Author Topic: Maisymouser's Case Study Saga  (Read 9207 times)

maisymouser

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Maisymouser's Case Study Saga
« on: February 29, 2020, 07:53:07 PM »
Background: We are a small family in a MCOL area. We were lucky and bought what I would consider to be our dream house off the bat at a fantastic price for our area (6 acre homestead in great area, house #1). BUT... we moved this year 45 minutes north to be closer to my new & better paying job (now I can bike to work!). Thanks to our Mustachian habits over the years, we were able to hang onto House #1 and rent it out, while buying House #2 in cash. The downside is that I miss our other property a ton- I can't see staying in our current house forever. It's very bland compared to house #1 and I miss the privacy, opportunities to garden, the unique space, etc. These feelings will be more pronounced when FIRE'd and I have more time on my hands. House #2 will do for now, though, as I am a self-proclaimed Mustachian now and am NOT going to put up with a clown commute of 45 minutes each way for my new job, which was a great financial and career move.

I have two autoimmune conditions that will require good health insurance throughout my lifetime; self insuring will never be an option for us. Though it causes me a lot of stress to think about with regards to FIRE options, I'm simply grateful I've been able to stay as healthy as I have and that the medications I am on even exist. I have been effectively symptom-free since treatments started years 8+ years ago and as long as I stay on my (extremely) pricey meds, I don't have concerns about my health.

I don't know when we want to FI or RE but we want to be able to ASAP and at the drop of a hat. You never know how life is going to go and I want as many options available to me as our kid grows up and our parents age. If you had to pin me to a goal, I'd like to be FI in 5 years.

A lot of the expenses below are ballpark ones because we aren't strict about tracking. We are lean and mindful about any spending we do, whether it's $1 or $100. Providing fairly conservative targets and goals for FIRE because that's how we like to roll.

Life Situation: 28F with 40M husband I started dating at 18 (cradle robber!!) and 1-year-old. Married filing jointly. Living in central NC. Partner works 3 days/week out of state during the school year, we both are happy with that schedule as it means he reduces daycare costs the other 2 days/week and summers.

Gross Salary/Wages: Me $65k annually, partner $70k annually.

Individual amounts of each Pre-tax deductions (annual):
*401k and 403b: $19k each (I get 9.5% match and partner gets 4% match)
*IRA (traditional): $6k each
*Optional 457: $3k at this point, but we plan to funnel any superfluous money here as the contribution limit is $19k
*Dependent Care FSA: $5k
*Health Care, Vision, & Dental Premiums: $1.5k

Other Ordinary Income: We make a little bit of money on the side raising and selling chickens, not enough to consider seriously here. We keep our eyes out for extra income opportunities but since we had our son it's been tough to find time for those.

Rental Income, Actual Expenses, and Depreciation: We rent House #1 now for $1700/mo which covers the mortgage, taxes, and maintenance but doesn't make us much more. In 6 years after the mortgage is paid off it will earn us something like ~$1k/month. The house has appreciated significantly, yet the rental income doesn't look great from a strictly financial standpoint... we hope not to sell the house as it is our dream home and I'd like the option to move back someday when FIRE'd. Or we will sell and buy a more expensive property in our current area.

Adjusted Gross Income: $100k

Taxes: Federal $9k, state/local ~$5k.

Current expenses: All numbers are annual:
* Mortgage: $18k for House #1, effectively covered by rent
* Taxes & Insurance:  $4k for House #2, House #1 costs covered by rent* Childcare: $6.3k - Only pay for Tu-Th care, may increase or decrease by ~1k/year depending on shifts in our daycare situation and schedule in the future
* Utilities: $?? Haven't lived in the new house long enough to get a gauge on, probably somewhere between $2-3k/year
* Internet: $600
* mobile phones: $480 give or take (through husband's family plan)
* vehicle maintenance / taxes / gas: $2k
* auto insurance / umbrella insurance: $1300
* pets: let's call it ~$200 to feed the two cats annually, haven't yet had major issues that require a vet visit.
* groceries / dining: $1500 (yes, per year- this is a separate thread's worth of discussion)
* medical / dental premiums: $2k
* medical / dental expenses: $5k
* Gifts / Charity: $500
* Travel & Entertainment: $1k target but we typically spend <$500 on this, anticipate increase as kiddo grows older
* clothing / shopping: $600, only shop at thrift stores and buy used clothes/household items.* House maintenance: let's approximate $6k for House #2, rent pays for House #1 maintenance
* Misc expenses: $2k? Bike stuff, kid stuff, random stuff...

Total expenses (annually): $36,480 +/- $5k, this number has moved all over the place and I don't trust it fully.

Expected ER expenses: This is tough to estimate. A conservative figure would be somewhere in the $40k ballpark range. I know I will want to travel more and have a good cushion. I also want to budget for any unexpected disasters (health, house, etc). We wouldn't need a second car so those associated costs would go down.

