Author Topic: House, Children ... Savings?  (Read 1573 times)

Stqx

  • 5 O'Clock Shadow
  • *
  • Posts: 2
House, Children ... Savings?
« on: May 15, 2017, 02:10:56 AM »
Hey everyone,

even though I’m not based in the US (Europe here) and many topics are not entirely applicable in my country, I’ve been a long time avid reader of this forum and really enjoy the great and helpful atmosphere. Thank you guys for all the hints and eye-opening topics and comments!

I’ve thought about my situation for quite some time and would now love to hear your opinion. My girlfriend and I are living a quite frugal life. We have a savings rate of above 50-60%, live in a small apartment which we own, are completely debt free (never had debt), are in our late 20s and both have college degrees. Nothing really to complain about … We both have rather safe jobs and we earn relatively average for our age & education (very little potential of earning more in the future). Changing jobs isn’t that easy – as my girlfriend definitely wants to stay with her current job and I – being rather risk-averse – am also very insecure whether I will find something safe and family-friendly.

Even though my girlfriend is living quite frugal, she doesn’t really share my enthusiasm for being FI. She was raised rather traditional and therefore “accepts” working until her retirement in her 60s and intends on giving a considerable share/all of our savings to our children rather than spending our savings for our early retirement. Additionally, we are currently intending to purchase a house within the next few years (and getting rental income from our apartment) and also plan on having children.

The entire situation gives me currently a bit of a headache. I am afraid of “losing” all my savings by purchasing a house. I am not used to the concept of debt and really don’t like the idea of having to use a considerable amount of my income to cover my debt for the next 15-20 years. I am afraid that when we purchased the house and have children, our savings rate will be 0-10% for the next 10-20 years … and early retirement will be basically impossible.
 
I’m probably exaggerating and also my girlfriend tells me that it won’t be that bad – but all the changes and living a more “exposed” life really currently gives me sleepless nights. 

What do you guys think?
Thank you so much for your help! 

MayDay

  • Magnum Stache
  • ******
  • Posts: 4014
Re: House, Children ... Savings?
« Reply #1 on: May 15, 2017, 04:24:41 AM »
You remind me of someone I know. He makes a good living and saves a lot. But he gets anxious about stuff like this despite having plenty in the bank.

Are you going to spend down some savings on a house? Yes. But as long as you don't spend it all, and you buy a house you can afford, and you actually want a house, then chill out. Do you want kids? If you do, you should have them even though yes, you'll probably save quite a bit less for a few years.

Of course if you don't actually want a house or kids, you shouldn't do it. But the way your post cell off to me, you do want them but it's more about your anxiety over money.

Regarding eventual early retirement, I'd say you've lots of time to tempt your GF with all​ the great stuff you can do after you retire. Ultimately of course you have to compromise- maybe that means working longer so you can leave some money to the kids. Only you know if the relationship is worth compromise or if you'd rather move on.

But keep in mind the odds are pretty low of finding someone else who wants to retire super early- you're likely to have to convince the next person too, so if you are happy with this person, probably it makes sense to keep working on convincing her.

Filliteracy

  • 5 O'Clock Shadow
  • *
  • Posts: 50
    • My Journal to FIRE: Winter is coming (FIRE in Canada)
Re: House, Children ... Savings?
« Reply #2 on: May 15, 2017, 07:34:59 AM »
Hey everyone,

even though I’m not based in the US (Europe here) and many topics are not entirely applicable in my country, I’ve been a long time avid reader of this forum and really enjoy the great and helpful atmosphere. Thank you guys for all the hints and eye-opening topics and comments!

I’ve thought about my situation for quite some time and would now love to hear your opinion. My girlfriend and I are living a quite frugal life. We have a savings rate of above 50-60%, live in a small apartment which we own, are completely debt free (never had debt), are in our late 20s and both have college degrees. Nothing really to complain about … We both have rather safe jobs and we earn relatively average for our age & education (very little potential of earning more in the future). Changing jobs isn’t that easy – as my girlfriend definitely wants to stay with her current job and I – being rather risk-averse – am also very insecure whether I will find something safe and family-friendly.

Even though my girlfriend is living quite frugal, she doesn’t really share my enthusiasm for being FI. She was raised rather traditional and therefore “accepts” working until her retirement in her 60s and intends on giving a considerable share/all of our savings to our children rather than spending our savings for our early retirement. Additionally, we are currently intending to purchase a house within the next few years (and getting rental income from our apartment) and also plan on having children.

