Overall Advice - Young, stupid, and good at a job.

[Relur]

I apologize in advance for the lengthy post.

Alright MMM's,

I have known about MMM for a while now, and I have been debating about some serious life decisions and how I can set that whole "financial freedom" into being.

Current Scenario:

I am a single male.
Working at a firm in IT for 80k a year.
I am 24 years old.
Overall career prospects are good(niche market that is populated by almost entirely baby boomers), but I wish to retire early.
Can't understand the glory over material objects.
I bought a house when I was 20 years old in 2008: 180k, 5% down, FHA loan, took the 8k homebuyer credit that is being paid back thru tax returns, 5.75% interest rate.
Currently 165k left on the loan. House is worth approx 150-170.
Just landed a job with another firm that is an hour away for about 12k more - company politics / environment were drivers.
Commute is 140 miles a day.
Vehicle gets 19MPG.
Approx time in vehicle every day = 2:30 hours.
Renting an apartment that is approx 10 mins from new job is about 700/month.
I currently pay 1450/month on my mortgage.
I estimate gas costs @ 4 dollar/gallon for my driving expenses, and the tolls are 4.60 a day.

So, I could afford to commute and just be fine - I was willing to do this anyway to get away from the current job. I would rather be driving than dealing with the type of stress at the old workplace.

I have a friend that is willing to split an apartment with me next to my new job.

I am debating if I should sell my home, or attempt to rent it out. ~1500 sq, 3 beds, 1.5 baths, semi finished basement, new construction.

If I sell, I have to pay back the remaining homebuyer credit in full the following tax year. I expect that real estate agent costs and other expenses of the sale would either leave me still owing money or just breaking even.

I am fortunate enough to do this when so many others are seriously underwater.

If I attempt to rent it out, I will be refinancing to a loan that  is a landlord loan( don't require primary on the loan to have residence there). I expect that once I refinance, my payment would also be reduced by ~200 since I could most likely get somewhere in the 3's.

All my friends are not at this point in there life and it is difficult, near impossible to take advice they say as somewhat sound as it changes too often. Parents were the classic american dream of financing everything and living life through payments so they are not good candidates either.

If anyone would like any more information, or if I missed an important ingredient for any scenario that you have envisioned - let me know.

It is with a heavy heart and a unclear direction that I request assistance of you on this fine day.

Thanks in advance for your observations.

[grantmeaname]

If you move out and refi are you on the hook for paying back the tax credit like you would if you sold the house?

[Relur]

If you move out and refi are you on the hook for paying back the tax credit like you would if you sold the house?

Yes

[gooki]

How much can you rent your house out for and do you want to be a landlord.

So I'd start researching your neighbourhood. See what the rents are like for a comparable place, see how long they're sitting vacant, etc.

But if you can break even on selling the house I'd consider that an acceptable option. If you're worried about missing out on future capital gains in the housing sector, you can always choose to purchase an apartment (which if you have a room mate lined up could keep you costs low), or simply invest you extra money.

If you do stay where you are, consider a different vehicle with better MPG, and refinance that loan.

[Ipodius]

Firstly - definitely don't commute. It can literally ruin your life - numerous studies have shown negative health effects, stress effects, and that people who commute advance more slowly in their careers! Commuting for two hours is *much worse* for you than working an extra two hours. But I'm sure you know this already :)

Otherwise, I'd say dispassionately do the maths on your two options - and then choose the one that makes more financial sense. At that point, you'll also be able to consider things like "is it worth losing $5k now in order to own the house in the future" or on the other side "is it worth losing $5k now in order to not have the stress and issues of renting it out".

Only once you know the financial position, will you be able to make an informed decision.

Otherwise, good job on getting an awesome job and amazing salary! You are *ideally* positioned for early retirement earning that kind of money in a country like the US at your age. 

[Secret Stache]

If you sell your home at a loss I believe you will not have to repay the "credit".

"If you sell your main home to an unrelated person or entity, you repay the credit only up to the amount of gain, if any, on the sale. Note: when calculating gain or loss on your main home if you received the credit, you reduce your basis by any remaining amount of the credit. See Publication 551, Basis of Assets, for more information. "

http://www.irs.gov/newsroom/article/0,,id=206292,00.html
 

[twinge]

If I were making this decision, I would run the numbers.  The relevant things I would consider are:


Renting out house

a) How much can you rent it for and is it enough to account for potential vacancy, damage, and 10% management fee (even if you choose to manage it yourself that can be considered the "hassle" fee).  Be sure to factor in any changes that may occur in lending rates, insurance and property taxes due to it being a rental property. Also figure in re-fi costs, and if you even can re-finance if you don't have enough equity in the house (I don't know anything about FHA and landlord loans so I don't know how this works).

b) Do you have the 6500 to pay back the 2008 "credit" (I'm assuming that's how much you have left)?