Assets:
* 401k  $65k me, $70k partner*457 $52k partner* IRA: $18k partner
* Roth IRA: 35k me
* HSA: $10k me
* cash: $1k me, $20k partner
* Home equity (house #1): $325k partner* Home equity (house #2): $220k split evenly between us* cars: $20k (one beater 2004 prius and one fancy 2017 electric hybrid prius- will NOT include in total assets since we don't plan to sell)

Total Assets (including all home equity): $816k
Total Assets sans House #1: $511k
Total Assets sans House #2: $616k

Liabilities:

Mortgage for House #1: $108k at 18k/year for next 5-6 years, personal loan so no option to refi/etc. Husband is on top of this so I'm not sure exact month we'll be finished.

Specific Question(s):   My maisy mustache, where do I start?

#1- Are we complete dummies for keeping House #1? If we didn't have emotional and family ties to it we wouldn't have considered keeping it, but I see us possibly moving back or keeping it for other non-financial reasons. I also don't trust a job any farther than I can throw a football and that's the only reason we are living in House #2. If I was laid off tomorrow we'd easily move back, no questions asked.
With that said, we need to figure this out within a couple years for tax purposes. If we sell after that, we will be taxed MUCH more heavily on the gains we will have made, to the tune of tens of thousands. Is it ridiculous to consider renting it forever even in the event that we don't move back? And if we don't move back, I'll still feel compelled to sell House 2 and find another multi-acre homestead property, which will be a lot more $$$ than our current house. Decisions, decisions...

#2- Where do you see us standing in terms of FI overall? Give me your gut reaction to our situation and what we could do better. Facepunches welcome of course!!

#3- Is there an estimate out there for the cost of raising a Mustachian child? It's easy to find non-MMM numbers out there (I think I saw $250k/kid in an MSN article last year, gross) but I don't know what to expect as my son grows up and we want to provide him fun and enriching opportunities. I'm contemplating a lot lately about whether we should foster/adopt, but that's another can of worms.

If you've made it this far, thanks for reading- I so value this community and your input.
« Last Edit: April 14, 2022, 04:08:02 PM by maisymouser »

waltworks

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Re: Overthinking All This
« Reply #1 on: March 01, 2020, 11:15:17 AM »
1. Financially it's a bad rental. You think you're breaking even, but you probably aren't in the long run.  You are also going to have to pay capital gains if you don't move back and decide to sell it, which is a major downside. Since you might move back in, though, it's not a terrible decision. You can think of it as purchasing something like a $5-10k/year option (depends on so many assumptions I won't even attempt to do a real calculation, but it's expensive) to live there someday, I suppose.

2. You are about a decade out. You've got $270k liquid, you could get another $200k by selling house 2. So say you basically have a stache of $470k, though some of it (house 1) is not really working very hard for you right now. That puts you halfway to the even million bucks you'd need for a $40k/year spend at 4% SWR. I often advocated higher WRs here but given your health condition I'd probably stick with 4%.

Assuming you are actually at something around 60% savings rate, you'll get there in well under a decade. But I'm not sure your spending numbers are accurate, given the level of assets is pretty low for your income/spending numbers, especially given the excellent performance of the stock and RE markets in the last decade (ie, probably half of your NW is investment returns, with only the other half being actual savings). You also had no kid to pay for daycare for for most of the time you've been together...

So your expense numbers are probably higher than you think. Only one way to find out...

Nobody ever wants to hear it, but you should track your spending. All of it. And include a sinking fund for the cars, as well as more expenses for the kid as they get older. Got a plan for college?

3.  I'd say, assuming you don't want to just not do soccer, summer camps sometimes, music lessons, etc, that you should assume around $5k/year for a mustachian kid raising expense level. If you want to just skip all organized activities, cut that in half maybe.

-W

maisymouser

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Re: Overthinking All This
« Reply #2 on: March 01, 2020, 02:45:34 PM »
1. Financially it's a bad rental. You think you're breaking even, but you probably aren't in the long run.  You are also going to have to pay capital gains if you don't move back and decide to sell it, which is a major downside. Since you might move back in, though, it's not a terrible decision. You can think of it as purchasing something like a $5-10k/year option (depends on so many assumptions I won't even attempt to do a real calculation, but it's expensive) to live there someday, I suppose.

2. You are about a decade out. You've got $270k liquid, you could get another $200k by selling house 2. So say you basically have a stache of $470k, though some of it (house 1) is not really working very hard for you right now. That puts you halfway to the even million bucks you'd need for a $40k/year spend at 4% SWR. I often advocated higher WRs here but given your health condition I'd probably stick with 4%.

Assuming you are actually at something around 60% savings rate, you'll get there in well under a decade. But I'm not sure your spending numbers are accurate, given the level of assets is pretty low for your income/spending numbers, especially given the excellent performance of the stock and RE markets in the last decade (ie, probably half of your NW is investment returns, with only the other half being actual savings). You also had no kid to pay for daycare for for most of the time you've been together..

-W

Thanks Walt.

I guess it's worth noting that until very recently I was a grad student making 20k and paid off student loans. I've only begun climbing the 50k+ salary ladder as of three years ago. That's where most of my assets have lagged. My husband has only recently become more stock-savvy (he used to do individual stocks, held too much cash, etc). That said, I appreciate the input and will start monitoring expenses more closely.

