I look across the wall and realize that if I went back to work we could be my neighbors. It's possible we'd be financially independent in 2 years. We could possibly save $200k/year or more. But it's also possibly we'd up our consumption just because we'd have to. We'd need more convenience because we have less time. I hope they enjoy their daughter as much as I do. I will say I do have envy sometimes at the thought they could be FI today possibly (not sure about their finances, I think they have a lot in the bank because they make a lot) while we still need to work another 5-10 years to get to where they are.

Have you ever contemplated your money or your life? Did you make a choice to scale back or retire early? Or take a different job or move to slow down? Why?

financial freedom some thoughts

June 3rd, 2014 at 05:55 am

My DH and I have been discussing the cost of living situation. He just refuses to believe that if we make less and move to a lower cost of living things will work out.

He wants to maintain our current standard of living. He isn't worried so much about what we spend, we don't have a high burn rate for our income. But rather our savings rate, he's uncomfortable with the idea of us saving less. He knows mentally that you make less = save less. You have less income you need to replace, but the idea of going backwards and saving less per year makes him uncomfortable.

His statement to me was interesting, since I'm the one who has gotten more into early retirement. He said never considered us retiring early but the more he thinks about it, the more he wants us to be independent on jobs. He really doesn't want to retire and a lot of self worth is tied to working and what he does. But he doesn't want to be dependent on a job where a job loss will leave us floundering. He's reflected a lot lately and he wants us to be flexible financially always. That we are able to weather storms.

But how do we get there? He said how can I predict we'll have enough? How can we guarantee that our estimates of an annual budget are accurate? How do we know that unexpected expenses won't crop up after we "retire"?

I can't guarantee any of that. I don't know that we won't get sick or need medical care to the tune of thousands of dollars. But I also don't know that we couldn't die young before we get to retire.

And truthfully we aren't saving enough for college and we're both aware of it. But at the same time right now college is taking a backseat to everything because we are so unsure about the future.

I'll write my thoughts on college. For now I'm going to a splash park and enjoying the summer with my kiddos!

Early Retirement?

May 28th, 2014 at 06:25 am

I never considered early retirement for DH and I. I still don't. I've always planned for 55 for DH to retire and I join him. I hate planning that far out because it seems weird to assume return rates and that we should have "millions" according to the savings calculators.

But rather I just have lived by the motto, save as much as you can, as early as you can, and see where life takes you.

So we've done that. I guess I should add I am soon to be 35 and DH will be 37 this year. Our financials are stable. But early retirement? We'll definitely hit it by 55. But any earlier? I'm not sure.

Let's assume we live on current budget of $60k/year. Right now that consists of half our mortgage and half our spending. At a Safe Withdrawal Rate (SWR) of 4% we'd need $1.5M. To be extra conservative for retiring early perhaps 3% WR would be better so we'd need $2M nest egg. This is of course assuming we have no Social Security draw. We could split the difference since FIRE Calculator says we'd have 0% chance of failing a 50 year retirement with $1.75M and a $60k/year spend rate. Also I'm assuming we get to spend all $60k on health insurance, health care, car replacement, home repairs, and we'd have no mortgage.

How long would it take us? Well using $475k retirement starting balance, assuming a $30k addition to retirement annually and a 6.5% return we'd have after 10 years $1.3M. We'd be $200-400k short of the nest egg I'd need to be comfortable. However if we looked at 15 years we'd hit $2M, the high end of our number

However that's not looking at our taxable accounts and assuming we're mortgage free. I find it hard to account for all variables because we haven't settled in a final home. We have no idea what our spending budget would be in a final home or how much we could really have saved outside of retirement. I mean our annual spending could go up by a lot over the next 5 years. It could also go down depending on where we live and what sort of house and lifestyle we live.

Just looking at the numbers I'm pretty confident we are securely on track to retire by 55, and possibly by 45 we could "retire" or at least be financially independent where a job loss wouldn't matter. Sometimes it's the knowledge that you could walk away and not worry financially is the best feeling.

Would we retire at 45? I don't think so. While I think we'll be set to FIRE, it doesn't account for the college expenses we'd be looking at after we FIRE. I think we probably need to wait until 50 because our nest egg would be enough solely in retirement accounts and I think our taxable accounts and cash flow at that time will be going to college. Of course I have no idea if our kids will want to go to college or get scholarships. I'm not even sure we're done having kids yet.

But I'll reevaluate every year. Of course the other factor is everything I budget off of now is based on living where we live. That I plan on changing sooner rather than later.

