Preparing for Potential Worse Times

[m8547]

Greetings. This is not quite a full case study, but I think it fits best here.

My situation is pretty good right now, but I’ve started becoming worried (paranoid?) that I’m not prepared if it takes a turn for the worse. I’m wondering if I should take advantage of the good times now to prepare for uncertain times in the future?

Some background: I started following MMM 10+ years ago and got set up well early in my adulthood. I’ve since strayed away from the path to FIRE, but I’m pretty comfortable where I’m at. I’m in my 30’s making $140k, and my girlfriend makes $80k. We’re not married yet, but we’re ready to be. I have around half a million between my 401k and some other investment accounts, with maybe 10% of that in a money market account as my emergency fund. She has some savings too.

I own a pretty good (but not perfect) house worth around $1-1.2M in a pretty good location. It’s in a HCOL area and in the suburbs, so we end up driving a lot. It has a big garage that I can use to work on stuff which saves me money and makes me feel productive in a way that computer work doesn’t. She owns a very small house in the city that we rent out. It generates positive cash flow, but it’s not super profitable. We plan to eventually sell it when we get married. My mortgage is low 3% and hers is high 2%.

My housing payment is around $4400/month (1500 principal, 2000 interest, 700 escrow, 200 utilities) which is a lot, but it’s been manageable. Until we get married I’m paying 100% for my house and she’s paying for (or profiting from) hers. I’m maxing out my 401k, Roth IRA, and HSA, but I’m not really saving beyond that. I got an early head start on FIRE, but it’s been on the back burner since buying an expensive house.

All that is to say, things are pretty good right now. If nothing changes we could keep happily living here, and I could probably retire sometime in my 50’s. But I’m becoming concerned about my long-term job prospects in this area. Given recent political events, I think there’s a good chance my job will be at risk (her job is secure regardless of politics). Worst case I could see the tech industry in the area crashing (it is heavily based on government funded science). That would make it hard to get a job, hard to sell my house, etc. Sure, it would recover eventually, but it might take years. Maybe I could find a job in a related industry, but a lot of other people could be trying at the same time. Or I could find a job unrelated to my skill set, but it’s hard to imagine making anywhere near the same salary right away. Maybe I’m overreacting?

I can keep paying living expenses for more than 6 months if I lose my job, but I’d be burning cash quickly with no foreseeable path to building savings back up if I find a job with comparable pay. And I’d rather have that money available for something fun in the future. I could maybe rationalize it by thinking of the principal portion of the mortgage payment as “saving” or the appreciation in value of the house as “investing”, but I’d be converting liquid investments into an illiquid and non-diversified house at an alarming rate. Her salary plus cash flow from renting her house could cover some of our expenses, but we can’t afford this house long-term on her salary alone.

So my question is, should we make big changes to our relatively comfortable life to be better positioned for future uncertainty?

For example I could sell my house and we could move into hers. I’d immediately have an extra $53k a year to save, which would allow me to build up considerable savings quickly. I’d be able to sell while the local economy is relatively good and get a high price for my house, likely netting a few hundred thousand depending on what it’s really worth.

Her house rents for around $2000 a month, but it is currently vacant. So I suppose our savings by living there is more like $53k - 24K = $29k, plus or minus some for the difference in taxes. But that’s still a huge savings compared to any monthly budgeting stuff like cutting back on going out to eat, etc. We are both reasonably frugal, but we make enough that we haven’t tried to ruthlessly optimize our monthly expenses.

The downside is, it’s hard to imagine being able to afford a similar house any time soon, with higher interest rates and housing prices seemingly increasing faster than my salary. It would be uncomfortable living in her house (700 square feet with a 1 car garage) versus my 1500 square feet plus a basement plus a massive four car garage. Her house is about the same commute to both of our jobs, in the city so closer to restaurants and groceries, but farther from some activities we like such as hiking and mountain biking. She’s okay living in either house because she doesn't have space-demanding hobbies like me.