We will continue to consider selling House #1. I know it's not the best financial decision and figured I could use unbiased forum-goers to remind me of this. I'm realizing that much of it depends on how I feel about my job in the next year or two. House #1 is closer to a lot of companies I may consider working for in the future should I decide to make a shift.

No plan for college yet. We have a small 529 and VTSAX fund we contribute to regularly.

engineerjourney

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Re: Overthinking All This
« Reply #3 on: March 02, 2020, 12:58:38 PM »
I am a house lover so I wont knock you for keeping your dream home even though you know its not the best financial decision.  Can we talk about why you bought the second home in an area that you moved to for a job that you don't necessarily see yourself staying at?  Why didn't you guys rent and keep/put that $220K in the market?  Or why didn't you get a mortgage at these historically low rates?  I see too much of your net worth tied up in housing which would be nerve-wracking for me, your feelings may vary.   You don't have to answer those questions but they might be good to answer for yourself.  I see you not as far along in your FI path because of the houses but not super far off track, you definitely need to nail down expenses though.  I track using Mint so its super easy and I have all my history there for years now (we use credit cards for most of our purchases so its real easy to track and categorize everything, obviously paying them in full every month.

As for kids, you seem to be winning on the most expensive part when they are young in your daycare costs so great job.  For comparison, I spend $12.5K a year per kid on daycare and have two in daycare right now so ouch! If you don't sign them up for tons of activities and you avoid sports travel teams it shouldn't cost nearly $250K unless you are planning on covering a full ride at an expensive college.  Check out the mini mustache area of the forum for more kid cost discussions that could be useful!

maisymouser

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Re: Overthinking All This
« Reply #4 on: March 02, 2020, 06:01:34 PM »
Can we talk about why you bought the second home in an area that you moved to for a job that you don't necessarily see yourself staying at?  Why didn't you guys rent and keep/put that $220K in the market?  Or why didn't you get a mortgage at these historically low rates?  I see too much of your net worth tied up in housing which would be nerve-wracking for me, your feelings may vary.


Part of it is that I've never done anything for more than 4 years of my life, and the idea of planning my life around a job I haven't been in for more than a few months seems overwhelming. I graduated college in 3 years, did grad school for 4, stayed with my first "real" job for 2.5... I mean, I hope I like it enough to stay with the job for as long as I can, but my track record hasn't been great in terms of doing the same thing for 5+ years. I'm happy to report that I think this job is a lot more conducive to long-term stability compared to my previous stints.

I don't think it makes sense to rent because it's expensive and I'm investing in real estate in an area where the values just keep shooting up. I guess I haven't done the math on what $220k would earn, but my gut says it wouldn't outpace what we would pay in rent each year plus appreciation on our house. Owning also offers us stability- being in the position of landlords for our other property now, I see that renting one place is never a sure and stable thing for tenants (we had to ask a long-term tenant to leave to change our rental model recently and it sucked). We didn't get a mortgage because we didn't want to pay the additional lawyer/bank/etc fees that came up when we looked into it. I think we saved something around $4k by paying in cash outright. It's also *so* nice from a mental perspective to have the house paid off.

Based on our other property in the area and how developments keep popping up, I feel pretty good about the location, condition, and price of House 2. While a lot of our NW is tied up in it, I feel confident we could sell it for $240k+ in a year or two pretty easily. But your points are totally valid.

I'll look into Mint again! I used to have it but stopped using it because I didn't like how micromanage-y I was getting about certain things.

waltworks

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Re: Overthinking All This
« Reply #5 on: March 02, 2020, 06:22:50 PM »
Home ownership isn't the slam dunk you think.

First, you've only been involved in RE for the last, what, 5 years or so? Folks who started paying attention in the last decade often have an idea that everything always appreciates, and that their area is special/up and coming.

This hasn't historically been the case. Millions of people literally lost everything in 2007-2009 because of that kind of thinking.

Second, people usually compare rent with a mortgage payment. "Why, I can own the house for less!"

Wrong. As a renter, you don't have to replace the carpet, paint, siding, roof, or appliances. You aren't responsible for property tax or HOA cost increases. You don't have to pay a plumber to come fix your leak. Any freestanding single family house is going to cost (in the US) a minimum of around $2k a year to maintain, unless it's a cinderblock wall metal roof shack or something.

Finally, both buying and selling RE costs a fortune. Figure 10% off the top between buying and selling. Yes, you can theoretically FSBO. Most likely you aren't being smart to to that, though, and you'll cost yourself even more in the long run.

So your $220k house needs to sell for ~$245k just to earn you a big fat zero.

It's also worth mentioning that by purchasing in cash, you have ignored one of the *biggest* advantages of RE investing in the US - dirt cheap gov't sponsored leverage. You can put down 20% (or much less) and finance the rest at (as of today) just over 3%. Then you can invest the rest (in other RE, if you want). Over 30 years, the stock market has never failed to beat that, usually by astounding margins.

