Upgrade House or Stay the FI Course

[daydreamer101]

Life situation: We are a DINK couple in our early 30s (31 to be exact). We live in a suburb of a large metropolitan area. I found out about FIRE at 21 & once graduated started working on it. After almost 10 years of hustling, I've started to shift my mindset to "maybe we should enjoy ourselves better?" also, "IF we have kids, how do we want to raise them?." Honestly, we are still not ready for kids, so don't see us having kids in the next 4 years, we may choose to do it in our mid-30s. [Please I don't want any commentary on the best age to have kids]. If it happens then, it happens. If not, it's going to be ok. After 10 years, we have, also, realized more and more of what we like. One, we are NOT going to be nomads. My husband hates traveling, he's a homebody. Believe me I've tried. So if we ever stop working, we will not be RV people, or traveling the world. I am a pretty active person (hikes, social activities, cultural activities).  So knowing that, I want to create a home in an ideal location. We do not want to move cities. I like the city were we live. So for now, we are considering - do we just upgrade our house and move neighborhoods? Finally, get a house in the city (premium)? That is the ultimate question... because we will ultimately be increasing our annual expenses due to the house upgrade. We currently live in a house we bought for $300K in 2018. It was never supposed to be our dream house. We knew that at that time. Hell, we should bought the city house in 2013 when we first bought our first house. Looking back we should have probably bought our house then. But at the same time we didn't really know what we wanted then or had the cash. A house in the city in the neighborhood I want to be in will be in the $700K-$900K. YUP YIKES! HARD TO IMAGINE!!! NEVER EVER THOUGHT WE WOULD EVEN BE CONSIDERING IT! It's all about location. But the location will allow us to be close to city amenities (which I want) and a great neighborhood. Con: I will have a long commute to office.

So here's our financial outlook. I will summarize but do know I keep a detailed spreadsheet to the penny:

Income Household Before Tax: $222,000 + bonus. Bonus is never guaranteed. Bonus potential is $30,000 -$50,000. I never count on the bonus.
     - Me - $150K plus 25% bonus
     - Husband - $72K plus bonus (it's ranged about $5K a year).

Pre-Tax deductions - Max out 401K + company match + max out HSA = $56,000. Didn't max out ROTH IRA because of income limit. Considering doing a backdoor, but would need to convert traditional IRAs to ROTH first.

Rough summary Expenses: We currently spend between $60,000 - $70,000 a year. Let's call it $70K because that has really been our comfort level.
                   - Mortgage principal + interest, property taxes (no state income tax state, high property taxes), home insurance = $24,000 20 year REFI 2.875% in April 2021.
                   - Utilities (HOA, Electric, Gas, Internet, Cell, Hulu/Netflix) = $6,000
                   - Food, car insurance, medical, personal, gas, home maintenance, etc. = $30,000
                   - One time shopping events, travel, etc... = $10,000

After expenses, we can invest about $64,000 a year in a taxable brokerage account. Not counting bonus. If we get a bonus, majority gets redirected to taxable.

Investment Assets (all in low cost broad market index funds): $1.17M
- 401Ks: $541,000
- Traditional IRAs: $55,000
- HSAs: $62,000
- ROTH IRAs:$92,000
- Taxable Brokerage - $445,000
- Cash - $36,000

Real estate: $440K plus appreciation
- Rental Property: Purchased for $140K (it was our first house). It has appreciated to ~ $250K.
- Primary House: Purchased for $300K. It has appreciated to ~ $400K.

Debts:($289,627)
- Credit Cards - pay off full amount every month
- Rental Property: ($60,772)
- Primary House: ($228,856)
- No car debt or other debt.

Inheritance - NONE - we end up with a reverse inheritance. Already planning to support my parents.

My target FI goal is to reach $3M in investments by age 40. It doesn't mean we will RE. My husband might, I probably won't. But I would like to have choices. Right now we are plugging about $120,000 (before bonus) between all accounts into the market. My husband still has growth potential (more than me as I have already reached Director level). But I have a pretty good salary with equity grants that will vest in 3-5 years. So we will continue to be a high income household in our 30s unless something CRAZY HAPPENS.

