Author Topic: Reader Case Study: Semi-mustachian family facing high housing costs  (Read 9563 times)

SmackDab

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TL;DR: We're semi-mustachian parents in our mid-30's trying to figure out if it makes sense to suck it up and deal with Seattle's increasingly high COL, or to uproot our lives and head for possibly greener pastures.

Life Situation:
Married couple in early- to mid-30s, one toddler, potentially another baby in a year or two. Living in Seattle.

Gross Salary/Wages:
Me: $124,000/yr
Her: $45,000/yr
Total: $169,000/yr

Pre-tax Deductions:
403(b): $18,000/yr (her job does not offer a retirement plan)
Health insurance: $1,677/yr (family is on my insurance; ins. not offered by her employer)
Dental insurance: $403/yr (same situation as health insurance)
Health FSA: $1,000/yr
Dependent Care FSA: $5,000/yr
Total: $26,080/yr

AGI: $142,920/yr

Taxes:
Me: $19,669/yr
Her: $7,469/yr
Total: $27,138/yr

Income After Taxes: $115,782

Current Expenses:
Rent: $1,416/mo
Electric: $70/mo (rough average)
Water/sewer/garbage: $140/mo
Internet: $75/mo
Cell phone service: $97/mo
Daycare: $1,810/mo (infant 5 days/wk)
Groceries: $600/mo
Restaurants: $125/mo
Gas: $80/mo
Cat food/supplies: $40/mo (we have 2 cats)
Auto/renter/life insurance: $170/mo
Home supplies: $80/mo
Entertainment (Netflix, movies etc.): $50/mo
Baby stuff (diapers etc.): $100/mo
Gifts: $25/mo
Charity: $100/mo
Vacation/travel saving: $125/mo
"Allowances": $900/mo ($450/mo for each of us to spend or save however we like)
Total Expenses: $6,003/mo

Monthly Saving:
Roth IRAs: $917/mo
Emergency fund: $100/mo
House fund: whatever's left over (usually around $2,700/mo)
Total Saving: $3,717/mo

Assets:
Investments: $761,000 across retirement and brokerage accounts. Roughly 80% domestic equities, 12% international equities, and 8% bonds.
House/down payment fund: $155,000 in savings account earning 0.75%
Emergency fund: $6,700 in savings account earning 0.75%
Checking: $9,500
Car (2007 Honda Civic): $8,000
Total Assets: $940,700

Liabilities:
None (we have credit cards that we pay off in full each month)

Specific Questions:
Objectively, we're doing just fine, although there is certainly room for some face punches (groceries, internet/cellphones, allowances, etc.). We're well on our way to FIRE, but the cost of living (housing specifically) in Seattle is really bothering me.

We've been trying to rent as cheaply as possible ever since we moved here so we could pay off our debts (success!) and save for a 20% down payment on a house. We currently live in a 2bed/1bath unit in a 1950's triplex in so-so condition. It's okay for us now (although the slow plumbing, single pane aluminum windows and draftiness drive us crazy), but things will really start to get tight once we have another kid. The location is also so-so: it takes me 45 minutes to bus or bike to work (I never drive) and anywhere from 20 to 45 minutes for my wife to drive to her job (she tried busing but has to transfer downtown, and the ridiculous rush hour gridlock and sheer unpredictability drove her over the edge). So we don't see our current living situation as a viable long-term option.

We've been looking at houses in north Seattle mainly because of the schools and proximity to my job (which generates most of our income). Mid-century 3bed/1+bath houses in mostly original condition routinely sell for north of $600k around here. Things get cheaper as you head further away from the city center, but commutes generally get worse as well. There are actually several locations north of Seattle that I could bike in from relatively easily, but the commute would be really rough for my wife (she works south of downtown).  She's already feels like she doesn't spend as much time with our daughter as she'd like, and I'd like to avoid exacerbating that situation if at all possible.

So we're torn between a few options, all with significant drawbacks:
  • Buy an expensive, close-in home and accept the potentially significant FIRE delay.
  • Buy a home further out and accept the negative commute impact.
  • Find a different place to rent (may be a tough proposition due to Seattle's skyrocketing rents and the fact that we have 2 cats. Our current rent is significantly below market.)
  • Move somewhere else entirely and accept the risk/uncertainty and the fact that we'd be starting over socially.

We've spun through these options in our heads so many times, and without any productive conclusions, that we're starting to get burnt out. I'm not coming to you guys expecting a magical solution where there are no tradeoffs to be made, as this is obviously one of those situations with no single perfect answer. I also debated framing the question as a Reader Case Study, but I guess I wanted to get some outside input on the decision in the context of our financial situation as a whole. Any other advice re: optimizing our finances would be appreciated as well.

So there it is, O Mustachian Ones...what would you do if you were in our shoes?

ShoulderThingThatGoesUp

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #1 on: October 29, 2015, 02:28:35 PM »
Total Assets: $940,700

For many people here that is enough to retire. Something to consider.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #2 on: October 29, 2015, 02:41:34 PM »
Total Assets: $940,700

For many people here that is enough to retire. Something to consider.

Very true. It would probably require moving to a lower-COL area, though. We generally like living in Seattle and the PNW and would prefer not to leave if at all possible. My wife also would like to continue her career and does a type of work that is generally difficult to find outside of decent-sized cities. But I acknowledge that these are choices that we're making, and that we have to live with the consequences.

humbleMouse

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #3 on: October 29, 2015, 03:44:45 PM »
So... you are concerned about the high cost of living, yet you pay $1400/month for rent (cheap if you ask me). 

You already save multiple thousands of dollars per month.  The budget buster is obviously the daycare for the infant.

Also, your net worth is approaching a million.

It seems to me there couple choices:

1) move to LCOL.  Depending on where you move you may not even save much in housing costs.  In Minneapolis $1400/month would get you a very modest house(small mortgaged house), or a modest 2 br apartment(rent in decent area).  Not much different from your current situation.

2) Stay where you are and keep saving. 

I guess my main question is what you are comparing the HCOL with.  What you are paying for rent and food is pretty much the same as Minneapolis, which is considered LCOL.

lhamo

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #4 on: October 29, 2015, 04:20:17 PM »
$1400 for a house (however small/dated) is really reasonable.  I'm paying $1600/month for a 2 bedroom condo in Northgate/Lake City area.

Depending on where you both work, I would suggest you look more closely at the Lake City/Northgate/Shoreline area.  Prices are going up, but still much lower than the closer in northend neighborhoods.  Bus service is decent as long as you are going N/S (though plan is to change routes and provide more E/W and other linking service, especially once the UW light rail station opens up next year).  They are putting in tons of bike lanes (just added one in front of our apartment the last couple of weeks).  Groceries are cheaper up here, too -- we have Fred Meyer and Grocery Outlet in Lake City, Costco up in Shoreline, and several ethnic markets to choose from.  Yes, sidewalks are relatively rare, but on the residential streets that doesn't really matter so much as there is relatively little traffic. 