Selling house:
a) You sound close enough where you might end up owing money when you sell so really figure it out .  But don't forget to add in the value of the "forgiven" tax credit if it applies.
 
If the numbers come out relatively close, I would probably go with selling, myself, and chalk it up as one of those mistakes you make when you're 20...  (But if renting clearly seems a better choice and you can build some more equity and perhaps sell in a better market, you might end up viewing it as a nice investment you made when you were 20...)

[Jamesqf]

I'd make a different suggestion.  Keep the house, maybe getting a roommate to share it, and take the apartment close to work with other roommate.  Keep the house as your official residence, spending weekends there, and stay in the work apartment during the week.  Also if your employer is amenable, you can look at working a 4-day week and/or doing some telecommuting.

That way, you cut most of the commuting time & expense and get to keep the house (and tax deduction, friends in neighborhood, etc.).  You may also be able to deduct some of the apartment expense as job-related (worked for me in similar situations a few years ago, but check). If the new job doesn't work out in the long term, you're not stuck with moving again.

[smedleyb]

I'll just repeat the advice I give to most single people just starting out in their careers:  rent, stay nimble, and look for ways to boost your earnings power.  The house will come later when you have a family.  Before then, it's too much;  too much money, too much, time, and too much stress (having a partner allows you to split the chores, and kids can help too!). 

Good luck moving forward.  And take it easy on yourself with that "stupid" stuff.  That fact that you're even here trying to fix your situation (which ain't even that bad) puts you ahead of 90% of your contemporaries, which does make you a genius. ;)

[Jamesqf]

The house will come later when you have a family.  Before then, it's too much;  too much money, too much, time, and too much stress...

Have to disagree.  Of course it's a matter of personal taste & circumstances, but sometimes "later when you have a family" may work out to "never".  In my case (YMMV, of course) t's not too much money - mortgage is less than what rent of a decent place would be, especially after figuring in tax deductions and accumulation of equity), and the time spent on upkeep and the garden is mostly a stress reliever.  Then there's the absence of the stress of dealing with landlords, the musical tastes of the people in neigboring apartments, etc.

[Relur]

I would like to first thank all of your advice and your suggestions.

As far as the decision that I am going to make right now is this:

Refi right now into something that will get me into a lower monthly payment, this needs to be ASAP in my plan.

Start renting apartment near new job.

Put house on the market / wait for possible situation to open up with either family or friends that are up in the air right now about renting it for ~900/month(great deal for them).

See how the house does.

The whole idea for me about refi'ing before I put it on the market is that I can probably refi to something like ~1100 - ~1200 which would make it easier to swing the longer it stays "vacant".

The biggest "problem" that I forsee right now is that although I "can" swing the rent and the house mortgage, I would not be putting what I want into my 401k or Roth accounts for every pay cycle.

I know I can view the house as a better investment than the retirement accounts in some perspectives.

I would also prefer to start growing my liquid assets.

Time to pull up my big boy pants and make some decisions.

[grantmeaname]

You can contribute to your 2012 Roth until April 15, 2013, so if you think you'll have the house sold within the next six months you could pause your Roth contributions and catch up in the first four months of next year.

[Relur]

So here a google docs ( im surprised not more people use them on this forum for running numbers)

https://docs.google.com/spreadsheet/ccc?key=0Ai4sQm5Nfay1dFdVaG9GNy1JRWd5d0I3M2xlY214Vnc#gid=9

Summary of Data tab is not really filled out. Not too worried about it. This spreadsheet is, as always, a work in progress.

Thoughts on the three scenarios that are posted?

Some notes:

I am not able to contribute into my 401k @ work until December 2012.
I am currently under one of my parents healthcare (thanks massachusetts).
                   