The entire situation gives me currently a bit of a headache. I am afraid of “losing” all my savings by purchasing a house. I am not used to the concept of debt and really don’t like the idea of having to use a considerable amount of my income to cover my debt for the next 15-20 years. I am afraid that when we purchased the house and have children, our savings rate will be 0-10% for the next 10-20 years … and early retirement will be basically impossible.
 
I’m probably exaggerating and also my girlfriend tells me that it won’t be that bad – but all the changes and living a more “exposed” life really currently gives me sleepless nights. 

What do you guys think?
Thank you so much for your help! 


Stqx,

If you are currently saving 50-60% of your incomes, I guarantee you that buying a home is going to be something a lot more trivial than you think. Remember this - loads of people own homes, most of them are also terrible with their money. I bought a home 2 years ago, thinking it was a huge decision, etc. Turns out when you don't overspend on a house, put 20% down to avoid mortgage insurance fees, go weekly payments instead of monthly to reduce the interest burden over the long run, (combined with the fact that interest rates are at historic lows), it's doesn't really tie up too much of your savings, and you'll see your liquid savings grow back in no time.

As for children, can't speak from experience, but MMM has interesting articles about how much of spending on children is self-imposed rather than actual mandatory spending.


Scortius

  • Bristles
  • ***
  • Posts: 458
Re: House, Children ... Savings?
« Reply #3 on: May 15, 2017, 10:31:47 AM »
Hey there.  I can relate quite well to this post, I'm in a very similar situation.  First, while my wife and I are both frugal, she does not really buy into the early retirement hype and views a life devoid of work as a waste.  What has helped was to have a talk where I went through all the benefits of being financially independent.  Specifically, that FI doesn't mean no more work, it means financial security and the ability to pursue work and fulfillment on your own terms.  That part she definitely understands and has helped her 'jump on the savings train'.

We are also buying a house right now and I have found myself struggling with the entire concept of the mortgage debt and a potential decrease in our savings rate.  Mathematically I still maintain that when approached responsibly, a low-interest mortgage should be considered 'good debt' as long as you are disciplined enough to use it as an opportunity to invest money you would have been saving to buy a house outright.  That said, the emotional side of it all has been very difficult and shouldn't be overlooked.  Again, what helped was to sit down with my wife and discuss my personal savings goals.  Essentially, I told her that it was a personal priority of mine to make sure we are putting away $X per month or year.  After discussing the reasoning and demonstrating that we should absolutely be able to afford that level of savings, she is also on board with that plan.

In the end you will need to go through this one way or another, and there's no easy solution.  I had a few severe anxiety attacks along the way, but things have become much better as the process has continued and I've been able to confirm that the specific goals I've set are still easily within our reach.  If you can set personal financial goals before you go into any high-stress situation, it will help you to navigate things knowing that your financial future will be safe as long as you stick to those goals you've already set.

If you're more interested in my personal situation, you can read my panic induced thread here:

https://forum.mrmoneymustache.com/real-estate-and-landlording/offer-accepted!-i-feel-in-over-my-head-help!/msg1528118/#msg1528118

FLBiker

  • Pencil Stache
  • ****
  • Posts: 985
  • Age: 43
Re: House, Children ... Savings?
« Reply #4 on: May 16, 2017, 09:31:17 AM »
I can totally relate, too.  I was very worried about owning a house back before we bought ours (5 years) ago.  I still freak out sometimes about possible things that could go wrong, but the reality is that it has absolutely been a good financial decision, and an enhancement to our quality of life.  When buying the house, we looked for something in good shape (it's 50 years old, which is old for where I live) in a quiet neighborhood within biking distance to work.  This meant it was cheaper than where a lot of my colleagues live, because they were looking for something new, in an exciting neighborhood, within a 30-45 minute commute.

And I was also nervous about having kids (although not primarily in terms of finances -- more in terms of doubting my ability to be other-focused rather than self-focused).  Our daughter is two, and having her has absolutely been the right decision.  Nothing makes me happier than spending time with her and my wife.  And, in our experience, having a kid hasn't been so expensive.  Just like with the house, we've bought thing secondhand when we can, and not gone overboard with stuff.  My wife has been able to stay home for the past two years, but she's going back to work in the Fall, which means we'll have daycare, which will be expensive (but it also means we'll have a second income again).

Like you, we saved around 50% of our salaries.  I don't think buying the house changed this at all, although we did buy at a particularly low time.  Having a kid changed this (because wife is staying home) but we've still saved 25-30%.  When my wife is working again, I suspect that will go over 30, and when our daughter starts school, we'll probably be over 40% again.  And, ultimately, the goal is having a good life, not maximal savings.