I would NOT contemplate adding a long commute with two young kids.  Recipe for disaster given the Seattle traffic situation. 

Schools might be a future issue but you might want to have a look at Columbia City and Beacon Hill, given your wife's work location.  Columbia City has gentrified quite a lot, but you can still get more bang for your buck there than up north.   And Beacon Hill is underrated, in my opinion.   We'd consider it if it weren't so far from the UW -- don't want to give DS a long commute.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #5 on: October 29, 2015, 04:28:26 PM »
So... you are concerned about the high cost of living, yet you pay $1400/month for rent (cheap if you ask me). 

Yeah, our current place is definitely cheap, especially for Seattle. It's a big part of the reason we're able to save so much. We were crazy lucky when we got it a few years ago, and we'd probably stay here indefinitely if we actually enjoyed the place more and thought it would meet the long term needs of our family. Unfortunately, it's older and has some significant issues that aren't easy to fix (obnoxiously slow plumbing and aluminum single pane windows that collect condensation like crazy Oct-May, which leads to mildew/mold around the windows). And I think it's definitely going to start feeling pretty tight once we have our second kid in another year or two. So I just don't think it's a sustainable long term option.

My point is that our current housing situation is abnormally cheap, and any new place we might move to in the area (rent or buy) is likely to be significantly more expensive.

Re: moving to LCOL, that option is on the table. I'm actually from Minneapolis, and that's where my wife and I first met. We moved out here, in part, to escape the frigid winters and humid summers. (There are also almost no mosquitoes around here...incredible). In many ways, this decision seems to be coming down to whether we prioritize FIRE higher than living in a PNW city. I have to admit I'm on the fence at the moment, so maybe I need to do some more focused thinking on that.

Goldielocks

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #6 on: October 29, 2015, 05:51:48 PM »
What is your 5 year and 20 year goal?

Are you looking to FIRE soon?  If so, your wife could FIRE now and your savings would stay the same, maybe even give extra for a larger place.

If you are just building a stash, but will keep working, what type of living situation do you see in 10 years?  How can you start to make that happen now?

You have plenty of income, in Seattle, that these are all possible choices.   

MerryMcQ

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #7 on: October 29, 2015, 06:11:15 PM »
I live south of you, near Tacoma. You're in a good position now and a baby takes at least 9 months start to finish. Why not keep up the great savings rates and then, once baby #2 is here in a few years, re-look at your goals? With how low your DW's income is, it may make a lot more sense for her to find something else to do very close to home, or to consider staying home altogether once baby #2 is here.

Look at the numbers:
45,000 (her income)
-7,469 taxes
-21,720 (infant daycare)
-18,000 (toddler daycare - estimated)
= -2189

That's before the costs of her commute, a 2nd vehicle, convenience food (because really, 2 kids are more like 5x as hard to juggle), work clothing, gifts for coworkers, etc, etc.

Actually, if you crunch the numbers right now, she's probably making an effective salary of about $1,000+/- a month. It may be worth it if she loves her job, but not many jobs are worth paying money to work at... which is what she'll effectively be doing once you add baby #2.

If you take her workplace location out of the equation, there are probably a lot of great, low-cost options for housing in an area that is an easy bike/bus/light-rail commute for you.

Argyle

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #8 on: October 29, 2015, 06:27:23 PM »
Is your wife in the kind of job where she could potentially find one (or one in another field) close to the part of Seattle you want to move?  $45,000 is not the kind of salary where it's worth staying put in an unsuitable location, especially if you can do as well in a better one.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #9 on: October 29, 2015, 09:23:07 PM »
$1400 for a house (however small/dated) is really reasonable.  I'm paying $1600/month for a 2 bedroom condo in Northgate/Lake City area.

Depending on where you both work, I would suggest you look more closely at the Lake City/Northgate/Shoreline area.  Prices are going up, but still much lower than the closer in northend neighborhoods.  Bus service is decent as long as you are going N/S (though plan is to change routes and provide more E/W and other linking service, especially once the UW light rail station opens up next year).  They are putting in tons of bike lanes (just added one in front of our apartment the last couple of weeks).  Groceries are cheaper up here, too -- we have Fred Meyer and Grocery Outlet in Lake City, Costco up in Shoreline, and several ethnic markets to choose from.  Yes, sidewalks are relatively rare, but on the residential streets that doesn't really matter so much as there is relatively little traffic. 

I would NOT contemplate adding a long commute with two young kids.  Recipe for disaster given the Seattle traffic situation. 

Schools might be a future issue but you might want to have a look at Columbia City and Beacon Hill, given your wife's work location.  Columbia City has gentrified quite a lot, but you can still get more bang for your buck there than up north.   And Beacon Hill is underrated, in my opinion.   We'd consider it if it weren't so far from the UW -- don't want to give DS a long commute.

Yeah, that's actually an area where we've been focusing in our house search (mostly the Meadowbrook area). In fact, we've made 2 offers in that area, but were outbid each time. The lack of inventory is frustrating. Beyond that, though, my wife is pretty bummed that there's so little within walking distance besides the schools (although that would eventually be very convenient). And personally, I'd like to go back in time and strangle whoever decided that nobody would need sidewalks north of 85th St...so shortsighted. Beacon Hill is the only south-of-downtown neighborhood we've been considering, but the inventory situation there is even worse than up north.

I would love to just chill and wait for the right house to come along, but the meteoric rise in prices has made me pretty nervous. Seattle overall was up over 10% year over year in 2015. Maybe we won't see the same thing next year, but even a 5% or 6% increase would negate much of the saving we've been doing.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #10 on: October 29, 2015, 09:36:01 PM »
What is your 5 year and 20 year goal?

Are you looking to FIRE soon?  If so, your wife could FIRE now and your savings would stay the same, maybe even give extra for a larger place.

If you are just building a stash, but will keep working, what type of living situation do you see in 10 years?  How can you start to make that happen now?

You have plenty of income, in Seattle, that these are all possible choices.

My FIRE goal is flexible, but I'd like to pull the trigger no later than 15 years from now. Maybe 10 if things go really well. I'm actually way more FIRE-motivated than DW...she got her master's degree a few years ago and is trying to gain momentum in her career. Which is a little unfortunate since my job is driving most of our income.

Objectively, I have a very good job. Great pay and benefits, minimal stress, decent coworkers, etc.. I just find myself getting bored a lot of the time and daydreaming of things I'd rather be doing than sitting in an office. Pretty typical situation, I know. It's kind of a golden handcuffs scenario, although I know that I could quit and we'd be fine, even if it took me a while to find something else. I'm just not sure there's any type of job out there, much less one that matches my education and background, that I can stick to for more than a year or so before boredom sets in. That's been the pattern at all my previous jobs.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #11 on: October 29, 2015, 09:53:25 PM »
I live south of you, near Tacoma. You're in a good position now and a baby takes at least 9 months start to finish. Why not keep up the great savings rates and then, once baby #2 is here in a few years, re-look at your goals? With how low your DW's income is, it may make a lot more sense for her to find something else to do very close to home, or to consider staying home altogether once baby #2 is here.