Some might say this is trying to time the market. Of course no one knows what will happen in the future. But on the other hand you could look at it as getting out of a huge non-diversified illiquid asset (the house) and establishing a financially secure position.

Some other options besides selling my house:
- Look for another job. I’d have to move to a related industry to reduce the government funding related risk. And it doesn’t eliminate all risk, for example if there is a general economic downturn.
- Rent her house again, optimize our expenses, save as much money as we can, and hope for the best. Sell my house if I lose my job. This doesn’t quite get us to a position of strength that I would like, but it is essentially the default option.
- Rent my house while we live in her house. Based on a quick survey of rents, I don't think this would be cashflow positive, but it could rent for a bit more than her house.

If we live in her house, what would our plans for the future look like? I know I would not be comfortable there long-term. As a temporary step to save money and be financially secure I’m okay with it. But I’m not sure what’s next, or what I’m planning for after that? We can accumulate savings living there, but do we plan to buy a larger house? Move somewhere LCOL and live off one salary? I guess we have not thought that far ahead yet.

Pros and Cons of my house:
Pros:
- It’s comfortable and has enough space to be here long-term
- I really enjoy having the garage/workshop and space to work on anything I want inside or outside
- No HOA
- Located close-ish to some hiking and mountain biking (we still have to drive to most trails)
- Interest rate is low
- Neighbors are great

Cons:
- It’s expensive!
- Yard work takes a significant amount of our free time. The lot is almost an acre. It's more than we need.
- It’s near a highway, so there’s always some road noise. It doesn’t bother me most of the time, but it could make it hard to sell in a buyer’s market.
- It’s not particularly close to anything. We’re both driving 25-35 minutes each way to work. Any errands are 10-15 minutes each way to town.
- There are only so many jobs within reasonable commuting distance from here. There are some options for me, but not unlimited possibilities. It ties us somewhat to this one location. With a cheaper house it’s a lot easier to move if needed because we could afford to buy a new house first.


Pros and cons of her house:
Pros:
- It’s cheap!
- Minimal yard work
- There is a grocery store a 10 minute walk away
- Neighbors are not bad
- More jobs within commuting distance, if I need to switch

Cons:
- It’s small. It’s 2 bedroom, 1 bathroom. The kitchen is tiny.
- Did I mention it’s small? When I sit on the toilet, my knees hit the bathtub! It’s almost tiny house sized (at least compared to typical American houses) but not built with clever tiny house efficiency. We could certainly make some improvements if we live there.
- The garage is a 1 car garage, but it is also tiny and barely fits the overgrown cars that everyone has these days. A RAV4 is just about the largest car that will physically fit (we both drive slightly smaller cars than that). It’s not a huge deal because I would take it over as a workshop, but it’s smaller than I would like as a workshop.
- Besides the garage there is only street parking. May be an issue if we go on a trip and need to leave our cars. Technically you are only allowed to park in one place for 72 hours, although I am not sure that it is enforced.
- The only private outdoor space is a small backyard area
- Still 25-30 minutes from work


Any words of wisdom or advice is appreciated!

[Malum Prohibitum]

Would you mind providing the mortgage amounts for each house?   It might make it easier to provide input with that information.   You did give the interest rates.  Also, how much is her house worth?

I think that is it for now.  Thank you.

[m8547]

My house has about 750k outstanding on the 30y mortgage at 3.25%. I paid low 900's a few years ago, and I estimate it's worth 1-1.2M. I've made some minor improvements, but I haven't had time to do anything that would substantially increase the value. It's not a fixer upper, but parts of it are still dated, which pushes it towards the low end of potential value. But the large-ish property is hard to find close to town, so maybe someone would pay a premium for that? Someone with horses just moved into a house down the street.

Her house has somewhere between 100-200k outstanding with an interest rate somewhere around 2.5%. Payment is around 1200 a month. The HOA is another couple hundred. The house is probably worth somewhere in the 400's. Sorry I don't have exact numbers right now. We could live there on one income reasonably comfortably.