[Guitarguy]

I'm 23, so I can kind of relate to what you're going through right now. You're right about refinancing- you could probably get down into the low 3 or 4's at our bank. However, you might be upside down in your mortgage because it's possible your house would appraise for 145-150 and you owe more that. I have seen a definite pattern of people that bought in '07-'08 and are appalled when appraisers come back with estimates. I even sometimes suggest that if your home gets a drive-by appaisel by the bank to SKIP the option of a full appraisel, especially if it's still within 90% of your purchase price. Often times the full appraisel will come back even lower than the "drive-by" and banks will always go with the lowest estimate.

Have you considered refinancing and renting it, while putting it up for short sale? The vibe I'm getting from your post seems to suggest that this home is a time and money sink on your life. Try and recoup some cash flow out of the house, then sell it and move  close to your job. Wouldn't you rather max your 401k and cash reserves, while keeping flexible for moving for job opportunity? Save aggressively for a new house, and who cares if rates go back up? You could possibly by a home with cash with a few years of high savings at that salary level.

[Relur]

I'm 23, so I can kind of relate to what you're going through right now. You're right about refinancing- you could probably get down into the low 3 or 4's at our bank. However, you might be upside down in your mortgage because it's possible your house would appraise for 145-150 and you owe more that. I have seen a definite pattern of people that bought in '07-'08 and are appalled when appraisers come back with estimates. I even sometimes suggest that if your home gets a drive-by appaisel by the bank to SKIP the option of a full appraisel, especially if it's still within 90% of your purchase price. Often times the full appraisel will come back even lower than the "drive-by" and banks will always go with the lowest estimate.

Have you considered refinancing and renting it, while putting it up for short sale? The vibe I'm getting from your post seems to suggest that this home is a time and money sink on your life. Try and recoup some cash flow out of the house, then sell it and move  close to your job. Wouldn't you rather max your 401k and cash reserves, while keeping flexible for moving for job opportunity? Save aggressively for a new house, and who cares if rates go back up? You could possibly by a home with cash with a few years of high savings at that salary level.

My house is not a complete sink of my life it has provided me great learning experiences, and deep down I do not feel that having the mortgage was a complete waste of money. I built amazing credit, and If I choose to rent it (even if I rent it @ FMV and the FMV is less than my mortgage ) I will still be making out.

I am currently debating whether or not refinancing is a good thing to do or not. In my current loan agreement there was a clause that stated that I needed to have the house as my primary residence for the first year of the loan. That has already been met, can you get home loans nowadays without that claus?

Also, I would think having a rental property ( even if I have to take out a small loan to pay off the government ) since I have an outstanding 2008 Homeowners Loan on the house and once they find out that I am renting it. I will owe the rest of the money in THAT tax year.


I have listed out three different scenarios in the spreadsheet that I linked in my previous post.

Here is a excerpt:

Living in springfield and commuting to work (starting august)   
Monthly cost of house + ults   1728.468
Monthly cost of costs that happen regardless   541
Monthly cost of auto insurance   190
Monthly cost of gas (travelling to framingham err'day)   819.69
Total money going out every month   3,279.15
Total money coming in every month from job   4210.52
How much money I have left each month   931.37
   
Living in Waltham, owning springfield, not renting, not selling   
Monthly cost of house + ults    1478.91
Monthly cost of costs that happen regardless   541
Monthly cost of auto insurance   190
Monthly cost of gas (travelling to framingham err'day)   128.33
Monthly cost of living in waltham   700
Total money going out every month   3,038.24
Total money coming in every month from job   4210.52
How much money I have left each month   1,172.28
   
living in waltham, renting springfield   
Monthly rent getting for springfield   1100
Monthly cost of expenses in springfield(1200/year)   100
Difference between rent + expenses, and mortgage   -478.91
Monthly cost of costs that happen regardless   541
Monthly cost of auto insurance   190
Monthly cost of gas (travelling to framingham err'day)   128.33
Monthly cost of living in waltham   900
Total money going out every month   2,480.42
Total money coming in every month from job   4210.52
How much money I have left each month   1,730.10

The formatting is all off cause of the spreadsheet. All of the backup math is in the spreadsheet.

[Another Reader]

If the balance on the mortgage is $165,000, and the house is worth $150,000 - $170,000, how will you refinance?  You have little to no equity.  Have you talked to any lenders? 

