Greetings,
We're about to embark on a new chapter, and we need your insights.
***Summary: Do we save for a down payment on the next home OR invest in retirement?***
The Life UpdatesBaby #2 is due in a few months, the husband is leaving his job to become a stay-at-home dad (so I'll support the 4 of us on my one-woman-LLC income), and we're moving back into our paid-off rental condo an hour away.
The Human Side- We're down-sizing from a 2,500 sq ft townhouse with 2-car garage into a 1,100 sq ft condo with zero garage space.
- We're moving because I hate the town we're living in, and since we're no longer stuck here for my husband's job, I CAN'T WAIT to move back to the college town where we own a rental home.
- Having no mortgage payment will be a major bonus!
The Math Side- Since I'm self-employed, my income varies. I'm conservatively estimating that I'll earn $100,000 net next year (after taxes and business expenses are deducted).
- Once baby #2 arrives and we move into a paid-off condo, our "bare bones" (borderline deprivation) budget is $25,000/year for a family of 4. Our very, very comfortable budget is $32,000/year (basically adding back travel and alcohol).
- If I make $100,000 and we spend $32,000, then we'll have $68,000 to play with.
The Questions- We're committed to living in our condo for at least 3 years while we figure out "what's next." We're currently in Virginia and might move out west (Utah, Colorado, Nevada, Montana?) but need time to search and decide.
- We could save/invest $68,000 x 3 years = $204,000 during those 3 years.
Do we.... a) Throw everything into retirement accounts? Investing would lower our taxable income and earn sweet sweet interest. We've got $200,000 invested now at age 32, so we're not behind, but we're not ahead. The husband is "retiring" to his dream job of being a stay-at-home dad, and I already "retired" from salaried employment to my amazing self-employment, so we're content with me working, since it's my hobby that happens to make nice $ too. In other words, we're drawn to FI but not RE side. My math brain LOVES this choice. But, we'd move in 3 years and have a mortgage again, which would turn my working-mostly-for-fun mindset into a working-to-pay-bills mindset. Quality of life matters a lot, otherwise, why bother with any of these changes?
b) Throw everything at a down payment for the next place?. There are plenty of wonderful places in the country where you can purchase a home for $204,000 cash. My human side LOVES this choice. The husband is also a fan.
c) A mix of investing and saving for a hefty down payment? If we choose this route, do you have tips for deciding how much to invest vs. how much to save for a down payment? e.g., 50/50? And where's the best place to store the down payment? We have a taxable account with Vanguard, but I know 3 years is very short, and who knows when our bull will turn into a bear.
If you're interested, our financial spreadsheet is here:
https://docs.google.com/spreadsheets/d/1oDfc1-QBNuoO84IO7XaXZe9SIa1llUcZJiJ-tQRkGdQ/edit#gid=0 It's a living breathing Google doc that I update regularly, so don't read into the exact numbers too much, as they often change.
Thank you, o wise ones.
P.S. Any additional tips for families transitioning from a 2-income household to a 1-income household? Or tips for a working parent who's about to transition into a stay-at-home parent role?