[SunnyDays]

Would the HOA allow you to add onto your girlfriend's house and/or build a garage?  If you could regain some of the space you would lose by selling your house, it might be a liveable compromise.  Or, is it possible to create a second suite in your basement and have 2 rentals in one?  Double the income.

[m8547]

Would the HOA allow you to add onto your girlfriend's house and/or build a garage?  If you could regain some of the space you would lose by selling your house, it might be a liveable compromise.  Or, is it possible to create a second suite in your basement and have 2 rentals in one?  Double the income.

I should have mentioned it's a townhouse. No space to add on. There is a crawlspace (4ft high with dirt floor) that we could improve a bit and use for storage.

Edit: forgot to address the second suite in the basement. My house is on septic, so it would need a new larger septic system to get that permitted. And the basement was not legally permitted when it was finished, so it might need some or complete refinishing (they did have the foresight to put in egress windows, at least). The county has strict building codes, so it's difficult and expensive to build anything substantial. Similarly ADUs are legal now, but it costs a small fortune to build one to code.

Living at her house, we would likely need to get a storage unit for, at a minimum things like out of season clothes and some tools that I want to keep but don't use often. The house was pretty full when she lived there by herself, and she doesn't have a lot of stuff. Maybe renting storage is not the mustache way, but $100 a month for storage is a lot better than thousands a month for a larger property. I would of course downsize the amount of stuff I have, but it's hard to imagine myself ever being truly a minimalist.

I did briefly explore local maker spaces. They have plenty of tools, but are a little tight on space to work, and you generally can't leave anything there. You have to just go and bring all the materials and do your work and take it home. That would be hard when I might only have an hour free in the evening.

I also looked briefly at renting warehouse type space. Its expensive enough ($1800+ for anything more than a closet and less than 30 minutes away) that it would negate any savings. I can of course spend more time looking for better deals.

A possibly crazy idea is, there's an industrial area outside of town where you can rent contractor yard space (like where a business stores their trucks). Maybe I could rent a yard, buy a couple shipping containers, and make a containerized workshop. I have no idea if that kind of use is permitted, or if there's even electricity available. I'd probably pay as much for containers as I would renting a warehouse for a year, so it's probably a bad idea. Just trying to think outside the box.

Maybe living at her house could be a very short term (~1 year) stepping stone to a more modest property closer to where we both work (it's a less desirable area than where either of our houses are located, so houses are a bit cheaper). Something with a 2 car garage and a driveway is not my dream house, but it's a big step up from her house. It looks like there are plenty out there for reasonable prices, maybe in the 500's-800's. Jumping up in interest rate would make it less attractive than it sounds just based on purchase price. But if we do well enough selling my and/or her house we could have a substantial down payment or maybe even buy a house in cash. It would be pretty nice to have a smaller housing payment and a shorter commute for both of us (assuming I keep the same job).

[Dicey]

The elephant is that with your low interest rates, almost anything else you buy is going to cost you more. I'd look hard at figuring out a way to make one of what you have work. I'd probably look at monetizing that land. Perhaps renting a portion of the yard to someone else with a tiny house?

You mention that if you sold, you'd have an extra $53k a year to save. What about the equity from selling the house?

And I'm just going to say it: If you've been on the path for over a decade and you only have ~$500k saved, there's probably plenty of low-hanging fruit in your budget.

[m8547]

The elephant is that with your low interest rates, almost anything else you buy is going to cost you more. I'd look hard at figuring out a way to make one of what you have work. I'd probably look at monetizing that land. Perhaps renting a portion of the yard to someone else with a tiny house?

You mention that if you sold, you'd have an extra $53k a year to save. What about the equity from selling the house?

Yes, a big part of what makes this idea work is the equity from the house. I would net a few hundred thousand (I estimate 200-500k) depending on what it really sells for. That would give me a substantial down payment towards a more modest house, making interest rates less of a factor. If we sell both houses we could buy something else with cash. I'll have to figure out the minimum I could take for this house to end up with lower costs in the end, and I can always choose not to sell for less than that amount.