As I mentioned in our previous post something had to be done to leave where we currently are. And I think at 34 and 36 we are going to "Early Retire" and switch from "high cost/high pay" to something else. Our current savings will give us the freedom to move.

It was mentioned that we may not want to move away from an exciting HCOLA, but I honestly I don't think any of the locations we are considering are "boring". I actually think they fit us better than NYC-BOS-DC does. We're more nature, outdoors, relaxation people.

This weekend we biked and hiked with the kids and I wish we just had better location to do it in. I was worried the entire time biking about being hit by cars. I'd like to also be able to take the kids to hike more somewhere closer. Perhaps one day.

Worrying about parents

May 25th, 2014 at 11:30 am

As an only child with three step siblings, and the knowledge my dad will predecease my mom, I worry about my mom. I know that she'll have more than enough money.

But I also know that my parents have always made bad financial decisions but out earned stupid. No matter what bad decisions they've made they've always earned enough to not worry about it. They've leased cars, taken trips every month and lived a great life. But they've never done any home repairs and literally gotten rid of cars because they didn't want to fix it.

My dad still works at 83 and has been forced to take RMD from his IRAs and SS. My mom has a pension and is collecting now SS. With everything they are making too much to qualify for Roth IRA which my mom still does since my Dad still works. So financially good.

The real bad? Well here are a couple of examples. First my mom finally sold a house in July 2012 after it sat empty for 3 years because she had to "clean" it and have it recarpeted and new window treatments to sell it. The people who bought it flipped it in less than a year for $50k more. Sigh. I told her to just dump it and stop worrying about it. She refused and said she had to "fix" it to sell.

Second my parents have a large house they live in part-time. Large as in 5000 sq ft. I worry about my mom trying to clean it, they no longer have a cleaner come in since the one we had got too old. My mom doesn't trust anyone else so she's been trying to clean the house herself. I try to suggest finding someone new but she said they "steal". This house is literally leaking in the roof. When we were there for Christmas we were using buckets all over the house and my DH considered getting up there to hammer in shingles himself.

So my mom promised to fix the roof. I went back earlier this month and it still hasn't been done because she's too busy and it has to be coordinated with tenting for termites and re-roofing. I suggested calling and organizing for her, or even coming back to do it, but she said she has to "clean" and pack up everything. I suggested hiring an organizer/cleaner. But she says they steal and wouldn't do it right.

It's not about the money. She told me that she has $80k in her checking account waiting to do the roof and termites. But how can anything be done if you live in perfect weather and yet almost 6 months later a roof can't be done?

I want to hire someone to come in and just start cleaning the house up. I suggested getting a dumpster put outside so she can stop saying she has to drive to the dump.

This doesn't account for the fact that my parents have a condo they live in part-week as well. Stuffed to the brim. Everytime I visit I am lucky to fit a gallon of milk in the fridge. I have a photo I took as proof of salmon in my mom's freezer from 2001. Yes it's dated. For 2 people they have 2 refrigerators and a freezer.

Every time I suggest downsizing I'm told they can't sell the house it's not sellable. They have to clean it up first.

Mind you my mom had physical therapy for her rotator cuff in the past year so I'm worried about her cleaning toilets, lifting heavy things, etc. She's in overall great health and so is my dad, but seriously? Why do they need 3 cars for 1 driver?

I read on another blogger talking about taking over the checking account. So I worry. I wonder when do the roles reverse and the child starts taking on parental roles?

questioning a high cost of living...

May 23rd, 2014 at 05:30 am

Is it worth it to live in a HCOLA? Does the income you can potentially earn outstrip the costs? Maybe.
But the truth is that there are more expenses than just a large mortgage although I'll get to that later.

I hadn't realized all the extra expenses but the small stuff all adds up. Our heating expense are $3k/year, $2500/year electricity, $4800/year for gas for cars. Small differences in price could give us financial freedom somewhere else. Saving on heating and electric bills or even gas could be diverted to paying for an individual health insurance plan.

But what really made me start looking at our financials and future plans was we decided to look at houses. We've been in our townhouse for 9 years now. Bought at the peak in 2005 and we've been happy. As I explained in an earlier post we never expected to stay here past 1 kid. Turns out we're still here with two.

But the truth is we started looking at homes this year. We decided why not make the jump, we've been prudent, paid down our home and increased income. Truthfully we can't afford it. Insane you say? I agree.

