New to Mustachianism, does my plan check out?

[Zstando]

Life Situation: I am a fresh college graduate (23yrs old) with a degree in chemical engineering. My fiancé (22yrs old), we are getting married in July (parents are paying for wedding), is planning on going to nursing school Fall ’19(ABSN program so only 15 months). I am new to MMM and have really enjoyed the past few weeks of reading through the site and learning so much. I currently work for a company in PDX as a Process Engineer and I make $63,000 a year. I currently live at home with my parents and commute to work (~30 miles), the savings of no rent or groceries outweighs the cost of driving to and from work every day in my mind. My fiancé and I are looking into buying a lot and building our own tiny home this spring, it’s much cheaper than buying a home in Portland, and we love the outside lifestyle it would force us to keep living. My fiancé currently has $28,500 in SL, which she starts paying next month (minimum payment is $295 but I plan on paying $500 per month).

Gross salary/wages: $63,000/yr for me and ~$33,000/yr for my fiancé
-   Her income will drastically decrease once she starts nursing school before it jumps up to close to my own income level. So we will have about 15 months where I am only counting on my income for the both of us.
401K: 5% plus employer 3% match (both go to 7% after 1 year) 8% total
FSA: $350/yr to pay for contacts
Insurance: still on Mom and Dads plan (Thanks to them for the extra savings!)

Taxes: ~30% each paycheck

Current Monthly Expenses:
$310 -> my car payment with $16,000 left (2.4% APR) (5 year loan)
$110 -> Fiance car payment with $4000 left (2.4% APR) (5 year loan)
$140 -> Car insurance for both cars
$260 -> Gas for car
$400 -> $50 weekly “Allowance”
$150 -> Misc. (Gym membership, music streaming, Etc.)
$500 -> Fiance Student Loans until she starts school again (8/19) (10 year “standard” repayment on $28,500 with minimum payment of $295)
I estimate our monthly costs once we no longer live at home will go up enough to bring our savings down to only $200 per month for the short period of time. I know that is severely low, but it is worth it for my fiancé to further her education in the long run.

Savings: My Paycheck - Total Spending = 3262 – 1870 = $1392 added savings per month 
I have $10,000 in savings and $1000 in 401K fiancé has $5000 in savings

Main Question: We would like to purchase a lot and build our own tiny home ($150,000 total cost) in May ‘19. I estimate about $1300 a month in mortgage payment(includes taxes). Factoring in the mortgage and removing student loan repayments while she is in school I think we can get by but with minimal savings potential while she is in school. Is this a good plan, or should we rent while she is in school and not deplete our savings with down payments and purchasing costs? I want to do what will put us in the best position long term and I think that building equity rather than renting is the way to do that, I am open to other avenues if the MMM world thinks there is a better way.

Thanks for all your suggestions and time spend reading in advance!

[nsmall]

Just a word of advice.  Have a simple wedding and ask the family to give you the extra money for something that will help you long term.

Building a home could cost way more than you have planned.  Do tons of RESEARCH then add some number like 20% (I am no expert, just a guess) to your final expected build costs.

[cchrissyy]

I don't think you should buy, and absolutely do not build, a home until you guys are both working your career jobs and very certain this is the city you will be in for the long term. Wait until she is done with her degree and you both have at least a year or two working somewhere and happy with it.  The freedom to move cities or just to different neighborhoods is worth a lot to your quality of life and this time will be well-spent in helping you make a good long-term decision.

As far as buying land and building, all I can say is there are reasons most people don't want to do that. Make sure you understand 100% what the expenses, risks, and downsides are for this plan and why people rarely do it in spite of the positives.

[wordnerd]

You need to factor in groceries, utilities, phones, incidentals, and health insurance. You'll be paying them soon, and you definitely will be in the red with a $1300 mortgage payment (does this include taxes and insurance or just principal and interest?). Work out a realistic budget (and live within it for sometime) before committing to any long-term purchases.

Other things to think about: You may not want a tiny home long-term (children, dogs, more than one sink/toilet for two adults). So, what's the resale market like for tiny homes (or what might it be like in 5 years)? Are you likely to lose money (my guess is yes)? I echo nsmall's comment about building costs too. You will wipe out your savings for the down payment presumably (and have no room left in your budget to save up another emergency fund), so you will need to think about how to cover repairs. I would suggest downgrading your cars to start (there is absolutely no need for a car that you paid over $16K for, especially when you aren't even covering your basic bills at this point).