Renting the land to horses is probably the best way to monetize it, but I don't know how practical that is. We're allowed to have 1.8 horses based on the size of the lot (not sure if that rounds up or down). I know nothing about horses. Could I build a horse pen (area? pasture?  whatever it's called) and just let someone keep their horses here? Or do people expect full service horse maintenance? I know people pay a lot to keep horses, so maybe it could be a profitable side hustle. I don't really want to add horse maintenance to my list of chores, but I guess if it pays enough I'd do it.

Building code makes camping and tiny houses almost impossible to do.14 days max is allowed. At a minimum the existing septic system would prevent a legal permanent tiny house.

Maybe I could rent some parking in the driveway, or rent space in the garage. That's worth just a few hundred a month at most.

Renting a room out is definitely an option, but I'd rather not unless I absolutely need to. The best way to do it would be to make the basement a suite that would give both the renter and us some privacy. They'd have a bedroom, living room, and bathroom. We'd share the kitchen. But the initial cost to do it (namely building a bathroom down there) makes the payback period a bit long. I could DIY, but it would require pumps for the toilet and shower which drives up the cost. I mentioned I can't legally make the basement a separate unit, but renting it as a room would be acceptable because I'm not going beyond the occupancy that the septic system was designed for.

And I'm just going to say it: If you've been on the path for over a decade and you only have ~$500k saved, there's probably plenty of low-hanging fruit in your budget.

I agree there's other low hanging fruit. I've had more than enough money to live comfortably, and I haven't been laser focused on early retirement. I like my job for the most part. I'd like to retire early, but if it's 5 or 10 or 15 years from now I don't think it makes a big difference, or at least that's been my thinking until recently. With fresh concerns about job prospects, I'm getting new motivation. I don't want to get into smaller budget details yet because housing is by far the biggest target, but I'll get there.

And for the last 7 years I've been spending a considerable amount of my money on HCOL real estate. The house I owned before this one was also relatively expensive compared to my income at the time. I could potentially turn the housing into a big win if I can sell at the high end of what I think is possible. Or if I sell at the worst case low end I will have "thrown away" a lot of money on interest (and to be clear I don't foresee ever being underwater on this house, but I guess anything could happen).

Speaking of housing, if my day job doesn't work out I could flip the townhouse. The bathroom and kitchen need to be renovated. If we are set on selling it, having those updated would likely increase the value by enough to pay for the time I spend doing the work.

[Malum Prohibitum]

Get married, sell the townhome, which provides $200-$300k in equity, and apply it to your stash or to your mortgage.

You could lower your mortgage from $750k down to potentially $450k.  Interest rates are likely to continue to drop.   Everything you described about your house is that you love it except for the monthly expense.  If she loves it, too, then you may potentially be able to keep it with a lower monthly expense - perhaps have it paid off in the next 7-8 years.

[ScreamingHeadGuy]

Get married, sell the townhome, which provides $200-$300k in equity, and apply it to your stash…

Exactly what I’d recommend.

[Sandi_k]

Get married, sell the townhome, which provides $200-$300k in equity, and apply it to your stash…

Exactly what I’d recommend.

+2 - but I'd also see if you can pay down the lump sum on your mortgage, and then have your lender re-cast the mortgage.

This would immediately lower your payments, and give you much more "headroom" for savings on a monthly basis. It would mean much more ability to survive a job loss or other fiscal hit.

[SunnyDays]

Horse person here!

