Author Topic: 10-year-out life plan: common sense?  (Read 991 times)

YourRocinante

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10-year-out life plan: common sense?
« on: June 10, 2018, 10:04:07 PM »
Hello! I've just started reading here, but I've luckily been living a lot of these principles already. My problem is, I have low skill/ knowledge about a lot of these "common sense" life things like buying a house and car and changing jobs and things. I'm finally at a stable place in my life, so I'd like to plan out the next ten years at least and am not sure how to do that.

My situation: I've got a great, government job with a great environment, great coworkers, great institutional processes, and great tasks. I net 31k/yr after taxes, and have decent insurance and will have a pension if I stay 10 years. I used to do landscaping for 8 years, and was also happy and content doing that, so I know I could stay at this job forever, happily.

My finances: I'm currently spending 15k on living, and saving 15k/yr. I know I could improve those ratios, and I'll be spreadsheeting to optimise those, but that's not most pressing for me right here. If you have incidental suggestions:

Spoiler: "breakdown/month" • show
apartment: 26% | 690
discretionary: 8% | 200
utilities/ recurring bills: 6% | 160
car+rent insurance: 5% | 130
food+fuel: 3% | 90
more taxes, medical: 2% | 30
savings: 51% | 1300

Current liquid money: 27k, still getting index funds/ IRA set up

My first dilemna: I'm renting, which isn't ideal for three reasons. One, I think it's cheaper to own/ mortgage a house. Two, I miss having a yard for growing plants and the ability to renovate my own place. And three, I always feel bad playing music over the speakers while crafting or working out. The upsides are that skilled maintenance is covered (I'm not a plumber), and that I don't know where I'd be able to buy a 1br/1bath house of 500sq ft (which is how much I use of my giant 2br/1bath 900sqft apartment) - I don't really want a roommate/partner in the next 10 years. I'm also only 3.5mi from work, a scenic 20min bike ride, in a plenty safe part of town.

My second dilemna: A car purchase. I'm currently borrowing my brother's civic for free while he lives in the big city (a win-win), but he'll probably want it back in a few years. A family member will sell me their immaculate '14 Mazda6 for just 10k. I was plenty happy with my old cars ('91 Civic, '97 Outback), and don't mind getting something money-efficient again, but the Mazda also gets decent fuel economy and I know its history, and I'll be helping out my family.

My third dilemna: Changing jobs. I was reading from you fine folks that "moving up" (ie getting more salary) means changing jobs every two years or so. I guess I could probably do that (well, in more like 4 years after I get my GISP cert, probably), but the uncertainty of finding another happy place to work where I don't have to worry about losing my job makes me wonder if that's worth it. Folks at my current place have all been there for anywhere from 10 to 40+ years, with most at least 20 years in.

unrelated; do any of you also find it impossible to read these captchas, or am I just terrible?

Linda_Norway

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Re: 10-year-out life plan: common sense?
« Reply #1 on: June 11, 2018, 12:40:51 AM »
Hello.

Welcome to the forum.

There is an MMM post and there are also several podcasts available about the true cost of owning a house. Many people think buying a house is cheaper than renting, but this is not always true. E.g. in the city of Toronto it is cheaper to rent a nice place in the inner city than to live outside the city center.

To compare the costs, you should do the math and calculate in everything:
Rent versus mortage
Maintenance
Property tax
Garden maintenance
Utitlies
Hown owners association
House insurance
How much the money you put in your house could have made on the stock market if you would have rented.
Extra commuting costs: car/fuel/insurance/car losing value.
Extra commuting costs: your lost time, which might lead to you buying more fast food and hiring someone to paint or clean your house.
Price of purchasing a house, % to be paid to the state. Broker cost.
Price of selling a house in the future: pictures, broker, making the house look representative.
The expected value change of a house. If we currently are in a bubble, the price could also go down.  But you could also use the average house price of the last few years. E.g. where I live, house prices went up with 1% the last year. The stock market does a lot better.

Remember: a house is not an investment, or generally a very bad one. There are several financial podcasts warning you not to see a house as an investment. It is a place to live.
If you decide to buy a house anyway, see if you could rent out a room to cover some of the cost.

You have a very good situation: a job that you enjoy and a very short commute. Commuting a long way really sucks in many ways, so think twice before you do that. About switching jobs every 2 years, that is really often. I don't think 2 years is the norm. But it is a fact that people who switch jobs, get paid market value, while those who keep sitting, get raises smaller than their market value. Then it is time to find out your market value and talk to your boss about why you need a raise. If I were you, I would also think twice about changing jobs, as you enjoy your job so much. Maybe you have the kind of personality that thrives in many jobs. But in many cases, the gras in another job is not greener than in your current job. Also, don't count your current job as secure. I have experienced several things in my life that I thought were as secure as the bank, but that weren't. No job is ever secure.

Are there options for you to increase your income in some other way? As you have such a short commute, do you have time for a side hustle? Could you do someone else's gardening, as you like to work in a garden? Maybe help some old person? Can you do paid overtime at your current job?