-W
« Last Edit: March 02, 2020, 06:25:48 PM by waltworks »

ericrugiero

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Re: Overthinking All This
« Reply #6 on: March 03, 2020, 07:21:10 AM »
You may want to look a little harder at the cost breakdown of renting vs owning. 

You said that a rental in the area of your new house would cost more than owning your home.  You also said that house #1 is basically breaking even (which probably means you are loosing money long term if you figure in the larger repairs you will eventually need).  It sounds like you might be able to get a better deal on renting around house #2 or you could get more rent from house #1. 

maisymouser

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Re: Overthinking All This
« Reply #7 on: August 18, 2021, 07:25:09 PM »
2021 Update!! It will be fun to see where we were pre-pandemic and where we're at now.

(Updated) Background/Life Situation:  No major changes! We still own a homestead that we rent about 45 minutes south and our compromise-house 10 minutes from my work. We are 5 years away from owning the homestead (House 1) outright and had bought House 2 with cash. A lot of replies were that the homestead was (and is) a bad rental, and I wouldn't disagree- but I am glad we kept it, both property NW's have soared and more importantly to me, we have the flexibility to move back to the homestead for the long term when that becomes available before or during FIRE.

Still have two autoimmune conditions, still very well managed by meds.

Got better at tracking expenses (see below) but this last year was quite the oddball, right? I based certain numbers on projected expenses for the upcoming year (e.g. we will be paying for full-time childcare).

Gross Salary/Wages: Me $65k $75k annually, partner $70k $75k annually. Yay raises!

Individual amounts of each Pre-tax deductions (annual): No changes!

Other Ordinary Income: We made about $2000 on top of our salaries this year but it's unlikely to continue, so not including it in future income calculations.

Rental Income, Actual Expenses, and Depreciation: Same as before. Rental income on the homestead pays for its expenses including the mortgage, and we are happy with that arrangement. It's insane how much the house has appreciated and even if it's not a good rental for as many as 10 years, we've still earned more than we could have possibly hoped to in Zillow appreciation alone.

Adjusted Gross Income: $92k (this was wrong in my OP- based current # on 2020 tax return)

Taxes: Federal $7.5k, state/local ~$4k (also wrong in OP- current # based on 2020 tax return)

Current expenses: All numbers are annual and based on expenses for May 2020 thru May 2021. I was too lazy to pull for Aug-Aug, but this'll do for my annual check-up. For expenses that were obviously impacted by COVID like childcare and travel, I've increased those and highlighted them in blue to note that this is more likely moving forward.
* Mortgage: $18k for House #1, effectively covered by rent. No mortgage on House #2.
* Taxes (various- includes fed/state, property tax): $3.5k
* Home Insurance:  $2.3k for House #2, House #1 costs covered by rent
*Childcare: $9.6k - We now have full-time 5 days a week childcare! This is an estimate per year based on our current rate and assuming DH doesn't care for DS during next summer, which would shave off about $2.3k. We'll make that decision later.
* Utilities: $2k - Includes electric, internet & propane.
* Mobile phones for DH and I: $960
* Auto Insurance: $1.6k
* Vehicle Maintenance / Registration / Gas: $2k
* Pets & Animals, including two cats and many chickens: $573 - This includes chicken food, litter, and cat food. Much of the chicken food is recouped when we sell pullets each spring.
* Groceries: $4.4k - This is high but we splurged a lot using Instacart and eating meat as a COVID coping mechanism. Hoping to bring this down over the next year.
* Healthcare/Medical: $3.6k - Includes health premiums and payments for all things medical, dental, and vision.
* Charitable Contributions: $230
* Entertainment: $404 - Likely to be a lot higher this year, but not sure by how much. COVID really put a dampener on entertainment/travel.
* Clothing / Shoes: $103 - See "Entertainment". I foresee much higher expenses on this end.
* House Maintenance & Tools: $1.7k
* 529 Contributions: $500
* General Merchandise: $1.1k - Basically my Amazon bucket. Anything that isn't included above, including a few bulk food items like walnuts, gifts, an upgraded piece of technology here and there.
* Hobbies: $1.3k - 90% of this is beekeeping costs. I started an apiary this year while the price of wooden hives was high. Still worth it :) I'd never spent this much on a single hobby before, but I'd like to budget for this level of hobby expense in the future whether it be beekeeping or other things.
* Postage & Shipping: $33
* Restaurants: $90 - Not normally this low. Uh, thanks COVID?
* Service Charges / Fees: $30 - The one time I tried an Audible trial... This line is punishment for forgetting to put a cancellation note in my calendar.
Total annual expenses: $36k

Expected ER expenses: Still working on what we'd need. I think our $40k ballpark range is pretty good, but more money more better right? Probably won't have nearly $10k in childcare expenses, but will probably want the flexibility to travel more and spend more than this last year.

Assets:
* 401k/403b/Rollover IRAs: $179k me, $5k DH (I had DH's numbers way off in my OP)
* 457 $105k partner
* Roth IRA: $59k me, $31k partner
* HSA: $14.5k me
* Brokerage: $12k me, $178k partner
* Stock Options (vest at 4 years or upon leaving company): $2.3k me
* Cash: $8k me, $58k partner

* Home equity (house #1): $475k partner
* Home equity (house #2): $270k split evenly between us

* Vehicles: $20k (one beater 2004 prius and one fancy 2017 electric hybrid prius- will NOT include in total assets since we will run them to the ground!)