You could fence off an area for pasture or even just a small corral if the person rides a lot, otherwise the horse will need more room so it doesn't go stir crazy.  Fencing a large pasture can be done with posts and wire, a corral is better off with metal fencing.  Neither is cheap.  It also needs a run in shed (3 sides and a roof with it's back to prevailing winds) to escape rain/snow/wind/sun.  Also, make sure the pasture doesn't contain anything toxic to horses, like black walnut trees.
Keeping one horse by itself is a lonely thing for it, so having someone live off site and just come by to visit/ride isn't ideal.  If two are permitted, that would be much better.  You would also need a source of water and a trough and a water heater if it will freeze in winter, so electricity required.  Somewhere to store hay and grain, where it can be kept dry and not mold, and probably a tack room for saddles and such, because that would be a pain to haul back and forth.  A small trailer would work for that. 
It would be wise for you to periodically check on the condition of the horse, because it's disheartening how little some people care about their health.  Make sure it has some meat on it - if you can see ribs, that's a bad sign, unless it's a Thoroughbred.  It's hooves shouldn't be long and it shouldn't look dejected or ill/injured.

Have I scared you off yet?  Horses require a lot of care and attention, and personally, I would not be comfortable just letting a stranger throw a horse on my land without knowing them or monitoring the situation closely.  You also have to consider liability insurance, should someone be injured by it.  It's a lot, and not to be done lightly, but if there is the right person and horse, it could work.  Ask around at any local stables or tack shops.

[m8547]

Get married, sell the townhome, which provides $200-$300k in equity, and apply it to your stash or to your mortgage.

You could lower your mortgage from $750k down to potentially $450k.  Interest rates are likely to continue to drop.   Everything you described about your house is that you love it except for the monthly expense.  If she loves it, too, then you may potentially be able to keep it with a lower monthly expense - perhaps have it paid off in the next 7-8 years.

Interesting idea. Realistically we have similar equity in the townhouse as in my house. Just putting the money in a HYSA would generate $1000/month, and there are surely better investment options for that chunk of money. If interest rates drop, then putting it into the house and refinancing to lower the payment is an option as well.

Get married, sell the townhome, which provides $200-$300k in equity, and apply it to your stash…

Exactly what I’d recommend.

+2 - but I'd also see if you can pay down the lump sum on your mortgage, and then have your lender re-cast the mortgage.

This would immediately lower your payments, and give you much more "headroom" for savings on a monthly basis. It would mean much more ability to survive a job loss or other fiscal hit.

I wasn't aware that recasting might be an option. Thanks for the suggestion.

[m8547]

Looks like recasting 250k into the mortgage would save me around $888/month, which is equivalent to a 4.26% return on that 250k, if I did the math right. It's interesting that it's higher than the mortgage interest rate of 3.25%, but I guess that's how the math works out.

[Dicey]

Paging @Exflyboy for his subject matter expertise.

[Laura33]

The reason you are torn is because you are trying to both protect against everything hitting the fan and plan for a big, comfy, expensive life.  Those tend to be two different things -- although the steps you take for the former do tend to put you farther along your path to the latter.

The way you protect yourself against a major downturn is to create your life in a manner that allows you to live on one income -- the smallest one -- indefinitely.  Since you've noted that you could not afford your current house without two salaries, then you cannot keep your current house and be completely protected from future downturns.  So you need to decide which is more important: do you need 100% protection?  Would mitigating your risks to some degree -- say, selling her house and socking away the cash, or recasting the mortgage -- be enough?  Might you be able to get a local job outside your field that would bridge the gap?  Could you monetize your hobby?  Or would you be bored and want to move somewhere else for a job in your current field -- and if you do that, what happens to your GF's job?  Is she even willing to consider moving in that scenario?  Will you get married, and if so, when?  What happens if you and your GF don't get married?  If your plan is to consolidate, how do you navigate that if you're not married?  Or even if you do?  What does she think about all of this?

My inclination would be to move to her house, sell yours, and negotiate with her to take over the garage for your hobbies if at all possible.  That frees up a ton of cash every month, and gives you six figures that you can immediately invest.  But it's not my life, and I am a sucker for nice houses, and I also have no idea what your GF thinks about all of this. 