If you can't tell already, I think this is a bad idea. You and your finance are quite young, starting new careers (still in school for her), seemingly haven't lived on your own or with each other before...It seems awfully premature to lock yourself into a location, a home, a housing build. A lot can change quickly, and you may want or need to move. It also seems you haven't managed a full household's worth of finances yet. I would focus on getting the fundamentals down: paying all your bills and saving without parental help while your soon-to-be-wife is in school, and then think buying or building a home in a few years if you still want to.

[ysette9]

I have bought real estate three times now and the first two times were mistakes. If I could give my younger self advice it would be to avoid buying real estate for a good long time and to save up as much as possible instead. You are young and the whole world is in front of you. Keep your options open and focus on saving a bunch and having lots of fun. This is the time to be carefree and enjoy this new life you two are building for yourselves. Don’t tie yourself down with the stresses of property and tight finances and the inevitable arguments that will cause.

[fuzzy math]

There's only 1 major employer in the city you listed. You are fairly discoverable here with the info posted. You might want to change it to PDX area.

I don't know where you're going to find a plot of land and build a tiny home for $150k in the area unless you're moving to Forest Grove or something. Rent out in the boonies since you're working in the boonies. Get your loans under control before you think of purchasing anything.

[Zstando]

**Updated Response**

Thank you to everyone that has responded. Your advice is all very sound and I am seeing the error in my thinking, I was trying to rationalize essentially living paycheck to paycheck while fiancé is in school and then count on her extra income to get us out of the hole. Saying that "out loud" sounds ludicrous now..

So! I will sit down tonight and recreate my budget, I am assuming that I will need a 3-6 month emergency fund, which I already have saved. Then I will budget out how to aggressively pay off the debt that we have already incurred as well as the SL debt that we will take on when fiancé goes to school. We will also have to take a hard look at the numbers and see where to cut back and see what exactly we are spending our money on.

Thanks so much for your help and advice. I will update with our new plan and budget later this week if anyone has any interest.

[Yanisimo]

Hey Zstando,

I am the same age as you, a recent graduate, and have also considered buying land and living in a tiny home.  I see some flaws in your plan. To begin with, you estimate savings of $1,392 per month, WITHOUT taking into account a mortgage/rent and groceries. You currently don't pay for those things because you live with your parents. You need to consider how much your savings will decrease once you add a mortgage and grocery expenses. That means you need to determine your mortgage if you buy land and a tiny house, and estimate your grocery bill (mine is $500 for the husband and I per month!). Once you do that, determine if you will be comfortable with the very little money remaining. Based on your current expenses, and adding an estimated $1,100 per month for mortgage and groceries, you will basically be living paycheck to paycheck. Are you okay with that?

This is what I would do based on your situation: I would continue to live with the family up until the wedding to continue saving money (I actually did this!). I would talk with your fiance and come up with a plan to pay off your combined debt of $48,500. Thankfully, it seems you guys don't have credit card debt. However, you know that MMM believes it is ludicrous to finance a vehicle, because if you have to finance something, it means you can't afford it and therefore you shouldn't buy it. I would personally not purchase real estate/tiny house until I was completely debt free. Continue to read through MMM's blog and other financial independence blogs. Do more research before you close on a real estate deal. Consider whether you will want to live in your city in the long term. Consider the local city regulations in regards to owning and living in tiny homes.
I would move into an apartment and work for the next few years on paying off the current $48,500 debt, saving for a down payment on a tiny home (if that is still part of your plan), and paying off the additional student loans your fiance will soon incur. Stay flexible. I wouldn't rush to purchase a tiny home and land at the moment due to your low savings margin and high debt.

[Hirondelle]

First thing I thought; you're very much a spendypants. You're living with your parents and already manage to spend $900+ per person per month?! That's literally my full monthly budget including rent and groceries.. I'm from a town where people tend to live with their parents for a long time as renting is hard and buying expensive and I've seen many in situations similar to yours; feeling like they save a big % of their money due to having little/no fixed expenses and throwing everything at frivolities.

Current Monthly Expenses:
$310 -> my car payment with $16,000 left (2.4% APR) (5 year loan) Fresh college grads don't need a 16k car. Actually, nobody does. Get something cheap with a good MPG
$110 -> Fiance car payment with $4000 left (2.4% APR) (5 year loan) That looks better, but maybe the loan is older?
$140 -> Car insurance for both cars I'm not in your area/country so have no opinion about whether this is high or not
$260 -> Gas for car That's A LOT. Why do you drive so much? Do you car commute? Is there a public transport option? Can you bike or carpool?
$400 -> $50 weekly “Allowance” That's a lot esp as things like the gym membership and music streaming are considered misc. What is this??
$150 -> Misc. (Gym membership, music streaming, Etc.)Depending on what this includes hard to say if it's reasonable or not..
$500 -> Fiance Student Loans until she starts school again (8/19) (10 year “standard” repayment on $28,500 with minimum payment of $295) What's the interest %? It might be better to not pay it off so quick and invest the money instead

You're still living with your parents and it seems like they're extremely generous with you as they don't let you pay for food/shelter AND keep you on their insurance. Please take advantage of their generosity by hoarding up as much money in the 1-2 more years that you'll be in this situation and your later self will be happy with you.