Is it a terrible move financially to upgrade to a house in the city? It will decrease our investment. Plus we don't even have kids....daycare is expensive....and kids are expensive.

I just don't want to ever end up in a situation where one of us gets laid off and shit breaks down. Also, in about 10 years, I will be helping my parents more financially (it's already planned, no point in making comments). But I want to start making stuff happen where I feel like we are enjoying life NOW. Like get that city house I always wanted. But my husband wants to do the FIRE as soon as possible.

How would we fund it? We would actually end up selling both our houses. We are accidental landlords and don't really want to own rental property (done that and crossed it off the list). So we would turn our house equity to fund the house purchase.

I realize by upgrading house, it will be anti-mustachian. But we have spent the last 9-10 years practicing mustachian practices, and I want to relax a bit.

Would appreciate any feedback, thoughts.

[jiimmy]

You're just a few choices away from being FI today.

It's totally ok to go forward with your plan, but it's important to realize you're making a choice. Is living in the dream house in the dream city worth ~10 years of work? I don't know the answer, that's up to you.

In my limited life experience, a reduction in commute times has been a major happiness booster. Fancier accomodations have not.

[Metalcat]

"I realize by upgrading house, it will be anti-mustachian. But we have spent the last 9-10 years practicing mustachian practices, and I want to relax a bit."

If it's unpleasant, you're doing it wrong.

The point isn't to cut expenses and white knuckle it until you have saved enough money to never have to work again, the point is to make optimal life and financial decisions.

Life is a series of trade offs, only you can determine which of those trade offs provides the best value.

Genuine question though: what feedback are you looking for?
There's only two reasons someone comes to a FIRE website and says "I'm thinking about spending a fuck ton and obliging myself to work for another decade." Either they're looking for permission or to be talked out of it.

So which is it for you?

[daydreamer101]

You're just a few choices away from being FI today.

It's totally ok to go forward with your plan, but it's important to realize you're making a choice. Is living in the dream house in the dream city worth ~10 years of work? I don't know the answer, that's up to you.

In my limited life experience, a reduction in commute times has been a major happiness booster.

I live in a large metroplex. Commute times differ. So right now, I live in the suburbs (technically within 10 miles of my office) but my commute time during non-covid times was still 30-45 minutes even with me waking up early and leaving work late. Yes, my commute time will differ/increase to about 1 hour. But then while at home, I will be next to a beautiful park, close to social activities like (arboretum, museum). The neighborhood is way more beautiful!!! New commute time will be 1 hour. It's the location I would want to raise kids....I would want kids to have diversity and access to zoo, museums, etc close by. Honestly, the suburbs just don't offer that. If we have kids, I don't want to raise them the suburbs. Most people choose to raise kids in the suburbs...but it's like living in a bubble. Don't want to get into it.

But things could change and I could get a new job. You never know. Reality is I'm 31 and a Director, so in a couple of years, I think I will be getting pinged for other roles. My goal is to move career wise in the next 4 years.

Also, yes, we will spend more money...but honestly, I don't know how much traveling we will be doing. We went on a 2 week trip to Italy in 2019 (before COVID) and my husband cannot do that. He doesn't like being away from home for more than 3 days and he doesn't like flights or long drives. Traveling will probably just become short trips to see family. I can travel on my own or just piggy back of my work trips. So while most FIRE people plan to spend a hefty amount on travel, we won't.

I think the new house will possibly add $25K-$30K in extra...It's a bigger jump...

The specific feedback I'm looking for is if buying a house will interfere with us getting to $3M at 40 years. $3M is the goal. We have $1.17M now just in investments, and we don't plan to dip into those investments. We will actually use our home equity after selling 2 houses (~$300K) and just get a larger mortgage.