Look at the numbers:
45,000 (her income)
-7,469 taxes
-21,720 (infant daycare)
-18,000 (toddler daycare - estimated)
= -2189

That's before the costs of her commute, a 2nd vehicle, convenience food (because really, 2 kids are more like 5x as hard to juggle), work clothing, gifts for coworkers, etc, etc.

Actually, if you crunch the numbers right now, she's probably making an effective salary of about $1,000+/- a month. It may be worth it if she loves her job, but not many jobs are worth paying money to work at... which is what she'll effectively be doing once you add baby #2.

If you take her workplace location out of the equation, there are probably a lot of great, low-cost options for housing in an area that is an easy bike/bus/light-rail commute for you.

Yeah, DW and I have talked about this. She's actually been promised a pay bump at the end of the year (probably around $8k), but even that would be wiped out by 2 kids in daycare. We basically see it as the price we pay for her to maintain momentum in her career. Despite the fact that my income is much higher, we value each of our careers equally and give them equal weight in our decision-making. She's actually interested in maintaining her career longer than I am. Beyond that, she feels that being a full-time SAHM is not for her, which I accept.

She's not in love with her current job, but she works in a field (nonprofits/philanthropy) where there's apparently a lot of competition for these not-particularly-remunerative positions, so she's not confident about her ability to find something much better in the near term. I didn't understand it at all until I realized that working for these organizations is essentially an act of charity, as you're implicitly "donating" the extra salary that you'd otherwise receive in an equivalent private sector job. Not something I'd be interested in personally, but DW has made peace with it.

Anatidae V

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #12 on: October 29, 2015, 11:31:47 PM »
Is there a chance you could go part time and look after the kid/s, thus reducing your daycare expenses and easing into FIRE?

lhamo

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #13 on: October 30, 2015, 07:35:23 AM »
I hear you about the non-profit salary issue.  One of the reasons I left my job/career is that they weren't willing to pay me what I was worth.  I had a decent salary for a non-profit, but I was looking at more and more responsibility/stress for a salary that was only about 60% of my boss', and I was stuck at the top of the crappy pay scale unless he left and they finally offered me his position.  Which by the time I left I didn't want because I had done it for 16 months at 60% of the budgeted salary and knew that it wasn't worth it even at 100% of the budgeted salary.

Meadowbrook is ROUGH -- that is my preferred neighborhood as well, because I'd like to be in walking distance to Jane Addams/Nathan Hale for DD and be on a direct bus line to the UW for DS.  You might find it gets less frantic now that everyone is settled in for the school year.  But of course fewer people list in the winter.  Still, when I was tracking the market last fall/winter it seemed like things were staying on the market longer at more reasonable prices.  If you aren't locked into schools you might have better luck avoiding the spring/summer buying crowd.
 

KCM5

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #14 on: October 30, 2015, 08:05:37 AM »
Have you considered staying home?

On the face of it, it looks like you should buy a place near your work and your wife should quit her job once #2 comes around or find one near your work that pays at least the same, hopefully substantially more than she's paid now. But if she loves her job, you have quite the stash right now. If you could comfortably live off of her income, you could quit when #2 comes and ride it out a bit until your both comfortable quitting. In that case, it makes sense to either rent or buy a place near your wife's work.

Personally, I'd probably end up going back to the Cities. Lower COL and a pleasant place to live. Winters are no joke, though. Have you thought about somewhere in the Midwest a bit further south? Des Moines, Kansas City, St Louis? (I live in Des Moines - I know its some sort of butt of everyone's jokes, but I kind of love it here).

FrugalFan

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #15 on: October 30, 2015, 08:49:04 AM »
You are so close to FI, it doesn't seem to make much sense to move in relation to your job if you could afford to FIRE in a year or two, or have one of you work only. Forget about your jobs for a minute and think about where you would like to live for the long term. Your finances are in such good shape I think you could make almost anything work.

partgypsy

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #16 on: October 30, 2015, 12:03:37 PM »
Yeah can you make it where you are right now for another 2 years, and then decide whether to keep working, retire, move close to one or more of your jobs?

To me the simplest is to move closer to the higher wage earners job, and have the spouse be stay at home, at least to school age. But your situation is more complication if she wants to continue working, and feels tied to a particular job.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #17 on: October 30, 2015, 12:15:51 PM »
Is there a chance you could go part time and look after the kid/s, thus reducing your daycare expenses and easing into FIRE?
Have you considered staying home?

On the face of it, it looks like you should buy a place near your work and your wife should quit her job once #2 comes around or find one near your work that pays at least the same, hopefully substantially more than she's paid now. But if she loves her job, you have quite the stash right now. If you could comfortably live off of her income, you could quit when #2 comes and ride it out a bit until your both comfortable quitting. In that case, it makes sense to either rent or buy a place near your wife's work.

Personally, I'd probably end up going back to the Cities. Lower COL and a pleasant place to live. Winters are no joke, though. Have you thought about somewhere in the Midwest a bit further south? Des Moines, Kansas City, St Louis? (I live in Des Moines - I know its some sort of butt of everyone's jokes, but I kind of love it here).

Honestly, I haven't really considered either of those options up to this point. Although we may be getting close to FI, I still view us as being in the accumulation phase, and so the prospect of losing some or all of my income, especially when it's driving us to make so much headway, seems unappealing. When we do end up buying a house (it'll happen eventually), I doubt we could qualify for much of a mortgage on just DW's income, although we could probably buy a house outright in some very LCOL areas.

I've actually lived in both St. Louis and Kansas City in the past. They were fine for a while, but I just couldn't see myself living there long term. I do acknowledge that it would probably be pretty easy for us to FIRE in either of those locations, though. I really need to do some soul-searching on how I value FIRE vs. living in the "ideal" (to me) location.

BDWW

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #18 on: October 30, 2015, 12:31:56 PM »
I'm going to add my voice to the LCOL thought.  Our mortgage is less than your rent on a 3200 sqft house. Of course, my salary is about half yours so, there's that. I would think there might be places that satisfy your interest in the PNW without the expense. Say somewhere like Eugene,OR. Not quite the same obviously, and a lot smaller, but significantly cheaper.

I have a strong(read stubborn) opinion about how much things are worth, and I just couldn't ever live in a place like Seattle or San Francisco* knowing how much further a dollar goes elsewhere.

