Author Topic: Valuing Present Lifestyle vs Future Financial Independence  (Read 2587 times)

engineerjourney

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I think this will be a personal decision but I am interested in hearing others opinions and logic!  How do you place value on big impacts to your present/near future lifestyle, especially if they conflict with getting to FI faster?  I am not talking about eating rice and beans vs going out to eat every day.  For me, the conflict comes with housing. 

I have always loved houses, grew up going to model/open houses for fun with my parents.  I look on Zillow weekly for fun and have started going to open houses for fun with my own family now.   I used high school graduation money to buy a house right after college graduation, delaying our wedding, it was that important to me/my DH.  Now, we have been in our house 7 years, have it half paid off already, and are thinking of moving in the next couple years.  There are things we want that this house cannot be renovated to provide (like location) but it is a great house that we could stay in for longer if we were willing to sacrifice what we want out of our home/lifestyle.  We spend a lot of time at home, we donít like to travel much, and now with two kids under 3 we really donít like traveling as much, haha.  The house/location and how it impacts our life is HUGE for our family and I am tempted to work for longer if needed to provide a better lifestyle concerning housing.  Is this stupid??

Background: We are only 30 years old, have $430K in investments, $150K in home equity, and an emergency fund.  We have to spend $2k/month on daycare but still max out two 401Ks, two Roth IRAs, and an HSA every year.  We plan to stay in this area for at least 15 more years if not longer.

How do you approach big decisions that could positively impact your life but could also negatively impact your FI journey?  Obviously everything is a balance but looking for a discussion or personal stories, especially if related to housing!

ReadySetMillionaire

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #1 on: March 20, 2018, 12:12:47 PM »
This is something I've been debating as well, but instead of moving, it's in the context of a home addition.  I actually just had a contractor out to give me an estimate this morning (it's going to be about $75,000).  So the question becomes: is having all the benefits of that addition worth $75,000?

As you've already kind of alluded to, the answer to that question, to me, involves the "time is money" principle--how much time would I have to work to afford that addition?  And so I ran some numbers, and it turns out that we would need to work an extra 6-12 months to have that addition.  In that light, the answer is clear: build the addition.  Like you, we spend a ton of time at our home, and we would gain an almost indescribable sense of utility from having some extra space. 

So I would tell you to not to think about every single expense as "negatively impacting your FI journey."  If you are willing to work for x period of time to enjoy y, then so be it.  But so long as you've made that calculation, and decided that your time is worth that expense, you're ahead of 90% of most people.

FreshPrincess

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #2 on: March 20, 2018, 12:42:08 PM »
We bought a very anti-mustachian house and I don't regret it for one second.  It's on two acres, has a pool, a stream, a walk out basement, is in a great location and I can walk to the grocery store, doctor, dentist, eye doctor, to get ice cream and to the bank.

I'd buy it again 1,000 times over and I never plan to move.  I work from home and we don't feel the need to take summer vacations because our backyard is basically a little resort. 

The joy that my home brings me is worth a few extra years of work.  Maybe it's silly that a house can bring me such joy, but we've only lived here 2 years and we already have so many memories of hosting Christmas, pool parties and other family events.  And my dog has never been happier to own 2 acres all to himself.

#worthit
« Last Edit: March 20, 2018, 12:46:59 PM by M5C2K7S2013 »

alanB

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #3 on: March 20, 2018, 01:20:59 PM »
Ah, the 7-year-home-itch.  Our situation is very similar, like every detail except we only have 2 kids.  We got an amazing deal on this cheap, livable house, really just due to the perfect timing.  There are some things we don't like about it though, so I check the Zillow listings pretty often too.  There are a few reasons we haven't moved yet:
- Laziness
- More expensive house would also have higher tax & utilities & upkeep cost & etc.
- Selling/moving is annoying (see: laziness)
- Close proximity to good public schools
- Hard to find a small house with a nice kitchen
- We plan to move somewhere far away when our kids go to college (or just get kicked out of the house, haha)

Some people have told me that they love our house because it has so much character.  My dad told me if we added an addition it would make a great starter home, haha. 