[eav]

Echoing others' responses it seems like you're wanting to go 0 to 100 in terms of financial responsibility. I was in your shoes living with my mom a year ago, and I would highly recommend renting for at least a year on your own before buying a house - not to mention building one. You can even take it as a research opportunity to live in an apartment with similar square footage to the tiny home you'd like to build. With your best interest in mind I'd genuinely recommend you go that route.

[Beardy]

Your hair is already starting to smoke with the debt you listed.

Forget the mortgage and focus on getting rid of the debt. Personally, I'd start throwing everything at crushing the debt first, but I have an extreme aversion to ANY debt. At least do this while still living at Chateau de Parental. Your MINIMUM debt payments alone are >20% of your paycheck, and that is prior to your SO starting back up at school again.

Your calculation for land mortgage and building doesn't include utilities. I urge you to rent for a few years, at least until you get yourselves debt free and established. Resale market for a non-mobile tiny home (which is I'm assuming what your build plan is) would be very limited, and not likely to follow typical home equity growth. You'd be better off investing or paying down debt. If the small cost and small space life appeals to you both, try renting an efficiency apartment to demo what that would be like.

Your families seem to be very financially supportive currently. THIS IS NOT A NEGATIVE...just something to keep in mind for future planning. Talk to them about how much of the bills are associated with you to get a better idea of expenses, and make sure to thank them PROFUSELY for their support.

Bottom line, I don't think y'all are quite ready to take on a mortgage, especially when it will more than triple your debt. You're on the right track having found MMM, just keep reading and learning.

[ANewLeaf]

It sounds like you are going to do some re-evaluating of your budget and plan, which is awesome.  Just a note that you may also want to do some research about what's involved in buying land.  Generally, the mortgage rates and information that you see online is all about traditional home mortgages.  But those mortgages use the market value of the house as collateral.  Mortgages on bare land often require a much higher down payment (25% where I am), and can have higher interest rates.  Appraisals are often required and can be costly and complicated.  Then you have to decide (in consultation with your municipality) what utility services you want to use and/or are required in order to be allowed to live on the property.  Lastly, make sure you are up to speed on the regs for tiny houses in your area.

In our area, tiny homes have to be considered either RVs or residential dwellings.  If they are going to be RVs/mobile homes, they have to be certified by the transportation authority as road worthy vehicles, which has a bunch of inspections and regulations involved.  Then, many residential areas have rules about whether you're allowed to a) park an RV or mobile home permanently on your land, or b) live in a non-permanent dwelling on your land.  In my area, you are allowed a) in some neighbourhoods but not others, and you're only ever allowed b) for shorter terms, and only while you're building your "permanent" home.

If the tiny house is going to be considered the permanent dwelling on the property, then it comes under the regular building codes and has to be inspected and wired in with foundations, etc according to the municipal bylaws.

The biggest struggle with the tiny home movement is figuring out places to park them and live legally.  I know that PDX may be ahead of the curve on these issues, but make sure you are going in with eyes WIDE open.  I know people who have ended up stuck.  It's often easier and cheaper just to buy a condo, a fixer-upper small house, or keep renting--although I know many of these are not really easy options in PDX. :(

[Kayad]

First off, congratulations on your impending wedding and your interest in building a frugal lifestyle with your spouse!  I wish I had discovered mmm at your age, I would be a lot farther along now.

I do agree that the tiny home plan is an overstretch (for now at least).  You should not feel any need to rush to tie yourself to a big purchase like that.  Focus on other goals for a few years (getting your spouse through nursing school, tackling debt, crushing it at your job).  You can make learning the ins and outs of the tiny house thing your hobby, so you could be ready to go for it in a few years when your situation is more established.

A few additional thoughts:
You have the possibility of really increasing your earnings as you get going at your career.  That is one of the best accelerants toward your financial independence at this point.  That should be a focus for you.

What is the interest rate on spouse’s student loans?  Depending on the rate, it may or may not make financial sense to prioritize paying them down in advance. (See the stickied order of investments post)