If you sell, you will likely have to bring a lot of money to the table and pay back a portion of the tax credit.  For example, if you sell for $160,000, pay a 6 percent commission and $5,000 in closing costs, you will have to come up with around $20,000 in cash to close, in addition to paying back the tax credit.  That's a big step backward.  If it were possible to refinance (FHA or???), I would live there long enough to refinance it as a primary residence.  I'm pretty sure after my experience of 110 mile round trip commutes for almost 11 years in a congested urban area, the option of staying where I am and commuting would quickly lose its appeal.  However, I would give the commute and the new job a trial while I was doing the refinance.  Once the loan closed and I was sure the new job would work out, I would look at renting out the house and moving to the new job location.

I would want to hold on to the house as an investment, a tax shelter, and a hedge against future housing costs, especially if it is in a desirable area and likely to appreciate. 

[elincolnp]

Here are my thoughts - rent out the extra rooms in your Waltham condo to students or young professionals and live out of your Framingham apartment. Room rents can go as high as $600 without utilities in Waltham. That way, you can have rent money covering part of the mortgage but you can keep it as your primary residence. You can even rent out all the rooms in the house and still keep it as your primary residence.

[Another Reader]

You mentioned your parents are not the fount of financial wisdom.  The following is some analysis from someone of their generation, based on your spreadsheet and your posts.  That's not to say I'm the fount of financial wisdom, just that I have probably done a bit better over time by doing many of the things mentioned.

First the good news.  It looks like you graduated with no student loan debt.  Congratulations on being a lot smarter than a lot of your generation.  The house purchase built your credit and gave you a tax write off for several years.   This part of your financial picture is now pretty bright.

Now, the bad news.  First, pay off those credit cards IMMEDIATELY.  With your salary, how did you acquire this debt?  Is it related to those court costs?  Are you living beyond your means on a regular basis??  Put the cards away.  If you are to the point where you can responsibly handle credit, sign up for a cash back credit card and use it for necessary purchases only.  Pay the bill as soon as it comes.  You should have cash reserves to pay bills and not have to match bills to paychecks.  Start a savings account and make regular deposits, even if they have to be small for now.  Pay yourself first and make it a habit.

Second, once the credit cards are paid off and you have a small cash cushion, you can get that Roth IRA started.  As a single person with a $90k salary, you probably will only have a few years to contribute before you go over the income limit.  Use the opportunity, as the growth and income from the Roth compounds and is tax free.  Sign up for your new employer's 401(k) when you are eligible in December.

Third are the court costs.  I'm guessing one or more moving violations, which probably also explains the ridiculously high car insurance bill.  If this is the case, it's time to change your driving habits.  Observe the traffic rules and do not mix alcohol and driving.  Employers LOOK at these things.  A DUI could cost you a job offer at some point.

Fourth, start shopping that car insurance.  I assume Massachussetts is one of the highest cost states, but you may be able to do better.  Call GEICO.  Heck, even a service oriented provider like State Farm ought to be able to beat that.  If your driving record is the problem, then call your provider every 6 months you are ticket and accident-free and ask for a rate reduction.  Over time, your rates should improve and you can move to a lower cost provider.

Fifth, see if you can refinance this house while it is owner occupied.  This is going to be difficult because of the job change.  Lenders like stability.  Get references for inexpensive brokers and try a couple of credit unions and local banks.  Your situation is also problematic because of the "loan to value" ratio.  The best rates are for borrowers with at least 20 percent equity.  You don't qualify for a HARP loan because your loan is FHA and is not owned by Fannie or Freddie.  You can refi as an owner-occupant as long as you are living in the house and you intend to maintain it as your principal residence.   Talk to these people and report back the results. 

However, your principal and interest payment is only $998, based on the information you posted.  A large portion of your payment is for the taxes, insurance, and the mortgage insurance.  You may be able to reduce the payment by around $250, under the best scenario.

If you decide to sell the house, you have two options.  You can bring a lot of money to the table or you can go the short sale route another poster mentioned.  A short sale is messy, blows your credit for a few years, and prevents you from buying anything for two years after the short sale closes.  For these reasons alone, I would keep the house for now and mitigate the financial impact.

Sixth, the commute is going to get old quickly.  You will be driving to and from the Boston area during commute hours.  Your time estimate may be low, depending on the traffic.  Instead of renting an apartment with a friend, why not see if you can rent a room close to the job for Sunday through Thursday nights?  It might be less expensive and you won't be obligated on a lease if the job does not work out or you get a better offer.  Then you can rent out your extra two bedrooms in Springfield.