There are bad aspects to every house.  If you got the dream house there would always be a nicer dream-within-a-dream house.  I am guessing that your current house satisfies your needs, but of course you are rich enough to get the house you want, and you will still be FI at a super young age.  Whether or not I would make the trade-off to work longer depends on how much more expensive it is, can you give hypothetical numbers?

engineerjourney

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #4 on: March 20, 2018, 01:54:00 PM »
RSM: that's a great way to look at it too, I like as many perspectives as possible!

M5C2K7S2013: That's what we are looking to have, a place we don't really need to leave to feel entertained and a place our friends and family will want to gather. 

AlanB: Right now, looking at the equity we have and the extra taxes/utility costs it would probably be an increase of about $400/month on our mortgage at most (for the very top of the budget purchase).. with the caveat that we go from a 12 yr mortgage with only 9 years left on it to a 30 year mortgage.  It wouldn't really upset our current savings rate but obviously we wouldn't be mortgage free as quick without aggressive paydown.  So its definitely something we can afford and if we didn't know about MMM it would be a no-brainer, haha.   Also, I know myself in that I will always be dreaming of home improvements and other houses, but I don't let those dreams get in the way of enjoying what I have now. 

Laura33

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #5 on: March 20, 2018, 02:07:15 PM »
Yeah, so, I totally feel you.  I have a big soft spot for houses, and I own a lovely old drafty impractical thing that is too big and costs way too much to heat, and they're going to drag me out of it feet first.

I think it is reasonable to buy a house that fits your needs and makes your life easier, as long as you do the math and accept the tradeoffs.  Yes, you make do for a while, you try free/cheap options to see if you can make it work, but if you are still dissatisfied about fundamental things that you cannot realistically change (like, say, location), it is reasonable to look to move.

The problem is that it's really hard to separate that sort of logical analysis from basic house lust.  I admit, I have had house lust several times -- the most powerful one when they built some new houses in the "right" school district (as we are in the "wrong" one), and the thought of open spaces and functional insulation was pretty powerful.  But is it a real need, or a real want, or just a daydream?  The way I tell the difference is to mentally imagine myself in that situation -- not just "wow wouldn't this kitchen be great," but how it would feel to pay the bigger mortgage (at a higher interest rate), whether I am going to be happy 10 years from now when I am going to work for X more years knowing that I am doing it for the house, how it will feel to pack up my stuff and to say goodbye to this place forever.  For me, all of those thoughts completely nauseated me, which told me that the spanky new house wasn't worth the extra money. 

Why don't you do some real research?  Instead of just drooling online, research real costs in that area (home prices/taxes/insurance, plus higher utility usage/maintenance/etc. with a bigger house), look at current mortgage rates, how much you'd have to put down, what your selling costs would be; think about what will be closer AND farther, because everything has tradeoffs.  Think about how much longer you'd need to work to afford the new place, and then start looking at houses in that price range -- can you afford a house that will actually make your life better, or in your price range would you just be replacing one set of problems with another? 

bortman

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #6 on: March 21, 2018, 09:02:20 AM »
engineerjourney, I don't want to take your thread on a tangent, but you clearly have a passion for houses and house hunting. Your recreation is perusing Zillow and going to open houses, so why not consider becoming a real estate agent?

Benefits:
ē you'd have a leg up on finding a house that would work better for your family
ē you'd be able to scratch the house-hunter itch without being inclined to buy/sell often
ē if you bring the passion that you've expressed here to selling houses then you'll likely do well

I dream of making a living doing something that I'm passionate about.  You seem to have found it .. go for it!

engineerjourney

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #7 on: March 21, 2018, 09:26:00 AM »
Laura33: I have been posting on this forum since 2013 and I have to say I really enjoy your posts and think you are a great addition to this forum (I am mostly a lurker, haha).  I run the numbers all the time, and have fallen out of lust with a house several times before even seeing it in person! So its definitely going to be more of a logical choice when it comes down to it.  I was just struggling with prioritizing all my wants in life I think, and seeing if others who know about FI have found they can and will choose things like housing improvements over reaching FI sooner. Because I know asking people in real life I would get "go for it" unanimously without any tough questions or pondering.   I will definitely keep asking myself these questions as each time I have to answer to myself I narrow in on what is most important to me/my family. 

