Author Topic: Case Study: Living at Home Forever?  (Read 2066 times)

yodelo

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Case Study: Living at Home Forever?
« on: March 06, 2017, 08:19:53 AM »
Life Situation: Single, 22 yrs old, living in D.C. in my parent's house

Gross Salary/Wages: I make 80k gross

Individual amounts of each Pre-tax deductions: Plan to max out 401k, and Roth IRA and I plan to continue this every year.

Currently have 11k in 401k, 5.5k in Roth IRA, and 3k in savings.

If I live comfortably at 35k per year, I'm using the 25x rule to find that I need 875k to retire. Just by maxing out my 401k and Roth IRA, I can reach this goal by 41 years old (19 years).

However, I have the opportunity to live at home for however long I want. Obviously, I want to limit the amount of time I'm doing this since it's not that fun, but for each month that I do so, I have $1500 per month to invest or save with.

1) What's the best way to invest or save this money? I'm thinking of just funneling it into a betterment account and getting a 7% return?
2) How long should I stay at home to get the most return? Example: Living at home for 2 years to shave 5 years off the 41 year old retirement. If I'm living at home for 2 years to shave 1 year off, then that's not worth it to me.


bullcitybro

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Re: Case Study: Living at Home Forever?
« Reply #1 on: March 06, 2017, 08:40:10 AM »
Life Situation: Single, 22 yrs old, living in D.C. in my parent's house
1) What's the best way to invest or save this money? I'm thinking of just funneling it into a betterment account and getting a 7% return?
2) How long should I stay at home to get the most return? Example: Living at home for 2 years to shave 5 years off the 41 year old retirement. If I'm living at home for 2 years to shave 1 year off, then that's not worth it to me.

1) Go to the Investing sub-section of the forum, and follow the suggested order for the US.  Basically, max your IRA, HSA (if applicable), 401k, then look into after-tax contributions to the 401k and/or a taxable brokerage w/ a mix of low-cost equity funds or ETFs.

2) Only you can answer this question.  It's all up to your personality and your relationship with your parents.  Personally, I was offered the same 'deal' from my parents and still moved out the second I turned 18.  I had a great relationship with them, but also have different priorities in life.  My entire reason for seeking FI is the "independence" part, and compromising that independence wasn't an option for me.  I know people with other goals that are living at home and using that to save pretty huge amounts of money.  Personally, I'd say that you're a 22 year old adult that can clearly afford to live on your own, I'd look for a cheap apartment, a shared living situation with a roommate, or an affordable starter home, and I'd enjoy not having to bring girls back to my parents' house.  :)

TreesBikesLove

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Re: Case Study: Living at Home Forever?
« Reply #2 on: March 20, 2017, 04:11:47 PM »
Your spending is really high for someone whose parents are giving you so much per month (over $1500 based on your estimate). You can lower your spending, gain independence, and still come out ahead by moving out and taking a hard look at what you spend all that money on. I agree with bullcitybro, taking girls back to your parents place is realllyyy lame. I moved out immediately after I got my post-college job and the independence is easily worth the $15k per year. Roommates are fun and girlfriends are even funner.

LiquidLen

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Re: Case Study: Living at Home Forever?
« Reply #3 on: March 20, 2017, 04:20:44 PM »
Don't spend so much. If you're living with your parents spend 5k per year (your maximum is 10k!).

marty998

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Re: Case Study: Living at Home Forever?
« Reply #4 on: March 21, 2017, 12:53:27 AM »
I wish I'd moved out earlier than 24.

Nothing worse than being an adult but not really because your parents still treat you like a kid.

akzidenz

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Re: Case Study: Living at Home Forever?
« Reply #5 on: March 21, 2017, 09:20:54 AM »
My situation a year ago was so similar to yours right now that I feel compelled to comment.

I finished school and began working at 22. My gross was the same ballpark as yours. My job was in my hometown so I thought, hey, why not live at home?

What I realized is that, although abstractly it makes more financial sense to live at home, it can enormously impair your independence and personal responsibility. I kept on thinking well, rent is $1,500–1,800 in my area, I can save that entire amount and more by living at home! But I think I resented myself for making this sacrifice—living at home is inconvenient in a number of ways, as a twenty-something. And because I felt like I was so responsible about saving rent money, it was hard to feel invested in cutting back elsewhere.