*I have friends who live in North Bend and San Francisco.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #19 on: October 30, 2015, 12:33:42 PM »
I hear you about the non-profit salary issue.  One of the reasons I left my job/career is that they weren't willing to pay me what I was worth.  I had a decent salary for a non-profit, but I was looking at more and more responsibility/stress for a salary that was only about 60% of my boss', and I was stuck at the top of the crappy pay scale unless he left and they finally offered me his position.  Which by the time I left I didn't want because I had done it for 16 months at 60% of the budgeted salary and knew that it wasn't worth it even at 100% of the budgeted salary.

Yeah, it really bothers me to see how underpaid she is. It really seems like you don't start making a decent salary until you're pretty high up on the totem pole, at which point the workload ratchets up as well. The ED at her last job was an insane workaholic who'd send emails at all hours of the night and hustle like crazy just to keep the organization afloat. That job really tempered DW's ambitions for being an ED herself someday.

honeybbq

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #20 on: October 30, 2015, 12:37:00 PM »
Sounds like you really want to stay here. Public schools are great, it's a fun place to live, nice place to raise kids.

Hmm. How about Magnolia? Then one commutes north and one commutes south?

I feel for you. Commuting and housing is a nightmare right now. I'd say you have a smoking deal with your 2bed place for $1400.

Don't forget if you move to a new state, there will be state income tax on your earnings most likely. That can eat up a chunk of your savings.


SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #21 on: October 30, 2015, 12:40:16 PM »
You are so close to FI, it doesn't seem to make much sense to move in relation to your job if you could afford to FIRE in a year or two, or have one of you work only. Forget about your jobs for a minute and think about where you would like to live for the long term. Your finances are in such good shape I think you could make almost anything work.
Yeah can you make it where you are right now for another 2 years, and then decide whether to keep working, retire, move close to one or more of your jobs?

To me the simplest is to move closer to the higher wage earners job, and have the spouse be stay at home, at least to school age. But your situation is more complication if she wants to continue working, and feels tied to a particular job.

Good points. We've actually talked about living in Bellingham (which comes up perennially on lists of mustachian paradise cities), but the lack of jobs in our fields has kept us from making a move. Maybe we could keep hunkering down for a while longer and keep building our stash with an aim toward eventually heading up there.

norabird

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #22 on: October 30, 2015, 12:44:08 PM »
I understand valuing a lower-paying job, and think there are definitely benefits worth taking the childcare hit to keep working at once. For now, your housing situation isn't an emergency, so you are possibly borrowing trouble--2 kids in a 2 BR is manageable, and you aren't even there yet. Keep monitoring the inventory and try not to worry too much about the rising prices; if they get too unreasonable, you can just keep renting. Even a  much higher rent would be manageable and once you retire, you may not need to be in seattle anyway. Maybe even Portland could be an option, if you love the PNW? Where is your family from? (I do get having a HCOL place you'd rather be, though, and think that's fine).

mm1970

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #23 on: October 30, 2015, 12:50:29 PM »
I live south of you, near Tacoma. You're in a good position now and a baby takes at least 9 months start to finish. Why not keep up the great savings rates and then, once baby #2 is here in a few years, re-look at your goals? With how low your DW's income is, it may make a lot more sense for her to find something else to do very close to home, or to consider staying home altogether once baby #2 is here.

Look at the numbers:
45,000 (her income)
-7,469 taxes
-21,720 (infant daycare)
-18,000 (toddler daycare - estimated)
= -2189

That's before the costs of her commute, a 2nd vehicle, convenience food (because really, 2 kids are more like 5x as hard to juggle), work clothing, gifts for coworkers, etc, etc.

Actually, if you crunch the numbers right now, she's probably making an effective salary of about $1,000+/- a month. It may be worth it if she loves her job, but not many jobs are worth paying money to work at... which is what she'll effectively be doing once you add baby #2.

If you take her workplace location out of the equation, there are probably a lot of great, low-cost options for housing in an area that is an easy bike/bus/light-rail commute for you.
I'm glad it's not just me.

Even before the new kid, she's taking home, what?  $45k- taxes - daycare = $15811, or $7.60 an hour, not counting commuting costs.

mm1970

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #24 on: October 30, 2015, 12:59:46 PM »
Quote
Yeah, DW and I have talked about this. She's actually been promised a pay bump at the end of the year (probably around $8k), but even that would be wiped out by 2 kids in daycare. We basically see it as the price we pay for her to maintain momentum in her career. Despite the fact that my income is much higher, we value each of our careers equally and give them equal weight in our decision-making. She's actually interested in maintaining her career longer than I am. Beyond that, she feels that being a full-time SAHM is not for her, which I accept.

She's not in love with her current job, but she works in a field (nonprofits/philanthropy) where there's apparently a lot of competition for these not-particularly-remunerative positions, so she's not confident about her ability to find something much better in the near term. I didn't understand it at all until I realized that working for these organizations is essentially an act of charity, as you're implicitly "donating" the extra salary that you'd otherwise receive in an equivalent private sector job. Not something I'd be interested in personally, but DW has made peace with it.

I can certainly relate a little bit, not being the "SAHM type" myself, either.

But I have to say...my last four years have been interesting:
- I haven't had a raise in 4 years (due to money issues at the company, but they are fine paying market rate to newbs)
- Adding the second kid is not 2x harder, it's 5x, at least.  It's a LOT more work, you no longer outnumber your children.  It's a stressful balance.  In order to maintain your sanity level, there is EXTREME temptation for spending money
- Once I hit 40, I hit the "glass ceiling", which I think it seems like your wife has also, albeit in the non-profit world.

So, all those said, it seems like she's working for very little money.  It's okay if she wants it, but eventually it might become super stressful.  It's also okay if there are other benefits (like, benefits).  But I would argue that "competition for these jobs" - well, that doesn't mean she shouldn't look.  She should absolutely look for new opportunities.  If there really is competition, then yes, she will have a harder time.

I understand the philanthropy thing.  I volunteer hundreds of hours at the elementary school each year.  The difference is I'm volunteering for my kid.

lhamo

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #25 on: October 30, 2015, 01:16:58 PM »
I know people still look down on it in house-centric US (especially Seattle, where people are ridiculously enamoured with their single family homes/neighborhoods), but if you are willing to consider a condo or townhouse there are still a lot of affordable options.  Quick search on redfin put this unit (up the street from me) at the top of the affordability list for 3br:

https://www.redfin.com/WA/Seattle/13739-15th-Ave-NE-98125/unit-B1/home/5784

It backs up on Jackson Park, so would be quiet.  QFC and Goodwill are just up the street.  Easy access to I5 at 145th and 130th, and also on direct buslines to downtown/the U District (73 and 373).  They've already dropped the price 20k since listing it in August.  I'm tempted to make an offer myself.....

There's also a 3br a couple of blocks over from my place, in a cookie cutter townhouse strip, for $395k.  Seems high for the neighborhood.  A 1br in our building just sold for 188k. 