FWIW, I applaud you for looking ahead.  We lived through the very scenario you fear, and it was the most stressful time of my life.  His job disappeared, I was 5 months pregnant and working very part-time, and it was the one time in our lives when we couldn't live on the lowest salary (because, hello, pregnant); we then had to move for a new job for him, we couldn't sell our old house as the market crashed, and we hemorrhaged cash for 13 months.  What saved us was having a big fat pile of cash to tide us over until things leveled out.

Oh, and if you are serious about protecting yourself against future risks, make sure you take a holistic look and don't just hyperfocus on what has currently taken over the front of your brain.  Specifically:  do you have disability insurance?  I assume you have medical insurance.  But at your age, by far the biggest risk to your financial future is being disabled and unable to work for an extended period of time.  If you have that insurance through your job, take the max coverage they will provide (something like 60%, since payments are tax-free).  If you don't, go get some quotes for "own vocation" coverage (i.e., you get paid if you can no longer work in your current job, even if you could still manage to work at McDonald's). 

Finally:  do your best not to bullshit yourself about needs vs. wants.  It's very, very tempting to build up rationalizations to support doing the things we want to do.  For example, your hobby is great because it saves you money!  But is it just saving money that you wouldn't need to spend in a smaller house, or saving you money on luxuries that you don't actually need?  IMO, the true benefit of the hobby is that it keeps you sane and works a different part of your brain (FWIW, my DH is a woodworker for precisely that same reason).  That's enough justification, as long as you can still afford it. 

And whatever you do, if you sell one house, do not just throw the cash into the other house without at a minimum recasting/refinancing.  The bank can foreclose whether you have 0% equity or 99% equity, so paying down a mortgage without getting rid of it entirely gets you no additional protection whatsoever. If TSHTF, you need two things: (1) low fixed monthly expenses, and (2) free cash.  So whatever amount you make from a sale needs to go toward one of those two things. 

[Sandi_k]

The reason you are torn is because you are trying to both protect against everything   Specifically:  do you have disability insurance?  I assume you have medical insurance.  But at your age, by far the biggest risk to your financial future is being disabled and unable to work for an extended period of time.  If you have that insurance through your job, take the max coverage they will provide (something like 60%, since payments are tax-free). 

Disability payments are only tax-free if the employee paid the premium. If the employer pays the premium, the payments are taxable.

Otherwise, excellent commentary from Laura, as usual.

[m8547]

The reason you are torn is because you are trying to both protect against everything hitting the fan and plan for a big, comfy, expensive life.  Those tend to be two different things -- although the steps you take for the former do tend to put you farther along your path to the latter.

The way you protect yourself against a major downturn is to create your life in a manner that allows you to live on one income -- the smallest one -- indefinitely.  Since you've noted that you could not afford your current house without two salaries, then you cannot keep your current house and be completely protected from future downturns.  So you need to decide which is more important: do you need 100% protection?  Would mitigating your risks to some degree -- say, selling her house and socking away the cash, or recasting the mortgage -- be enough?  Might you be able to get a local job outside your field that would bridge the gap?  Could you monetize your hobby?  Or would you be bored and want to move somewhere else for a job in your current field -- and if you do that, what happens to your GF's job?  Is she even willing to consider moving in that scenario?  Will you get married, and if so, when?  What happens if you and your GF don't get married?  If your plan is to consolidate, how do you navigate that if you're not married?  Or even if you do?  What does she think about all of this?

My inclination would be to move to her house, sell yours, and negotiate with her to take over the garage for your hobbies if at all possible.  That frees up a ton of cash every month, and gives you six figures that you can immediately invest.  But it's not my life, and I am a sucker for nice houses, and I also have no idea what your GF thinks about all of this. 

FWIW, I applaud you for looking ahead.  We lived through the very scenario you fear, and it was the most stressful time of my life.  His job disappeared, I was 5 months pregnant and working very part-time, and it was the one time in our lives when we couldn't live on the lowest salary (because, hello, pregnant); we then had to move for a new job for him, we couldn't sell our old house as the market crashed, and we hemorrhaged cash for 13 months.  What saved us was having a big fat pile of cash to tide us over until things leveled out.