Seventh, you mention your IT job is in a niche area, and you are replacing baby boomers.  Are you sure the work you are doing will even exist in 10 years?  Will you continue to be employable in IT if it doesn't?  It's easy to focus on salary early in your working years.  Some career planning now with an eye to your future employability is in order.

OK, you have probably tuned the parental type advice out by now, so that's it for now.  Good luck with the changes ahead of you.

[elincolnp]

Good point about the car insurance. I live in a very high-crime area of Boston and pay $100 a month for both me and my boyfriend (both under 25yo) through Liberty Mutual. It seems insane that you're paying twice that, farther out in Boston metro, for one person.

[Relur]

Right away I want to thank you for your effort that you are putting into this. I can't tell you how much I value it.

Now to respond to each one of those things:

First, pay off those credit cards IMMEDIATELY.  With your salary, how did you acquire this debt?  Is it related to those court costs?  Are you living beyond your means on a regular basis??  Put the cards away.  If you are to the point where you can responsibly handle credit, sign up for a cash back credit card and use it for necessary purchases only.  Pay the bill as soon as it comes.  You should have cash reserves to pay bills and not have to match bills to paychecks.  Start a savings account and make regular deposits, even if they have to be small for now.  Pay yourself first and make it a habit.

I regularly used these credit cards before my moving violations. I had to exhaust my savings to handle those and in turn the credit cards were the last on the list until now. Note how little liquid I have right now.

Second, once the credit cards are paid off and you have a small cash cushion, you can get that Roth IRA started.  As a single person with a $90k salary, you probably will only have a few years to contribute before you go over the income limit.  Use the opportunity, as the growth and income from the Roth compounds and is tax free.  Sign up for your new employer's 401(k) when you are eligible in December.

I have started my new job in June and the salary is 80k. After the credit cards are paid off, should I think about paying off/down the car payment first and then Roth? Roth 401k limit is 107k - I expect it will take me at least 3-4 years to achieve that.

Third are the court costs.  I'm guessing one or more moving violations, which probably also explains the ridiculously high car insurance bill.  If this is the case, it's time to change your driving habits.  Observe the traffic rules and do not mix alcohol and driving.  Employers LOOK at these things.  A DUI could cost you a job offer at some point.

I am reminded it of it consistently. No repeat offender here.

Fourth, start shopping that car insurance.  I assume Massachussetts is one of the highest cost states, but you may be able to do better.  Call GEICO.  Heck, even a service oriented provider like State Farm ought to be able to beat that.  If your driving record is the problem, then call your provider every 6 months you are ticket and accident-free and ask for a rate reduction.  Over time, your rates should improve and you can move to a lower cost provider.

I just finished shopping it around, tried Liberty Mututal, Geico, and All State. The best rate was ~2200 / year from Liberty. I took it.

Fifth, see if you can refinance this house while it is owner occupied.  This is going to be difficult because of the job change.  Lenders like stability.  Get references for inexpensive brokers and try a couple of credit unions and local banks.  Your situation is also problematic because of the "loan to value" ratio.  The best rates are for borrowers with at least 20 percent equity.  You don't qualify for a HARP loan because your loan is FHA and is not owned by Fannie or Freddie.  You can refi as an owner-occupant as long as you are living in the house and you intend to maintain it as your principal residence.  Talk to these people and report back the results.

However, your principal and interest payment is only $998, based on the information you posted.  A large portion of your payment is for the taxes, insurance, and the mortgage insurance.  You may be able to reduce the payment by around $250, under the best scenario.

If you decide to sell the house, you have two options.  You can bring a lot of money to the table or you can go the short sale route another poster mentioned.  A short sale is messy, blows your credit for a few years, and prevents you from buying anything for two years after the short sale closes.  For these reasons alone, I would keep the house for now and mitigate the financial impact.

I will start the process shortly. I have been getting alot of things in the mail about refinancing back into another FHA loan. I am not sure if this is what I want to do or not, I would think I would want to get into a convential loan. Is this even possible?

Would it be a better option to not even price out refinancing and just take the potential ~250 hit since I have met the first year owner-occupant agreement on my current loan and I could rent it out without potential legal action?

Sixth, the commute is going to get old quickly.  You will be driving to and from the Boston area during commute hours.  Your time estimate may be low, depending on the traffic.  Instead of renting an apartment with a friend, why not see if you can rent a room close to the job for Sunday through Thursday nights?  It might be less expensive and you won't be obligated on a lease if the job does not work out or you get a better offer.  Then you can rent out your extra two bedrooms in Springfield.