Lucky Girl

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #26 on: October 30, 2015, 01:31:02 PM »
I was not going to post, since I'm not sure it will be helpful, but my experience is similar in many ways so maybe I can add to your thought process.

Like your wife, I also work in non-profit fundraising, I have two young kids, and I am a "trailing" spouse--DH is definitely the primary breadwinner.  We also live in a HCOL area.  I also did not want to be a SAHM.  I have a JD that I spent over $100k on--how could I  let that go to waste?  But it wears on you after a while to know that these non-profits are basically taking advantage of you.  I worked in a non-profit for 10 years, and finally decided I needed to get out and do something else.  I ended up at a consulting firm, basically getting the same good feeling for helping to raise money for worthy causes, but making real money (six figures).  In my current firm I have discovered that there are dozens of for-profits companies that service the non-profit fundraising world and pay semi-competitive salaries at the same time. 

I will stay at the consulting firm until we hit FI.  Then, once money no longer matters, I will figure out where I want to work and go do it without regard to salary.  I also feel like I am a real contributor to my family this way, instead of a burden.  And DH will have real freedom of choice as well.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #27 on: October 30, 2015, 02:46:18 PM »
I understand valuing a lower-paying job, and think there are definitely benefits worth taking the childcare hit to keep working at once. For now, your housing situation isn't an emergency, so you are possibly borrowing trouble--2 kids in a 2 BR is manageable, and you aren't even there yet. Keep monitoring the inventory and try not to worry too much about the rising prices; if they get too unreasonable, you can just keep renting. Even a  much higher rent would be manageable and once you retire, you may not need to be in seattle anyway. Maybe even Portland could be an option, if you love the PNW? Where is your family from? (I do get having a HCOL place you'd rather be, though, and think that's fine).

Yeah, we're trying to remain content with our current place as long as we're living here, and we know it's a great deal financially. I have to admit that it's really hard for me not to worry about rising house prices. Even in 2006 people were saying "buy now or be priced out forever!" and we all know how that turned out, but things feel different this time. All indications are that the people spending insane amounts of money on houses around here are doing it because they actually have insane salaries and insane amounts of cash on hand.

Can anyone talk about their experiences moving to different cities/states with young children? We've definitely considered staying put and saving, and then decamping to someplace a little cheaper (Portland and Bellingham have come up), but that leads to our issue with not wanting to "start over" socially. We're both introverts and are not the type to instantly make a ton of new friends wherever we go. DW has found a really great group of young mothers here that she gets on great with, and she has a hard time thinking about giving that up with a move. I believe we can eventually establish ourselves socially wherever we go, but it seems like the transition would be difficult.

justajane

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #28 on: October 30, 2015, 02:56:44 PM »
I don't think it fair to deduct the full daycare costs from the wife's salary to determine the relative value of her job. Daycare is a family expense and should be treated as such. Sorry, this whole discussion just rubbed me the wrong way regarding how little she is making once you subtract daycare. Why is it coming out of her salary? Yes, I know intellectually that if she were to stay home that that expense would go away or at least reduce, but still. If she likes working and doesn't want to stay home, I think she should work regardless of the math laid out above. This just underscores the potential difficulties or minefield when two spouses have such different income levels.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #29 on: October 30, 2015, 02:58:48 PM »
Quote
Yeah, DW and I have talked about this. She's actually been promised a pay bump at the end of the year (probably around $8k), but even that would be wiped out by 2 kids in daycare. We basically see it as the price we pay for her to maintain momentum in her career. Despite the fact that my income is much higher, we value each of our careers equally and give them equal weight in our decision-making. She's actually interested in maintaining her career longer than I am. Beyond that, she feels that being a full-time SAHM is not for her, which I accept.

She's not in love with her current job, but she works in a field (nonprofits/philanthropy) where there's apparently a lot of competition for these not-particularly-remunerative positions, so she's not confident about her ability to find something much better in the near term. I didn't understand it at all until I realized that working for these organizations is essentially an act of charity, as you're implicitly "donating" the extra salary that you'd otherwise receive in an equivalent private sector job. Not something I'd be interested in personally, but DW has made peace with it.

I can certainly relate a little bit, not being the "SAHM type" myself, either.

But I have to say...my last four years have been interesting:
- I haven't had a raise in 4 years (due to money issues at the company, but they are fine paying market rate to newbs)
- Adding the second kid is not 2x harder, it's 5x, at least.  It's a LOT more work, you no longer outnumber your children.  It's a stressful balance.  In order to maintain your sanity level, there is EXTREME temptation for spending money
- Once I hit 40, I hit the "glass ceiling", which I think it seems like your wife has also, albeit in the non-profit world.

So, all those said, it seems like she's working for very little money.  It's okay if she wants it, but eventually it might become super stressful.  It's also okay if there are other benefits (like, benefits).  But I would argue that "competition for these jobs" - well, that doesn't mean she shouldn't look.  She should absolutely look for new opportunities.  If there really is competition, then yes, she will have a harder time.

I understand the philanthropy thing.  I volunteer hundreds of hours at the elementary school each year.  The difference is I'm volunteering for my kid.

I think the 2nd child is going to lead to a critical decision-making phase for DW. She has been talking about potentially taking a year off to spend with "future baby", as she felt a little bummed about not having enough time with our first kid before starting daycare. Of course, her employer offers zero maternity leave benefits (they're not even bound by FMLA due to their small size). Maybe this is further reason to sit tight for a while so we can reassess after we have a better understanding of what our lives are going to be like with 2 kids.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #30 on: October 30, 2015, 03:05:09 PM »
I know people still look down on it in house-centric US (especially Seattle, where people are ridiculously enamoured with their single family homes/neighborhoods), but if you are willing to consider a condo or townhouse there are still a lot of affordable options.  Quick search on redfin put this unit (up the street from me) at the top of the affordability list for 3br:

https://www.redfin.com/WA/Seattle/13739-15th-Ave-NE-98125/unit-B1/home/5784

It backs up on Jackson Park, so would be quiet.  QFC and Goodwill are just up the street.  Easy access to I5 at 145th and 130th, and also on direct buslines to downtown/the U District (73 and 373).  They've already dropped the price 20k since listing it in August.  I'm tempted to make an offer myself.....

There's also a 3br a couple of blocks over from my place, in a cookie cutter townhouse strip, for $395k.  Seems high for the neighborhood.  A 1br in our building just sold for 188k.

We were originally set on a single family house, and I guess that's still our preference, but I'm considering townhouses more and more. We've ruled out condos in part because my favorite hobbies (working on bikes, brewing beer, tinkering) tend to require some unfinished "shop" space, like a basement or garage. It's something I could potentially compromise on, but since these are the things I'd like to spend more time doing once I'm actually FIRE, I'm reluctant to give it up.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #31 on: October 30, 2015, 03:15:23 PM »
I was not going to post, since I'm not sure it will be helpful, but my experience is similar in many ways so maybe I can add to your thought process.