Oh, and if you are serious about protecting yourself against future risks, make sure you take a holistic look and don't just hyperfocus on what has currently taken over the front of your brain.  Specifically:  do you have disability insurance?  I assume you have medical insurance.  But at your age, by far the biggest risk to your financial future is being disabled and unable to work for an extended period of time.  If you have that insurance through your job, take the max coverage they will provide (something like 60%, since payments are tax-free).  If you don't, go get some quotes for "own vocation" coverage (i.e., you get paid if you can no longer work in your current job, even if you could still manage to work at McDonald's). 

Finally:  do your best not to bullshit yourself about needs vs. wants.  It's very, very tempting to build up rationalizations to support doing the things we want to do.  For example, your hobby is great because it saves you money!  But is it just saving money that you wouldn't need to spend in a smaller house, or saving you money on luxuries that you don't actually need?  IMO, the true benefit of the hobby is that it keeps you sane and works a different part of your brain (FWIW, my DH is a woodworker for precisely that same reason).  That's enough justification, as long as you can still afford it. 

And whatever you do, if you sell one house, do not just throw the cash into the other house without at a minimum recasting/refinancing.  The bank can foreclose whether you have 0% equity or 99% equity, so paying down a mortgage without getting rid of it entirely gets you no additional protection whatsoever. If TSHTF, you need two things: (1) low fixed monthly expenses, and (2) free cash.  So whatever amount you make from a sale needs to go toward one of those two things.

Thank you, this is great advice. I probably should have though of all this before buying this house, but I think I got caught up in the crazy housing market, and I didn't give enough consideration to what would happen if I lost my job.

I've thought for a while about if we were to sell her house, and I don't think it does enough. Say we net 250K and put that in a HYSA at 4.8%, that earns $1000 a month. If we recast it into the mortgage that decreases the payment by around $888. I am not convinced that it really gets us to where I want to be. It's a start because as long as we are both employed we can start saving that $1000 or so a month, but it will take a long time before that snowballs into a meaningful amount. So at this point I am leaning towards selling my house.

I looked around some more, and I was initially overly optimistic about the potential value of my house. I think a realistic estimate is that I could net 200-300K, most likely on the low end of that. I need to think about what is the lowest I would take for it. If I net 200K that is still a substantial down payment towards a future house that's bigger than hers, but still modest. If I get a lot less, then we are not much better off in the long run because a mortgage on a new house will have a much higher interest rate.

If we live in her house for a while, we are well positioned to look for another house. There are plenty of options for modest houses in the 600-700k range closer to where we both work. Pretty much standard suburban cookie cutter houses on small-ish lots. I think I'm okay with that. We could both save 10-15 minutes each way on the commute everyday, and if we are lucky we could also be within walking distance from a grocery store (there is one for sale now that's just about perfect, but it will surely be sold by the time we are ready to buy). If we downsize that also makes it easier to move if I change jobs, whether it's to another part of town or another state.

I've definitely lived a little too comfortably the past few years. If I think about what I really need, it's a lot less.

My hobbies specifically are woodworking, working on cars, and home improvement projects. You are spot on that I like to do them because they use a different part of my brain. I doubt I'll ever monetize the woodworking. The market seems super competitive, and I work too slowly to produce anything in any reasonable amount of time. Working on cars saves me money, but if I put a price on the space/time it takes it's not worth it. I still enjoy it, and I'll do my own oil changes as long as I can even if I can get it done for $39 at an oil change place. Home improvement project have the biggest monetary potential, but it takes a long time and a lot of work to see any return, and there are still all the risks of owning a house. My house could potentially be worth a lot more if it were fully updated, but that would take years at the pace I work. I'm maybe 25% of the way to my ideal state after 3.5 years.