I have been consistently driving to the new job is just (5-10) minutes under an hour and rarely beyond 1 hour. This is summer vacation time as well, should I expect once school is in session that it will be better or worse?

Since I have already been here a month(June 18th start date), I dont see any big issues and I am currently not still looking for other employment so I don't expect me to return to springfield unless my prevoius employer comes to the table with a better offer out of nowhere. This is unlikely.

If I will be living in both springfield and in framingham (renting Sun-Thursday), I will now have almost double utilities correct? Until I get renters in there for the other rooms. Then it can be split 2 or 3 ways.

What if I were to get a rent by rent agreement with friend. Are those types of rental agreements common?

To note, if I start renting out my house ( even a room ) I will have to pay back the tax credit.

Seventh, you mention your IT job is in a niche area, and you are replacing baby boomers.  Are you sure the work you are doing will even exist in 10 years?  Will you continue to be employable in IT if it doesn't?  It's easy to focus on salary early in your working years.  Some career planning now with an eye to your future employability is in order.

OK, you have probably tuned the parental type advice out by now, so that's it for now.  Good luck with the changes ahead of you.

My job is supporting mainframe operating systems. There was buzz back in the 90's of mainframe going away, but with most Fortune 500 companies + government still having mainframes. I do not expect my job prospects to be all that limited. The only REAL negative about my career is that if I don't place myself near a somewhat metro area (or at least a tech company concentration) it is likely that I will have to move a ways.

Long post is long.

[Another Reader]

Ok, here's what I would do if I were you.

As soon as you can pay off the credit cards, give them a rest.  Use cash and debit, and look around for a good cash back card.  With your low reserves, you need some time to build them back up.

I assumed the $78k was before the new job.  You have less to work with than I thought.  You should establish some cash reserves before you do anything else.  That way, when the next emergency comes along, you will be better prepared.  Your spreadsheet reflects a paycheck to paycheck way of thinking.  You will be less stressed about money once you get beyond this.

Paying off the truck is a good idea, but I would favor the Roth IRA first right now.  You will have a limited time to use this investment vehicle unless the income limits rise faster than your paycheck.  What most folks here miss because they are so young, is the tyranny of RMD's at age 70 1/2 for the tax deferred savings vehicles.  My folks had to take RMD's and pay taxes on money they did not need or want to spend.  There are no RMD's for Roths and you can withdraw your contributions without tax or penalty.  Unless the interest rate on the truck is really high, I would stick with the scheduled payments.  But that's me.  If the truck payment is a thorn in your side, go for it.

Enough on the car insurance, except to remember to call every 6 months you are ticket and accident-free.  The insurance company is not going to call you to let you know you are eligible for a lower rate.  They may make an automatic adjustment on your annual premium, but it still pays to keep on top of it.

Call around to find out your mortgage options.  A conventional mortgage with PMI may be less expensive than FHA, but you may not be eligible because of the lack of equity.  Get the cost and payment estimates in writing.  I know many people that refinanced their homes as owner-occupied and then moved shortly after because their needs changed.  Lenders ask about your intent, and they don't knock on your door 11 months later to see if you are still there.  Your biggest problem is likely to be time on the job, but you may be able to get around that if your previous job lasted several years and the new job is in the same field.

I don't know your area, but traffic here is lighter during summer vacation.  I routinely took a 15 minute hit on commute time both ways when school started. 

If you find a room to rent, you will likely have to pay a little something towards utilities.  In turn, you will charge a portion of your house's utilities to your room tenants.  If you rent an apartment with a friend, the owner or property manager will want you on the rental agreement.  I don't think your friend would want an uncommitted month-to-month subtenant anyway.

According to the IRS publication mentioned by another poster, you don't have to pay back the tax credit at an accelerated rate inless you completely convert the house to a rental or start spending all of your time at the rental by the job.  Where you "live" is a gray area.  What about someone that travels every week on business and is never home?  How much time you spend where is not the sort of thing the IRS is interested in. 

My belief is if you start adopting some of the "Mustachian" frugality and discipline described in the blog and on the forum, you will see some very real progress in your financial situation by the end of the year.  Just questioning what you are spending your money on is a start.  It means you are awake and paying attention.