I moved out this January. Strictly speaking, I am saving less and spending more now. But I think the tradeoff is acceptable for the increased personal autonomy and independence I feel living on my own. I am more conscious about my water usage because I pay for utilities. I'm happy to care more about this—it aligns with my values to be environmentally conscious. I'm much more thoughtful about not buying junk, and my spending on eating out/entertainment is now much more targeted. I'm still going to a ton of concerts, but I'm paying only for the ones I truly value. I still eat out, but I don't make it a lazy habit. I was surprised to realize that my savings rate didn't dip enormously—I became more conscious about my overall spending, and that filled some of the gap.

I also think—in a lot of situations, even if you have chill parents—it kills your social life a bit to live at home. Can't bring people home (or maybe you can, but it's an awkward thing to explain). Can't have friends over late into the night (or you can, but you have to clear it with your parents). You're still living in a home under someone else's rules. It's unlikely you can negotiate things with your parents, the way you can with roommates. The space never really feels yours. You don't really feel like you're an independent adult.

I'd seriously consider whether saving extra money living at home is worth the constraints of doing so. A friend and I were both living at home to save money for a down payment. I decided eventually that I wasn't sure I even wanted to live in the area long-term, and I needed to live on my own to truly assess that (and staying ~3 years at home to save up a down payment didn't seem worth it). I moved out and he moved out about two months later—I guess not having a friend to complain about parental living with made him realize it was pretty miserable. (We both love our parents, for the record.)

One nice benefit of getting to stay with your parents is that you can shop around and wait until the rental market produces the perfect apartment/roommates/rent cost. My rent is ~$300 lower than what many of my friends are paying, and the area is a bit nicer, too.
« Last Edit: March 21, 2017, 09:23:36 AM by akzidenz »

thatluckydog

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Re: Case Study: Living at Home Forever?
« Reply #6 on: March 21, 2017, 11:16:02 AM »
Have you looked on CL to see what is available for a room for rent? This to me is quite ideal. You only have to furnish the furniture for your BR, and you can interview your roommate/landlord by seeing the space that THEY live in. I would caution you to find someone who has similar goals and values as you. Their ways will almost certainly rub off on you. I have always had either roommates or lived with my GF. I am 32. I moved out at 23 and it was a very freeing experience to learn that self reliance is possible. Lean on yourself, it will prove in your mind that you can!

iowajes

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Re: Case Study: Living at Home Forever?
« Reply #7 on: March 21, 2017, 11:40:28 AM »
Are you paying your parents rent?

If not, how do you feel about the fact that they are essentially forgoing their FIRE (and actual independence) to subsidize you?

That's my issue with living at home.

What are you spending $35k on a year? That seems really high without a rent/mortgage payment.

Meg77

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Re: Case Study: Living at Home Forever?
« Reply #8 on: March 21, 2017, 12:24:21 PM »
Save up $10K in cash and then move out. 

I know it's hard to give up the ability to save so much, but what is money for if not to realize your values and reach your goals?  Assuming things like independence, maturity, personal growth, dating/sex, responsibility and self-actualization are important to you, putting some physical and financial distance between you and your parents will get you closer to that vision. 

Also, you aren't living independently on $35K because you have free room and board right now.  So your retirement projections are probably way off.  But I'd rather retire at 45 after living independently than retire at 35 because I never left home.

PS - don't max out retirement at the expense of saving for shorter term goals like establishing a solid emergency fund.  You may also want to save for a car, a wedding, a home, a business, a rental property, some kids' tuition or any other number of things prior to retirement.

2Birds1Stone

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Re: Case Study: Living at Home Forever?
« Reply #9 on: March 21, 2017, 12:32:08 PM »
You spend a crazy amount of money for someone living at home, unless you share the mortgage, utility, food, maintenance bills?

I live on my own in a high cost of living area and spend ~$25k/yr (rent is $550 a month for my half of apartment).

If you are living at home, try to maximize savings even more. Then move out and go be an adult. Get roommates, buy a house and rent out rooms, rent a room from someone with a house, etc.
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