About getting a car yourself... You have a 20 minute scenic bike ride to work. So, ride your bike to work. The environment will appreciate it, as well as your wallet. If you ever need to use a car, use Über or see if you can join a car share program in your neighbourhood. Owning a car costs a surprising amount of money. Don't do that if you don't absolutely need it and and want to save money. You do not need to help your family with buying their old Mazda.
« Last Edit: June 11, 2018, 11:39:06 AM by Linda_Norway »

Linda_Norway

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Re: 10-year-out life plan: common sense?
« Reply #2 on: June 11, 2018, 01:52:14 AM »
You will find a similar post about buying a house with several good answers here:

https://forum.mrmoneymustache.com/ask-a-mustachian/first-house-purchase-timing-advice-please-help!/?topicseen

nereo

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Re: 10-year-out life plan: common sense?
« Reply #3 on: June 11, 2018, 11:16:47 AM »
...just adding to Linda's excellent post:
This calculator is a great way of judging whether you would be better off renting or owning, financially speaking.  It's not the final word, but it at least address the question "does it make financial sense?"
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

YourRocinante

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Re: 10-year-out life plan: common sense?
« Reply #4 on: June 11, 2018, 03:41:28 PM »
-snip-

You have a very good situation: a job that you enjoy and a very short commute. Commuting a long way really sucks in many ways, so think twice before you do that. About switching jobs every 2 years, that is really often. I don't think 2 years is the norm. But it is a fact that people who switch jobs, get paid market value, while those who keep sitting, get raises smaller than their market value. Then it is time to find out your market value and talk to your boss about why you need a raise. If I were you, I would also think twice about changing jobs, as you enjoy your job so much. Maybe you have the kind of personality that thrives in many jobs. But in many cases, the gras in another job is not greener than in your current job. Also, don't count your current job as secure. I have experienced several things in my life that I thought were as secure as the bank, but that weren't. No job is ever secure.

Are there options for you to increase your income in some other way? As you have such a short commute, do you have time for a side hustle? Could you do someone else's gardening, as you like to work in a garden? Maybe help some old person? Can you do paid overtime at your current job?

About getting a car yourself... You have a 20 minute scenic bike ride to work. So, ride your bike to work. The environment will appreciate it, as well as your wallet. If you ever need to use a car, use Über or see if you can join a car share program in your neighbourhood. Owning a car costs a surprising amount of money. Don't do that if you don't absolutely need it and and want to save money. You do not need to help your family with buying their old Mazda.

I think I'm already making less than market value simply because I work for the government. In addition to that, I'm paid out of state grant funds, so I don't know how much leverage I could have in getting non-commission-approved raises, but maybe moving to a higher position would at least put me farther up the pay scale. I'll definitely reconsider how safe my job is, though, thank you. I probably need to expand my skillset so I can be hired into a less narrow position in the private sector if necessary.

Doing additional yardwork on the side is something I already do a little bit, but I've been considering more places where my hobbies/ interests and marketable products and services overlap, for sure.

I'll reconsider getting the Mazda. Right now I've been calcing my fuel efficiency in the civic, and it's surprisingly lower than I expected. I'm also trying to make a list of places I would need a friend or hired car to get to.

You will find a similar post about buying a house with several good answers here:

https://forum.mrmoneymustache.com/ask-a-mustachian/first-house-purchase-timing-advice-please-help!/?topicseen

...just adding to Linda's excellent post:
This calculator is a great way of judging whether you would be better off renting or owning, financially speaking.  It's not the final word, but it at least address the question "does it make financial sense?"
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Ah, yes, I saw that linked in the thread. I'll play with the calculator after I figure out which scripts to unblock on that page.

Thank you both for the suggestions! I'll make some changes based on what you've recommended.

[EDIT] So, according to the calculator, with very rough numbers, I could save 70$/ month by owning. That's not bad, but it's also a 9-year commitment to finding another job here if I have to change, which is unlikely for my specialty. Maybe I'll look around at some actual houses just to see, but I'm not sure if that's worth it.
« Last Edit: June 11, 2018, 04:28:37 PM by YourRocinante »

catccc

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Re: 10-year-out life plan: common sense?
« Reply #5 on: June 13, 2018, 06:52:05 AM »
IDK if the NYT calculator has been adjusted for new tax laws.  Most people are losing home ownership benefits because the standard deduction is going up.  I wonder if you should run it again and slide your marginal tax rate down to zero and see how it affects the calculation.

I would only get the mazda 6 if that would car and price would be a good choice if you were getting it from a total stranger.  I hope this doesn't sound mean, but I don't think "helping a family member out" should be a factor in your car purchase.

If your current job is good, they pay you fairly, you like the environment, etc., then I would stick with it until there's a reason to move on.  Go ahead and get your GISP cert, I generally think it is good to invest in yourself.  But perhaps there is plenty of room for growth where you are, or will be in the future.

Also, if this is a state job and you have access to a 457(b), take advantage of that thing!  This is a huge advantage for FIRE!