We looked at our monthly budget and decided okay we'll increase our payments a little, loosen the purse strings, and cash in some home equity. We bought our current townhouse for $575k and can sell it for $729k low end. With what we owe I estimate we'd have comfortably $300k in equity to put down on our next place or 20% and bank the rest.

Well we started our budget search at $750k. After looking around we realized no way in hell were we going to be able to buy a house. We upped it to $800k and started to finally see homes sort of. We looked a house 0.5 miles from us 3 bd/3ba 1500 sq ft on a 3400 sq ft lot listed at $749k went in a bidding war the first weekend with 10 offers, 3 over $800k and settling at $830k. Um no thank you bidding war.

Well that meant our budget needed to head to $900k to get into the market at an "entry" level home that might need work. So we stepped back.

Trust me as you read you're probably screaming move the f$*% out LAL! You're insane. But my DH I think wanted to cry because he loves his career, he wants to continue at it, but the reality of us living here is a tough pill to swallow. Yes DH loves his job, but even if I go back to work we'd be one job loss away from losing the house if we took on a huge mortgage. And honestly we'd be working for what? To make more money to spend it on housing and living expenses. I pointed out we are constantly chasing a lifestyle that people in lower COL already have. It was time to reevaluate the true financials.

Honestly I wasn't comfortable spending so much and getting so little. I didn't like the idea of DH or potentially me being a clown car commuter where he drove at least 1 hour or at "least" an hour on public transit. What's the point of having a family you don't see? Why should he get up and leave the houose at 7 before the kids do to come home by 6 and maybe see them 1 hour??? Why live so far way to afford a home? Then we'd be better off staying put. But do we want to raise our kids in a townhouse forever? Do we want to yard or indoor playspace?

These questions are what ultimately lead us to the hard decision that we need to move. That we need to reevaluate and restock our life. We need to consider working smarter. We've amassed a pretty sizable pot of money, perhaps it's time to maximize what we can do with it.

The next step? Early retirement...but not quite what you think.

what I heard in my dental chair

May 22nd, 2014 at 01:30 pm

Yesterday I got my teeth cleaned during my semi-annual cleaning. I've been going to my dentist for 7 years now and they are very good. The dental hygienist is great and she's a lovely lady. Tells me awesome stories about growing up in a military family and she's lived all over the world.

She tells me she recently turned 65 and was asked if she was going to retire. So I said "will you?" She got offended. Now she's married but without children unless you count two golden retrievers.

She says to me if I retire and take SS I only get 33% of my income. If I wait until 70 I get 45%. I need every penny I can get. My mother is 95 and still alive. I'm going to live a long time. And I want to live in the lifestyle I'm accustomed to. And I don't have enough money. I'll still be short when I do decide to retire. She says it's so hard to save money.

I sit there unable to really comment as my mouth is being worked on of course. Good thing it was because I really wanted to ask, how much money does she really think she needs to retire? 100% of her income? Does she spend every penny she makes?

I sit here now thinking, on these forums everyone touts saving at least 15% for retirement so you can adjust to living on only 85% of your income. But I've been seriously looking at retirement numbers and I've wondered do people really need to replace 85% of their income? I mean if they have a paid for home? Then the mortgage if it's say 20-30% of their income, then perhaps it goes down to 5% repairs/maintenance.

So couldn't someone in retirement live on 65%? And then less taxes because they are in a lower bracket, say saving 10% federal? So is the truth that most people could afford to live on 55% in retirement?

Or it that people are just spending every penny they make? So that the thought of living off what they saved is impossible?

I don't know but I found it sad that she is 65 and worried about retiring and replacing her income. And she can comment that SS won't be enough for her.

Is this what is waiting for most Americans?

A big change is coming

May 15th, 2014 at 07:32 pm

Recently my DH and I made a big decision. We are leaving our current location for a new place. We decided that for non-financial reasons we want to move. However we finances has of course complicated our decision.

Do we move without jobs? Do we move to somewhere that we could possibly get jobs in our fields? Do we take jobs in something different with a lot less pay? Do we move somewhere else a lot less expensive?

My preference is to move somewhere less expensive. I think that we can likely get jobs paying enough to cover our basic expenses and if housing is cheap enough we could manage on a lot less.

We certainly don't have enough to retire early but I am not sure we want to. My DH isn't comfortable with that jump. Perhaps when he's 45?

I guess that's the reason why I'm blogging again now. To document our journey for this big change in our lives. I don't know what the future holds but I am excited.

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