Total Assets (including all home equity): $1.4m
Total Assets (excluding House #1, since we do not plan to sell): $921.8k


Liabilities:

Mortgage for House #1: Personal loan at approx. $72k balance. Currently being paid through rental income for said house.

Notes/Thoughts:

I just turned 30! The next decade is going to be pretty awesome and I'd like to be fully FI by 40.

I'm really happy with where we're at jointly. There's still asset gap between DH and I, but I have greater earning potential at this point and we'll close that gap probably in the next decade if I keep working.

We have a goal to save $100k for our son to receive when he's an adult in a combination of a 529, brokerage account, and Roth IRA (when he's old enough to work).

I'd like to expand our family and we are looking to become certified foster parents, with me hoping that if there is a good fit that requires permanent placement we can take on a second child permanently. DH is fairly ambivalent about this, but open to fostering. I'm not sure how our expenses would change with another child in the mix, but I think we're in pretty decent shape.

In a few years we ought to take a very serious look at the ACA marketplace and determine what the plan would be if we both RE. More likely than not, DH will not want to keep commuting 2 hours each way twice a week to work. Or he'll get asked to come in more frequently but will use FU money.

I'm mentally preparing myself to work full-time another 10 years. I like my work enough- it challenges me but also provides me a pretty good deal of flexibility. That can change in an instant so I'll keep plugging away and saving so that if things go sour, we've got plenty of options.

Any recommendations/thoughts? Will try to post an update annually with major changes.
« Last Edit: August 18, 2021, 07:28:04 PM by maisymouser »

MrThatsDifferent

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Re: Overthinking All This
« Reply #8 on: August 19, 2021, 09:01:28 AM »
Good work. If you’re both working another 10 years, you’ll be fine under almost any scenario so I wouldn’t stress, keep doing what you’re doing and focus on your health and well-being. Also, make sure you have a will and estate plan and update both with each life event.

youngwildandfree

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Re: Overthinking All This
« Reply #9 on: August 20, 2021, 06:21:16 AM »
Yay updates!

Are you still liking your job? Is there a possibility of moving back to the homestead and working remotely? 10 more years seems like a long time with your current assets! I do appreciate the cost of medical care requiring some extra padding.

brandon1827

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Re: Overthinking All This
« Reply #10 on: August 20, 2021, 07:05:37 AM »
PTF

Congrats on the raises and kudos on better expense tracking

maisymouser

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Re: Overthinking All This
« Reply #11 on: August 21, 2021, 01:15:04 PM »
Yay updates!

Are you still liking your job? Is there a possibility of moving back to the homestead and working remotely? 10 more years seems like a long time with your current assets! I do appreciate the cost of medical care requiring some extra padding.

Yeah, my job's alright. It's just a job- I'm learning loads, though, and like the people/mission/culture. I don't see any problem staying for the next couple of years, but when my son starts school in 2023 and we are looking for a longer-term house (not going to work in the one we currently live in) things are going to need to change.

Right now my immediate manager and department are pretty good about WFH and flex time, but I have been a bit disappointed about the organization's stance on the future of work in my role. My entire department is supposed to be on site full-time 5 days/week now though I'm pretty sure we could all WFH 1-2 days a week and remain just as productive. In fact, we received no major complaints on productivity or project progress over 2020 when we were all WFH. Praise was given and I thought it would be an impetus for encouraging WFH. But, "butts in seats" over measuring how productive people are seems to be the current director's focus.

Despite the current policy, several members of my team and 'sister' teams are not on site every day- from what I can figure, it's a 'don't ask don't tell' situation on whether you're WFH a couple days a week. My manager is cool with how I spend my time, and they actually worked from home for 2 weeks recently (got COVID after being fully vaccinated). Since I live very close to work I have been going in daily but taking a lot of late-afternoon meetings at home.

With all that said, I might have to flex some FU muscles to get a formal arrangement to WFH in the future- and it would likely be part-time, with a 45+ minute commute each way 2-3 days/week. I acknowledge that I do need to be there in person to complete about 40% of my activities. It's not anything I want to argue for right now but will become critical in 2023.

In '23, I'll be completing a major project and will want to finalize the move-back or buy-a-local-house decision. I'm leaning toward the former since the housing market hasn't provided us many reasonable options. Oh, and I am betting that I'll find more earning potential and flexibility closer to the homestead with the experiences I'm getting at my current job, especially if my project succeeds.

Morning Glory

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Re: Overthinking All This
« Reply #12 on: August 21, 2021, 03:35:26 PM »
Thanks for the update. You are doing great!!!