Malkynn: Trade off is exactly right.  I am not here for someone to justify whatever I end up choosing, seeing how others approach similar situations and what decisions they made helps me think of all the angles before acting.  Going part time is another item on my life "wishlist" and it's all about prioritizing and figuring out which "wants" will make the best impact with the least downside!

bortman: Haha, Real Estate is on my list for part time work/eventually FI work.  Currently I do really like my job (not love) but it pays way better than real estate with a lot less hours (engineer working 42hrs max/week).  Most real estate agents have to be on call 24/7 it seems to make money and I can see myself falling out of love with real estate once its a job real quick..  if I was doing it without any need for the money that would be a different story, I could choose to be only a buyers agent with hours I set myself.  With a young family I wouldn't want to be showing houses in the evenings and weekends like most have to do to work around clients work times.  Definitely on my radar though!!

charis

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #8 on: March 21, 2018, 10:31:52 AM »
Quote
There are things we want that this house cannot be renovated to provide (like location) but it is a great house that we could stay in for longer if we were willing to sacrifice what we want out of our home/lifestyle.

Since you've said that the house is great, can you expand on what specific sacrifices you are making and what it is about location that you would like to change.  It's hard to know what logical reasons you have to move without a more concrete idea of the exact issues. 

engineerjourney

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #9 on: March 21, 2018, 11:27:04 AM »
Quote
There are things we want that this house cannot be renovated to provide (like location) but it is a great house that we could stay in for longer if we were willing to sacrifice what we want out of our home/lifestyle.

Since you've said that the house is great, can you expand on what specific sacrifices you are making and what it is about location that you would like to change.  It's hard to know what logical reasons you have to move without a more concrete idea of the exact issues.

I am definitely interested in hearing what others have done about decisions like this but for our specific situation: outdoor space, location, and size of the 3rd bedroom are the major cons to our house.  It's "small" at 1300 sqft but its laid out well and doesn't have wasted space!  We can't walk anywhere and are unable to add some outdoor items that would enhance our life (screened porch and water feature primarily).  We only have 2 children now but might end up shooting for 4.. we could fit 3 young children in this house with two sharing the nice sized 2nd bedroom but the 3rd bedroom is just not big enough to be anything other than a nursery (or a small office for future owners).  So there isn't any emergent need to move, just some quality of life things.. that may or may not be worth the hassle and $$ of moving.  Housing is something I have always been willing to work for, just not sure to what extent :)

Laura33

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #10 on: March 22, 2018, 08:53:17 AM »
@engineerjourney - thanks!  FWIW, you can fix bedrooms, but you can't "fix" outdoor space or walkability.  One of the big reasons I love my house so much is because once my kids got a little older, they could walk or bike places by themselves -- I am in a first-ring suburb that was largely developed around the streetcar, before everyone had cars and cul-de-sacs.  So there are sidewalks everywhere, the shops and restaurants are less than two blocks away, and library and schools are all within about a half mile.  The independence my kids have -- and the freedom that I have from being the family chauffeur -- is priceless.  And I had no idea exactly how valuable that was until we were actually living it.

historienne

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #11 on: March 22, 2018, 10:06:00 AM »
you can't "fix" outdoor space or walkability.  One of the big reasons I love my house so much is because once my kids got a little older, they could walk or bike places by themselves -- I am in a first-ring suburb that was largely developed around the streetcar, before everyone had cars and cul-de-sacs.  So there are sidewalks everywhere, the shops and restaurants are less than two blocks away, and library and schools are all within about a half mile.  The independence my kids have -- and the freedom that I have from being the family chauffeur -- is priceless.  And I had no idea exactly how valuable that was until we were actually living it.