I can definitely do some woodworking even in a 1 car garage. It would be nice to downsize my priorities too. Right now I want to do woodworking and work on cars and work on the house and maybe some gardening, and I need to maintain the yard, not to mention we need to get out of the house and do some fun things together occasionally! I don't have enough time/energy for everything, and as a result I end up doing only a little of each thing. But if I were to focus on just a couple things that would be nice. My "workshop" is in a pretty sad state, and I could spend some time making it functional in a smaller space and doing the kind of projects where, when they are done I'll say, "why didn't I do that years ago." Like building an actual sturdy workbench. The table saw doubles as my workbench right now, which does not lend itself to working efficiently.

[m8547]

Well, a lot has changed since I last posted. We're engaged now. And I'm in the process of selling my house, with an offer of around 1.1M. If all goes well I'll net around $275k which is pretty good but not life changing (I'm not going to retire on that). We're mostly moved out of my house and living at her house. It's fine so far, but we haven't really settled in because of the uncertainty of being mid-sale. I hate moving, so I'm not going to fully commit to it until the sale is a sure thing. I'll have a better idea in a week.

Sometimes I wonder if we priced the house too low, or if I should have held out for better market conditions (it's a buyer's market right now). Maybe I could have made another $100k. But I remind myself if we live frugally and save for 2 years we'll have another $100k. And there's no way to know if housing will be up or down in a year or two.

I spent the last 4 months frantically renovating the remainder of the kitchen and finishing what seems like a lifetime worth of half-finished house projects. My latest accomplishment is, with the help of the whole family, moving 4000 pounds of rotten logs out of the backyard in one weekend.

I am excited for the possibilities that this unlocks. The time savings of a lower maintenance house will be huge. I'm already enjoying and looking forward to going to new restaurants in the city, and looking forward to having enough money that we can comfortably afford to eat out occasionally. And being free from my expensive housing payment we'll have the flexibility to move if we want to, or I can consider new jobs, etc.

[Laura33]

Congratulations!  On both the engagement and the house sale. 

Don't worry about coulda shoulda woulda -- it's just as likely that if you'd priced higher, you'd have overpriced for the market and taken longer to sell/sold for a lower price.  The important thing is you have both cut your costs and improved your liquid assets, and both of those things put you in a better decision to move toward the future you and your fiancee want.

[roomtempmayo]

Heck yes.  I just read the initial post and thought, "move to her house, no question."

Awesome to scroll down and see that's what you did, @m8547 ! 

You just made your finances and your marriage way more resilient.  You can't control the future, but you accurately predicted much of it in November and now you're much better prepared for whatever comes.

[Cannot Wait!]

Congrats!
I'm curious how you feel about your job security these days?

[m8547]

Congrats!
I'm curious how you feel about your job security these days?

I'm feeling about the same about my job security on average, which is to say still not great. It varies based on how busy I am in a particular week, whatever crazy things are in the news, how depressing it is to walk around and see half the building empty (with more people slowly leaving) when it was full a couple years ago, etc. The company I work for does mainly government contracts, so it's somewhat insulated from short term changes. I have very little understanding of how the contracts actually work (there are people who spend their whole careers on that), but they've been doing some presentations about how they lobby the government, and it's been helpful to see a little of what goes on behind the scenes.

We also found out my fiancee's job is less secure than anyone though. They are cutting something like 10% of staff in the next year. She still has a job and very likely will next year, but it was a bit of a shock when that announcement came out.

I am intentionally being vague with the details about our jobs, but these are two industries that a few years ago seemed about as secure as anything. I guess now we know better.

So far living in 700 square feet is alright. The house has everything we need. It's a box with a roof, heating, cooling, a bathroom, a kitchen, etc., just like any other house. It's going to take some work to figure out the most efficient use of space to make it as comfortable as a bigger place. A few months ago I expected I'd want to look for a larger house in a cheaper area, but now given all of the above I'm happy just staying here for a while. And it's a pretty nice location. People are paying millions to build giant houses in the neighborhood, but we get to live here for relatively cheap. Literally half the houses on the street were scraped and replaced with giant $1m+ mansions in the last 5-10 years.