Anniemaygo

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Re: Overthinking All This
« Reply #13 on: August 24, 2021, 03:35:56 AM »
I wanted to chime in on being a foster parent-
My ex and I fostered for about 3 years and it was an incredible experience for us and our kids that were about 7 and 4 when we started.  All the kids we fostered were wonderful and added a lot to our family dynamics.  That said, it’s also hard and you need to make sure you and your husband are 100% onboard and committed.  It can be significant added stress with some behavior challenges and also a lot of scheduling challenges.  We both worked full time and the initial month was a challenge - it took a week to get them enrolled in school in our town, need care during that week, then the kiddo needs to get up to date on medical/ dental, usually some therapy appointments to help process.  It was hard to do with two adults working full time outside the house.  Overall it was a positive experience for all of us. 

I currently volunteer as a CASA (court appointed special advocate) for kids in foster care and it’s also been rewarding, that might be a good start.

Paper Chaser

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Re: Overthinking All This
« Reply #14 on: August 25, 2021, 04:59:26 AM »
Background: We are a small family in a MCOL area. We were lucky and bought what I would consider to be our dream house off the bat at a fantastic price for our area (6 acre homestead in great area, house #1). BUT... we moved this year 45 minutes north to be closer to my new & better paying job (now I can bike to work!). Thanks to our Mustachian habits over the years, we were able to hang onto House #1 and rent it out, while buying House #2 in cash. The downside is that I miss our other property a ton- I can't see staying in our current house forever. It's very bland compared to house #1 and I miss the privacy, opportunities to garden, the unique space, etc. These feelings will be more pronounced when FIRE'd and I have more time on my hands. House #2 will do for now, though, as I am a self-proclaimed Mustachian now and am NOT going to put up with a clown commute of 45 minutes each way for my new job, which was a great financial and career move.

It sounds like you may have a plan to change this in the next year or two, but to me this reads like you spent 6 figures to be less happy in your home where you likely spend 30-40 waking hrs/wk. And you did that so you could avoid the relatively minor financial and time costs of commuting in a Prius for at most 7.5hrs/wk, and often less with WFH.

I think I'd strongly consider selling House #2 (once its been your primary residence for 2 years) and then investing the proceeds to accelerate your FIRE timeline. If you're good with the current FIRE timeline, then you could sell it and put the proceeds toward paying down the mortgage on the dream home, or keep house #2 as a rental. The cost of living in your dream home is essentially just the cost of commuting for the next couple of years until you can leverage your current job experience into something closer to the dream home. That's got to be much lower than paying 6 figures to live someplace where you aren't happy just to avoid a commute.
« Last Edit: August 25, 2021, 05:05:39 AM by Paper Chaser »

maisymouser

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Re: Overthinking All This
« Reply #15 on: August 25, 2021, 02:15:05 PM »
Background: We are a small family in a MCOL area. We were lucky and bought what I would consider to be our dream house off the bat at a fantastic price for our area (6 acre homestead in great area, house #1). BUT... we moved this year 45 minutes north to be closer to my new & better paying job (now I can bike to work!). Thanks to our Mustachian habits over the years, we were able to hang onto House #1 and rent it out, while buying House #2 in cash. The downside is that I miss our other property a ton- I can't see staying in our current house forever. It's very bland compared to house #1 and I miss the privacy, opportunities to garden, the unique space, etc. These feelings will be more pronounced when FIRE'd and I have more time on my hands. House #2 will do for now, though, as I am a self-proclaimed Mustachian now and am NOT going to put up with a clown commute of 45 minutes each way for my new job, which was a great financial and career move.

It sounds like you may have a plan to change this in the next year or two, but to me this reads like you spent 6 figures to be less happy in your home where you likely spend 30-40 waking hrs/wk. And you did that so you could avoid the relatively minor financial and time costs of commuting in a Prius for at most 7.5hrs/wk, and often less with WFH.

I think I'd strongly consider selling House #2 (once its been your primary residence for 2 years) and then investing the proceeds to accelerate your FIRE timeline. If you're good with the current FIRE timeline, then you could sell it and put the proceeds toward paying down the mortgage on the dream home, or keep house #2 as a rental. The cost of living in your dream home is essentially just the cost of commuting for the next couple of years until you can leverage your current job experience into something closer to the dream home. That's got to be much lower than paying 6 figures to live someplace where you aren't happy just to avoid a commute.

Well, I wouldn't say I'm UNhappy in House 2. I would certainly be less happy spending 7 hours/week driving instead of spending it with my little guy, I can tell you that much! I'm plenty alright with where we are at- it's a nice house in a nice area with nice people around- but there's a lot less personal fulfillment potential on the property (think: gardening, outdoor gatherings) and I would prefer spending my time at House 1 long-term. Honest, I am plenty pleased with that decision so far, just not what I want forever.

I also would argue that I'm not paying 6 figures to live here- I view it as an investment at this point. Property values on my road have gone up by 30%+ since we bought. I don't see any downside to doing exactly what you said in 2 years, though- sell and turbocharge our FIRE numbers, while leveraging job experience. Until then, I'd like to continue being able to bike to work (did I mention I really do like my work right now?) while getting ready for the next phase- moving back and continuing the march toward FI.

brandon1827

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Re: Overthinking All This
« Reply #16 on: August 25, 2021, 03:02:02 PM »
I can completely understand where you're at. Time with our kids is one of the most valuable gifts we can give them. If you're currently satisfied where you are, you have the property value increase in your pocket, and the flexibility to move back to house one when the time is right...do what makes you happy as the finances seem to be in order.

maisymouser

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Maisymouser's Case Study Saga
« Reply #17 on: April 14, 2022, 02:11:17 PM »
2022 Update!!