FWIW, this exactly describes my experience too.  Our house is about 1400 square feet and feels plenty big (although we are done at two kids - not sure how I'd feel about it with four!).  But part of what makes it all work is that we live across the street from a park, two blocks from the elementary school, and walking distance to library/shops/playgrounds.  The neighborhood is all rowhouses, so reasonably dense, and kids roam around in a way that's pretty unusual for the 21st century.  It's great both for them and for us as parents.  We could have saved money by buying in a neighborhood further from all that stuff, and I'm glad we didn't.  Conversely, though, the truly fancy houses are (of necessity) in a much less walkable neighborhood, since every house is on its own quarter acre lot.  I wouldn't want to live there even if money weren't an issue.

Prairie Stash

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #12 on: March 23, 2018, 01:43:40 PM »
Quote
There are things we want that this house cannot be renovated to provide (like location) but it is a great house that we could stay in for longer if we were willing to sacrifice what we want out of our home/lifestyle.

Since you've said that the house is great, can you expand on what specific sacrifices you are making and what it is about location that you would like to change.  It's hard to know what logical reasons you have to move without a more concrete idea of the exact issues.

I am definitely interested in hearing what others have done about decisions like this but for our specific situation: outdoor space, location, and size of the 3rd bedroom are the major cons to our house.  It's "small" at 1300 sqft but its laid out well and doesn't have wasted space!  We can't walk anywhere and are unable to add some outdoor items that would enhance our life (screened porch and water feature primarily).  We only have 2 children now but might end up shooting for 4.. we could fit 3 young children in this house with two sharing the nice sized 2nd bedroom but the 3rd bedroom is just not big enough to be anything other than a nursery (or a small office for future owners).  So there isn't any emergent need to move, just some quality of life things.. that may or may not be worth the hassle and $$ of moving.  Housing is something I have always been willing to work for, just not sure to what extent :)
One of the things about housing, you can always move later. The more you delay, the easier it gets I find. If the idea is to move for more kids rooms, then move when you get the kids to fill them. Moving early just means you have mortgage payments on extra rooms.

I have a bungalow with 920 sf  and a finished basement. I can "afford" a house three times larger, I can also afford to work part time (I'm a hypocrite, I work FT but my spouse is PT instead). Housing is a struggle, you can either have more time at home with the family or a larger house, part of the decision we made when the spouse went PT. You say you only work 42 hours/week, the other way of expressing that is holy crap, why do you work so much! What if the question was rephrased; do you want a larger house or more time at home?

Life is always a series of compromises. I look at my house and I can see all the hours of work I put into paying it off; about 9,700 of paid employment (take the house price, interest payments and divide by hourly wage after tax). Is my house worth 9,700 hours of my life, I think so. Is it worth 20,000 hours, time I would otherwise spend with my kids and spouse? How many of your hours on this earth do you want to spend on your house payments? For perspective, a typical career is 80,000 hours of work, the less you spend on everything, the shorter the career.

Perhaps a reframing of the question can help you answer it better.

Awesomeness

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Re: Valuing Present Lifestyle vs Future Financial Independence
« Reply #13 on: March 23, 2018, 04:17:30 PM »
When you find that combination of loving your home and the numbers are right itís awesome!   Iíve had that before but I donít now.

At my divorce I had two homes and I had to choose. One I loved but couldnít afford now and later may have been a struggle.  The other only the funds made sense. I chose the cheap one.  Itís fine and itís the emotional events that make it difficult so maybe I can fix that. But I dream about and hunt for a place I can afford in the same area I had to leave.  Itís motivation to get my finances in order and keep plugging at my debt, itís the same amount I need for a down payment.  I know if I can get debt free I can save for my house. 

Iíve always been a house nut so I get it.

Maybe consider saving for a down payment and keeping your current home. If you wanted to downsize, keep it for your kids someday etc. Itís there if you need it. Itís half paid off and youíre only 30 thatís great!  I do regret selling one cheap house I had. It would be paid for soon if I had held it. Time goes by fast and thatíd be nice rental income. Pass by that darn thing all the time.