Like your wife, I also work in non-profit fundraising, I have two young kids, and I am a "trailing" spouse--DH is definitely the primary breadwinner.  We also live in a HCOL area.  I also did not want to be a SAHM.  I have a JD that I spent over $100k on--how could I  let that go to waste?  But it wears on you after a while to know that these non-profits are basically taking advantage of you.  I worked in a non-profit for 10 years, and finally decided I needed to get out and do something else.  I ended up at a consulting firm, basically getting the same good feeling for helping to raise money for worthy causes, but making real money (six figures).  In my current firm I have discovered that there are dozens of for-profits companies that service the non-profit fundraising world and pay semi-competitive salaries at the same time. 

I will stay at the consulting firm until we hit FI.  Then, once money no longer matters, I will figure out where I want to work and go do it without regard to salary.  I also feel like I am a real contributor to my family this way, instead of a burden.  And DH will have real freedom of choice as well.

Really interesting insight, and it does sound like your family's experience is similar to ours. DW has a lot of hang-ups about the "private sector", like she'd never be qualified to work for one given her exclusively non-profit background. Her experience and education is essentially in project/program management within the non-profit context, and I've told her that those skills are almost universally desired among countless businesses. There's also a certain amount of altruism that's driving her decision-making, although the realities of her job (and the amount of time/effort spent catering to the needs of wealthy funders) may be eroding that a bit.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #32 on: October 30, 2015, 03:21:44 PM »
I don't think it fair to deduct the full daycare costs from the wife's salary to determine the relative value of her job. Daycare is a family expense and should be treated as such. Sorry, this whole discussion just rubbed me the wrong way regarding how little she is making once you subtract daycare. Why is it coming out of her salary? Yes, I know intellectually that if she were to stay home that that expense would go away or at least reduce, but still. If she likes working and doesn't want to stay home, I think she should work regardless of the math laid out above. This just underscores the potential difficulties or minefield when two spouses have such different income levels.

This is a good reality check. We do try to value our careers equally when making decisions as a family. I also acknowledge that I wouldn't want to be a full time SAHD (at this point in time) any more than she wants to be a full time SAHM, and it would be hypocritical to expect her to do something I wouldn't be willing to do myself. Daycare costs aside, I really just wish she was being paid what she's worth!

knudsoka

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #33 on: October 30, 2015, 04:37:07 PM »
For what it's worth, here's our experience:

Mid-30s married couple, no kids (yet). We bought a house in Maple Leaf in January 2013 after looking, HARD, for a solid four months (looking at six-plus houses a week, really being open to lots of different neighborhoods, etc). We ended up putting offers on two houses before this one, mostly because they were the only ones we saw that weren't bizarre in some way, and were horribly outbid both times. We had a budget of up to $375,000.

We saw this house on December 19th. I think most people were "done" for the holidays at that point, and somehow, miraculously, only one other offer was made. We got it. I think we signed the official bid-acceptance paperwork literally on Christmas Eve. We went right up to our budget, and the house needed (needs!) work, but it's great, the neighborhood is fantastic, it will all be fine. We're in the process of putting in an Airbnb/rental studio in the basement, to help put our house to work for us, since it's a little big (1700 sq. ft.) for just the two of us.

The kicker: Our mortgage is totally doable, and we make literally half of what y'all make.

It seems to me you're in a great position, with so much money in the bank and a rental you like, to just wait for the right house, at the right price. I think it's overstating it quite a bit to say that modest homes "routinely" go for over $600K, unless you're looking for something that's been totally fixed up already.

Hang in there!

MerryMcQ

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #34 on: October 30, 2015, 04:58:57 PM »
We do try to value our careers equally when making decisions as a family. I also acknowledge that I wouldn't want to be a full time SAHD (at this point in time) any more than she wants to be a full time SAHM, and it would be hypocritical to expect her to do something I wouldn't be willing to do myself. Daycare costs aside, I really just wish she was being paid what she's worth!

If neither of you want to stop working, then don't. But your question was where to look for a home, and you're worried about selecting a neighborhood with a great bike commute for you, because it would be a worse commute for her... yet you've already acknowledged her pay is low, she doesn't like her current job, and her current commute is enough to interfere with family time. I am not sure that the math works to pay significantly more for a home to be close to her job, when her job isn't giving the same financial returns that your job does.

To me, the logical thing (if you really want in a home RIGHT NOW) is to pick the neighborhood that is the best situated for your bike-able commute and that you both love, with the schools you like and the neighborhood amenities you want. Then have her find a job that will also be an easy commute for her from that location. She can likely find something pretty easily that will replace the income and be fulfilling; this is Seattle after all. :)  Once you are both working at ideal locations, then you move forward with a home purchase in that neighborhood.

As for the non-profit experience translating to the for-profit world... well, I've bounced back and forth between non and for profit companies, and never had a moment of trouble. If the UW is an easy bike or bus ride from your chosen neighborhood, they are hiring like crazy and greatly appreciate the experience in non-profit fundraising. And they have on-site childcare. I will say that when I worked in non-profits, the benefits (like being able to telecommute 2-3 days a week, flexible schedules to take care of kid things, etc) made up for the lower salary.

Quote
We've ruled out condos in part because my favorite hobbies (working on bikes, brewing beer, tinkering) tend to require some unfinished "shop" space, like a basement or garage.

Ooh, my DH loves brewing beer. There is an awesome (!!!) place called Station UBrew in Puyallup. You can brew, hang out with other brewing folks, and take home great craft beer - and no clean up! If you ever need a brewing buddy, then just PM me. My DH would love someone to brew with.

monstermonster

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #35 on: October 30, 2015, 05:22:59 PM »

If neither of you want to stop working, then don't. But your question was where to look for a home, and you're worried about selecting a neighborhood with a great bike commute for you, because it would be a worse commute for her... yet you've already acknowledged her pay is low, she doesn't like her current job, and her current commute is enough to interfere with family time.

Except that she DOES like her job, and wants to keep working in that field for much longer, having just gotten her masters a few years ago. OP says he doesn't really care as much about his job.

It really gets my goat when people say that $45K isn't an OK salary, too. It's more than most of the country earns. If you make more than $50,000, you earn more than 73.4% of Americans. Calm down people.
« Last Edit: October 30, 2015, 05:26:13 PM by monstermonster »

MerryMcQ

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #36 on: October 30, 2015, 05:59:51 PM »
Except he's said:

Quote
She's not in love with her current job

Quote
Yeah, it really bothers me to see how underpaid she is.

Quote
She has been talking about potentially taking a year off to spend with "future baby", as she felt a little bummed about not having enough time with our first kid before starting daycare.