(Updated) Background/Life Situation:  Me (30), DH (42), and DS (3) all happy and enjoying life. Still no major changes to work/house situation. We still own a ~6 acre homestead that we rent out, which is 45 minutes south of the house we currently live in, which is about a half acre with lots of shade and little garden-able space. I have a ~10 min drive or ~30 min bike commute to work. The homestead continues to be expensive to maintain and obviously not an ideal rental property, but we are planning to move back next summer just before our kid goes to kindergarten.

The homestead house has some long-overdue repairs that need to be made this year. Multiple factors contributed to water damage to the front foundation, including poor grading, gutter issues, and heavy rains this year that culminated in some serious damage to this already-ancient-and-needy section of the building. It's going to be painful but we have to hire out to replace a section of the foundation and build a new porch, which will serve mainly to mitigate further water intrusion as well as be another covered space for us to enjoy. DH has collected estimates and it'll probably be a good $20k+ in repairs between the work that will be hired out and his DIY projects. All that said, I'm glad we are continuing to maintain the house and am looking forward to moving back.

Still have two autoimmune conditions, still very well managed by meds. Having chronic conditions that cost >$150k+/year to keep under control sucks for FIRE planning purposes since I don't know what the healthcare situation will be in 10+ years. Hoping for the best, planning for the worst. Grateful we have good insurance currently.

Gross Salary/Wages: Me $82k annually, partner $75k annually. Got a 7.5% raise this year. My bonuses not included since it's not guaranteed, but typically ~5% of my salary. DH in public education so no bonuses there.

Pre-tax deductions (annual): $63k including employer matching. Increased DH's 403b contribution and are maxing out the 401k/457 contributions.

Other Ordinary Income: Approximately $12k in interest, LTCG, and qualified dividends this year.

Rental Income, Actual Expenses, and Depreciation: $22.8k in rent, $11.6k in real expenses, and $6k in depreciation. Net $4800 in income. Major repairs coming up this year that will ensure we will NOT make a profit on rental income.

Adjusted Gross Income: $113k

Taxes: Federal $17.6k, state/local $5k

Current expenses (annualized): Largely unchanged.

* Mortgage: $18k for homestead property & covered by rent income. No mortgage on House #2.
* Home Insurance:  $2.3k for House #2, homestead insurance covered by rent
* Preschool: $9.6k and well worth it. Glad COVID homeschooling days are over for us.
* Utilities: $2.5k - Increased this estimate based on higher propane costs.
* Mobile phones for DH and I: $960
* Auto Insurance: $1.2k - Got a better deal this year & my 2017 vehicle depreciated enough for us to see this drop in insuring costs.
* Vehicle Maintenance / Registration / Gas: $2k
* Pets & Animals (two cats and many chickens): $600- This includes chicken food, litter, and cat food costs.
* Groceries: $4k
* Healthcare/Medical: $3.6k - Includes health premiums and payments for all things medical, dental, and vision.
* Entertainment: $1k - Tickets to events, day trips, etc.
* Clothing / Shoes: $500 - Largely includes shoes & winter/summer apparel to stay comfortable. I should probably buy new socks & underwear this year but damn, undies are pricey and no one gets to see them.
* House Maintenance & Tools: $20k - See above. Estimating major repairs to homestead this year that will not be recouped in rent, as well as maintenance/landscaping at House 2. We had some preventative foundation work done this year to House 2 that cost $1.7k and the homestead is looking to be a doozy this year.
* 529 Contributions: $500
* General Merchandise: $1.3k - Basically my Amazon bucket. Anything that isn't included above, including a few bulk food items like nuts, gifts, bike parts, tools, etc.
* Hobbies: $1.5k - Mostly beekeeping. Added $500 to this category for whatever hobby DH happens to have each month.
* Postage & Shipping: $50
* Restaurants: $250 - I plan to eat out at least a few times this year now that COVID is less of a concern. Most of this will be spent on quality Indian food :)

Total annual expenses WITHOUT house repairs: ~$35k
Likely annual expenses this year AFTER house repairs: ~$55k

Expected ER expenses: Healthcare still a black box and makes planning... difficult. There's no way we're RE'ing in <5 years so going to not worry too much about what we would end up actually spending. Also, it is becoming clear that being in love with an old house is expensive and there will be plenty of repairs and maintenance that we need to budget for. Assuming we don't spend $10k+ on healthcare after we stop working for insurance, we could leanFIRE on ~$40k, fat FIRE on ~$80k. Likely actual spend will be somewhere in between.

Assets:
* 401k/457/403b/Rollover IRAs: $459k
* Roth IRAs: $102k
* HSA: $15.7k
* Brokerage: $118k
* Inflation protected fund (DH): $70k
* Stock Options: $5.3k
* Cash: $50k
* I bonds: $15k

* Home equity (house #1): $500k
* Home equity (house #2): $340k - If we sold, assuming would pay 6% in realtor fees and would net $320k. Hoping to explore FSBO though...

* Vehicles: $20k (2004 Prius and 2017 Prius Prime, not included in total assets)

Total Assets (including all home equity): $1.65m
Total Assets (excluding House #1, since we do not plan to sell): $1.15m

Notes/Thoughts:

Still chugging along here. We are doing well on paper, but want to plan for a more luxurious lifestyle in FIRE and have plenty of work left in us. With that said, progress toward full FIRE and the security it brings seems to have slowed down this last 6 months, with a return to preschool eating up a good chunk of my paycheck and with stocks wavering.

We have a goal to save $100k for our 3yo to receive when he's an adult in a combination of a 529, brokerage account, and Roth IRA (when he's old enough to work). I haven't included those numbers previously and they are also not included in our assets above, but we are doing well with this goal and have at least $20k set aside so far.

When I last posted I mentioned becoming licensed foster parents. This has been SO SLOW y'all. We began discussions with the county and got on a wait list for training, and decided to work with a private agency. But that's taken a long time too it seems. First we had to get all these background checks and forms to them, and our social worker left the organization so her supervisor has to get up to speed with our case before we can even begin the required classes. Ugh. Luckily I'm not in a major rush or anything, but I would like to get this going within a year to find out if it's for us. I didn't realize it would be a 6+ month process just to start classes. In an ideal world, we would eventually find a good fit and be called to adoption. If not, I might consider having a second child biologically. Or heck, maybe we'll be one and done. Regardless, I feel compelled to pursue fostering as a service and as a parent. Wish we could get some traction on this front.

DH continues to commute a long distance 2x/week during the school year for his job but likes the arrangement overall. He's not actually having to pull more than 20h/week now that he has classes set up the way he likes. I would love for him to consider RE in like, 5 years or so.

Work is pretty good. I'm WFH on average 1.5 days per week. I think I need to seriously consider other options in a year (right around the time we intend to move to the homestead), both to get a pay bump and to have a tolerable commute.
« Last Edit: April 14, 2022, 04:12:41 PM by maisymouser »

BuffaloStache

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Re: Maisymouser's Case Study Saga
« Reply #18 on: March 07, 2023, 12:30:34 PM »
I know I'm super late on this reply and in danger of resurrecting a dusty thread, but Maisy you've been providing great perspectives to me recently so I wanted to comment on your situation.

Revisiting the original questions in your first post/adding some additional thoughts:
  • I don't think you were dummies for keeping House #1, especially since you plan to move back there soon. If anything, you are mitigating your losses by renting it out in the interim. As others have said, you may have been better off taking out a mortgage on House #2 (on purpose, back when rates were so low to increase amounts being invested each month), but I totally understand how not having a mortgage provides a piece of mind. {For reference I'm ~3 yrs away from finishing a mortgage on my rental property, and there are many days that I think I'd like to just drop a lump sum and finish if off... but it is only ~3%.}
  • I think you are in pretty good shape for FI overall, but as you mention your Healthcare needs and situation really make it complicated. What are your total assets without House #2 equity? What is your Total net worth without equity from either house, or at least significantly discounting House #2 equity for selling costs (staging/prep work, several %'s for listing fees, etc. etc.). E.g; if you were to take out from your assets tomorrow and pay off your mortgage, any other outstanding loans (do you have a car loan or any other debts?), etc., how much would you have left? I think knowing this number may give you a better understanding of how close you are to FI. Also, if you find that you actually are close, could you spend some time to investigate health care options? I don't really know where to start on this one but I'm decently sure my local library has a "ACA Healthcare Open Enrollment Workshop" once a year, so maybe be on the lookout for something like that?
  • Others have mostly answered this one, but I think it's highly variable based on the family life that you establish and what you want to give to your child later in life. You note above that you already have ~$20k set aside towards your $100k goal for your child, which is amazing. Heck, according to Bill Ackerman in this article you are already ahead of the game to make your son a Millionaire :-).

Overall, keep up the good work!
« Last Edit: March 07, 2023, 12:50:28 PM by BuffaloStache »

Endo1030

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Re: Maisymouser's Case Study Saga
« Reply #19 on: March 10, 2023, 07:39:58 AM »
Have you ever looked into an FQHC (Federally qualified health center) for the benefit of using their pharmacy which can take advantage of 340b drug pricing.  You mentioned you have an autoimmune disorder that costs 150k/yr to keep under control.  I don't know exactly what medication you are taking to manage it.  But as an example, where I work, we can provide Humira for what is called penny price, and patients can get it for 10$ a month without going through any sort of copay card.

The contracts for each drug vary between every institution, and they are not permanent, but it's worth looking into in your particular location and inquiring what the cost would be for your medication, if it's something you are currently getting from a retail pharmacy.  The catch is that you generally will have to switch your primary care to one of their providers, and they will refer you to a rheumatologist or whatever specialist you need.

 

Wow, a phone plan for fifteen bucks!