Quote
There are actually several locations north of Seattle that I could bike in from relatively easily, but the commute would be really rough for my wife (she works south of downtown).  She's already feels like she doesn't spend as much time with our daughter as she'd like, and I'd like to avoid exacerbating that situation if at all possible.

So it appears that neither SmackDab or his DW are keen on her current job or its pay rate. Staying in the field is great. I think what I'm trying to say is don't chose a neighborhood to buy a home based on the commute to a job that under pays you and you'd don't like that much.

Personally, I think renting until after baby #2 comes is probably the wisest move, since you'll likely re-evaluate your situation then and a newborn doesn't really take up all that much space. Right now baby #2 is still pretty hypothetical... For example, I loved my career, but was hospitalized for a large part of my second pregnancy, then had a baby with an immune system issue who couldn't go to daycare. Did I plan on being a SAHM? Nope, but I couldn't work for a long time. Then, I went back into the same career field, with a much better employer, at a higher salary. You really never know what the future will hold. Babies are hard to predict. :)

Goldielocks

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #37 on: October 30, 2015, 07:03:23 PM »
I don't think it fair to deduct the full daycare costs from the wife's salary to determine the relative value of her job. Daycare is a family expense and should be treated as such. Sorry, this whole discussion just rubbed me the wrong way regarding how little she is making once you subtract daycare. Why is it coming out of her salary? Yes, I know intellectually that if she were to stay home that that expense would go away or at least reduce, but still. If she likes working and doesn't want to stay home, I think she should work regardless of the math laid out above. This just underscores the potential difficulties or minefield when two spouses have such different income levels.

Lol. I know what you mean.

Here, there is almost no income splitting, so for tax reasons, if the highest earner takes a $60 k pay cut, it is worth the same as the lower income.  Better to have two persons making $75k than one at $125k and the other at $45k.


With regard to non profits, if the at is that low, it really is only suited to people needing work experience, semi FIRE, or persons who do not need the income.

Gosh $45 is the same as seattles living wage plus SL repayments. Hard to believe they are requesting grad degrees.  Seriously think about a job that gives time to volunteer free time instead. Or the other side of government grants-- the side that approves funding, for example.

seattlecyclone

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #38 on: October 30, 2015, 07:38:15 PM »
Yeah, we're trying to remain content with our current place as long as we're living here, and we know it's a great deal financially. I have to admit that it's really hard for me not to worry about rising house prices. Even in 2006 people were saying "buy now or be priced out forever!" and we all know how that turned out, but things feel different this time. All indications are that the people spending insane amounts of money on houses around here are doing it because they actually have insane salaries and insane amounts of cash on hand.

I agree about it feeling different this time. The local increase in real estate prices seems to be driven less by banks' lending practices and more by the fact that Amazon and other companies keep hiring well-paid employees, they want to live close to work, the supply of single-family homes is relatively fixed, and the supply of apartments has not yet caught up with demand.

I don't think your situation demands radical changes. Per the 4% rule, your long-term investments are enough to sustain a $30,000/year lifestyle. Your expenses are in that general ballpark already if you could eliminate rent (by paying off a house) and childcare (by retiring). You have enough in your house fund for a 20% down payment on a $600k house. Buy a $600k house and take out a 30-year mortgage at a 3.75% interest rate, and you're looking at a monthly payment of about $2,000 per month on a 30-year loan (before property tax and insurance). How long would it take you to repay the remaining $450k? Five years, maybe? Do that and you're FI in Seattle. Or if you really just want to get out of the workforce, buy a house elsewhere for less than $150k and you're FI today.

Noodle

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #39 on: October 30, 2015, 09:10:50 PM »
On the housing, I echo the recommendations to keep renting, since you have such a screaming deal, and see how things look when you actually have a new baby in the crib. I know the housing market looks crazy at the moment, and it's tempting to want in, but I would honestly be nervous about housing going up that fast. I know Amazon looks untouchable, but so did Boeing and now they've packed up and moved to Chicago. Seattle has been through two major crashes since 2000. It's not like you're having trouble accumulating savings in the current situation.

On the job front, Seattle is a weird market for non-profits. The local philanthropic community seems to prefer starting their own organizations over contributing to established ones, leaving a bunch of small, struggling non-profits scattered across the landscape. Combine that with a labor market that has a lot of people willing to work for small salaries--new UW grads who don't want to leave town, trailing spouses from the tech sector, etc. and salaries are awful. Some possible directions: UW or one of the other universities, working for a grant-maker rather than a non-profit, if she's interested in development, the medical field pays its fundraisers well. Also, possibly national organizations that have a Seattle presence (the Red Cross, for instance) because they are going to reference national salaries in setting rates; maybe city or state government.
« Last Edit: October 31, 2015, 08:52:38 AM by Noodle »

justajane

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #40 on: October 31, 2015, 07:00:19 AM »
I'm in a LCOL area, so take this with a grain of salt. But I do think your view of your wife's salary is a bit skewed based on your own very high income and the area in which you live. 40K here would be an average or possibly high wage for a non-profit worker. I know of people likely working for half that. I guess my question is - considering she wants to work in this area, what are you expectations for what she should be paid?

Now I think the larger problem is lack of benefits like paid maternity leave and other quality of life issues. I would expect a good sick leave policy and a decent amount of vacation. 

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #41 on: October 31, 2015, 05:21:32 PM »
As for the non-profit experience translating to the for-profit world... well, I've bounced back and forth between non and for profit companies, and never had a moment of trouble. If the UW is an easy bike or bus ride from your chosen neighborhood, they are hiring like crazy and greatly appreciate the experience in non-profit fundraising. And they have on-site childcare. I will say that when I worked in non-profits, the benefits (like being able to telecommute 2-3 days a week, flexible schedules to take care of kid things, etc) made up for the lower salary.

It would definitely help if our jobs were located a little closer together. Hell, even something downtown would be a huge improvement over her current employer's location, since so many buses (and express lines and the future light rail extensions) head downtown. A job at UW would be amazing. But she obviously understands the nonprofit job market better than I do, and I don't want to be overbearing in suggesting where she ought to be working.

I also had the impression that part of the trade-off in working for non-profits was that they were more relaxed about offering stuff like flex time and working from home, but her current job has been exactly the opposite. They want butts in chairs at the office, 9-5, 5 days a week. Very frustrating.

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #42 on: October 31, 2015, 05:26:51 PM »
So it appears that neither SmackDab or his DW are keen on her current job or its pay rate. Staying in the field is great. I think what I'm trying to say is don't chose a neighborhood to buy a home based on the commute to a job that under pays you and you'd don't like that much.

Personally, I think renting until after baby #2 comes is probably the wisest move, since you'll likely re-evaluate your situation then and a newborn doesn't really take up all that much space. Right now baby #2 is still pretty hypothetical... For example, I loved my career, but was hospitalized for a large part of my second pregnancy, then had a baby with an immune system issue who couldn't go to daycare. Did I plan on being a SAHM? Nope, but I couldn't work for a long time. Then, I went back into the same career field, with a much better employer, at a higher salary. You really never know what the future will hold. Babies are hard to predict. :)

Yeah, DW likes her career and the type of work she does, but she's just not thrilled with her current job.

The more I think about it, the more I'm leaning towards continuing to rent until our family and job situations settle in a few years. I'm still super nervous about what housing costs might be like at that point, but I guess having to deal with a hot real estate market is probably better than having bought an expensive house that doesn't meet our family or commuting needs after only a couple years.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #43 on: October 31, 2015, 05:41:35 PM »
I don't think your situation demands radical changes. Per the 4% rule, your long-term investments are enough to sustain a $30,000/year lifestyle. Your expenses are in that general ballpark already if you could eliminate rent (by paying off a house) and childcare (by retiring). You have enough in your house fund for a 20% down payment on a $600k house. Buy a $600k house and take out a 30-year mortgage at a 3.75% interest rate, and you're looking at a monthly payment of about $2,000 per month on a 30-year loan (before property tax and insurance). How long would it take you to repay the remaining $450k? Five years, maybe? Do that and you're FI in Seattle. Or if you really just want to get out of the workforce, buy a house elsewhere for less than $150k and you're FI today.

I'm not sure I understand the math here. With a $600k house, $120k down and 30 yr mortgage at 3.75%, the monthly payment (including tax and insurance) would be around $2725. If I look at our current expenses, and replace our rent with that house payment, that leaves about $1390 in free cash flow left over at the end of the month to put towards the house principal or other investments. That's $16680 per year. In order to pay off, say, $400k of extra principal in 5 years, we'd need $80k per year. Even if we completely stopped contributing to my 403(b) and our Roth IRAs (which I'm not particularly comfortable doing), we'd still have a long way to go. I get your overall sentiment, but I don't think the numbers work out quite as well as you're indicating.

seattlecyclone

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #44 on: November 01, 2015, 11:22:03 AM »
I don't think your situation demands radical changes. Per the 4% rule, your long-term investments are enough to sustain a $30,000/year lifestyle. Your expenses are in that general ballpark already if you could eliminate rent (by paying off a house) and childcare (by retiring). You have enough in your house fund for a 20% down payment on a $600k house. Buy a $600k house and take out a 30-year mortgage at a 3.75% interest rate, and you're looking at a monthly payment of about $2,000 per month on a 30-year loan (before property tax and insurance). How long would it take you to repay the remaining $450k? Five years, maybe? Do that and you're FI in Seattle. Or if you really just want to get out of the workforce, buy a house elsewhere for less than $150k and you're FI today.

I'm not sure I understand the math here. With a $600k house, $120k down and 30 yr mortgage at 3.75%, the monthly payment (including tax and insurance) would be around $2725. If I look at our current expenses, and replace our rent with that house payment, that leaves about $1390 in free cash flow left over at the end of the month to put towards the house principal or other investments. That's $16680 per year. In order to pay off, say, $400k of extra principal in 5 years, we'd need $80k per year. Even if we completely stopped contributing to my 403(b) and our Roth IRAs (which I'm not particularly comfortable doing), we'd still have a long way to go. I get your overall sentiment, but I don't think the numbers work out quite as well as you're indicating.

Suppose you stopped contributing to your retirement accounts as well. I'm not suggesting you actually do this, but just as a thought experiment. You would have an extra $917/month that you're not putting in your IRAs and perhaps $1,100 per month after taxes if you stopped contributing to the 403(b). Let's call it an even $2,000 monthly in addition to the $1,400 that you're already saving. This mortgage calculator shows that you would pay off your loan within eight years if you borrowed $450k at 3.75% and made $3,400 in extra principal payments each month. Within eight years your mortgage would be gone, and the growth on your existing investments would likely be enough to get you the rest of the way to FI.

So you would be fully FI in eight years if you quit contributing to the retirement accounts and put every last cent toward your mortgage. What if you kept contributing to the retirement accounts? The tax savings from putting money in your 403(b) would compound and help your net worth grow even faster than in the above scenario. You could also invest the $1,400 instead of putting it into the mortgage. The market tends to return more than 3.75% yearly, so this would likely accelerate things as well. Could these two things shave three years off of the eight-year schedule for getting to the point where you have enough saved up to pay off the house and still have 25x living expenses remaining? I think it could at least come close.

SmackDab

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #45 on: November 01, 2015, 01:35:26 PM »
Suppose you stopped contributing to your retirement accounts as well. I'm not suggesting you actually do this, but just as a thought experiment. You would have an extra $917/month that you're not putting in your IRAs and perhaps $1,100 per month after taxes if you stopped contributing to the 403(b). Let's call it an even $2,000 monthly in addition to the $1,400 that you're already saving. This mortgage calculator shows that you would pay off your loan within eight years if you borrowed $450k at 3.75% and made $3,400 in extra principal payments each month. Within eight years your mortgage would be gone, and the growth on your existing investments would likely be enough to get you the rest of the way to FI.

So you would be fully FI in eight years if you quit contributing to the retirement accounts and put every last cent toward your mortgage. What if you kept contributing to the retirement accounts? The tax savings from putting money in your 403(b) would compound and help your net worth grow even faster than in the above scenario. You could also invest the $1,400 instead of putting it into the mortgage. The market tends to return more than 3.75% yearly, so this would likely accelerate things as well. Could these two things shave three years off of the eight-year schedule for getting to the point where you have enough saved up to pay off the house and still have 25x living expenses remaining? I think it could at least come close.

Thanks for the link to that calculator...that helps to clarify the math a bit. I'm still leery about putting so much cash into mortgage prepayments (as opposed to investments), especially when rates are so low, but it's definitely an interesting thought experiment. I do tend to get decent raises fairly regularly in my job, so maybe in the future it would be possible to do aggressive prepayments without sacrificing investment saving too much.

seattlecyclone

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #46 on: November 01, 2015, 04:17:44 PM »
I think you should be leery about putting that much into your mortgage. With interest rates as low as they are, you're likely to do much better in the long run by investing that money. But if you, like many here, won't consider yourself truly FI until you have a paid-off house and 25x your other living expenses in Vanguard, this goal really isn't as far off as you might have previously thought. Continue maxing out your retirement accounts, invest some (or all) of the surplus after other expenses, and decide for yourself whether you're willing to retire with a mortgage or not.

csprof

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Re: Reader Case Study: Semi-mustachian family facing high housing costs
« Reply #47 on: November 01, 2015, 09:30:55 PM »
House/down payment fund: $155,000 in savings account earning 0.75%
Emergency fund: $6,700 in savings account earning 0.75%

Ally bank 1% savings account -- an extra $400/year in free interest income while you're sitting on that very large pile of potential down payment cash, over your current 0.75% interest.