[jiimmy]

The specific feedback I'm looking for is if buying a house will interfere with us getting to $3M at 40 years. $3M is the goal. We have $1.17M now just in investments, and we don't plan to dip into those investments. We will actually use our home equity after selling 2 houses (~$300K) and just get a larger mortgage.

With your enormous income, yes, you'll probably hit $3m by 40. But will the lifestyle inflation continue? The goal might be $6m by then, especially as kids tend to be everyone's favorite excuse for ultra-consumption.

[daydreamer101]

Great questions.....HAH yes... I agree with you especially because I grew up poor. 3 years ago I would, also, "WTF? WHY" But then COVID happened, we got locked up in our house, one of my uncles died of an unexpected heart attack at 59, my dad got cancer and recovered.

I've literally spent all my time hustling through life. Graduated valedictorian, finished B.S+ M.S. in 4 years, worked so many hours to get promoted several times. Most people would say "time to quit," but part of me wants to just hit cruise control and just enjoy the money for a bit. As long as I don't get fired/quit, I get compensated well.

Some of my perspective has changed.....I'm actually trying to get away from penny pinching...CRAZY. For example, my grandma died 4 years ago. I SHOULD have bought my grandparents (who were in Mexico) an IPHONE so I could facetime my grandma every single day. I miss her voice....I could have had her record videos with the Iphone. But they had flip phones only. I SHOULD have just spent the money to take a 3 hour flight every couple of months to see my grandma. But I didn't. And now I regret it. I should have had a bigger house instead of living in a small apartment, so I could have my grandma stay for weeks at a time comfortably. I was so focused on FI 5 years ago....that if I had just dropped $10K, I could have made more memories.  I corrected it - i bought my parents and grandpa iphones in 2017. Haven't regretted it. My mom (US) talks to my grandpa (Mexico) daily.

Some of the rhetoric is to invest as much money so you can have the time to do such things and get there as fast as possible. Believe me that's what we have/are working on. We have saved over 50% for a decade and we started at $0 and got no financial windfalls. Reality is..I'm not going to FI tomorrow. Not at the income level needed for expenses such as aging parents or even kids. So yes, I want us to enjoy it.

My perspective is changing. It's a bit of a rant but it's the feelings pestering.

Will the lifestyle inflation continue? That's the challenge! I am thinking that in about ten years, I will be giving my parents about $20K annual support. It might be less but if anything happens like my parents need a nurse or something; I want to be in a position to do it. My parents have worked hard/saved but as low income immigrants, it's been an uphill battle. We helped them buy a house (CASH) in the neighborhood they wanted to be in since we were kids. Granted, it was $130K. Then my dad did a bunch of work.

So maybe I'm here to get talked out of it...haha probably am. But constructively, it's all math anyways.

At least I need to know if we can still have $3M by 40 even if we buy a house or perhaps start spending more money to buy memories now? Anybody been thought about it this way???

Thanks for the discussion, as right now it's all in my head!

[Metalcat]

A lot of that sounds like being cheap, not frugal, which is something that we Mustachians tend to be VERY against.

We're not against spending, we're against mindless consumerism. But you have to be responsible for your own life and happiness.

Life is too short to waste it just trying to get rich. You will miss out on A LOT just focusing on that.

[daydreamer101]

There were some instances were I might have been too frugal. But when you are worried about making sure you have enough income to make your goals but, also, help your family, it's a fine line. We, also, had a different income. I didn't know our income would grow to this level now.

We were just making decisions, trying to make choices. We have been frugal Mustachians. I still have my first car, a 2007 compact car, that I bought in 2012.

I'm just trying to figure out the roadmap. It's so hard.....

[NorthernIkigai]

How much is the house in the city about your current life, and how much about a possible future life with kids? You say it would be a more beautiful neighbourhood, but is it actually somewhere you really want to live right now, or somewhere you see yourself living later on?

I'm just wondering whether it might make sense to at least hold off the plan to move until you are closer to that phase of your life (potential job changes, potential children, etc.), rather than making any big changes now. Unless you actively dislike where you are living now, that is. I sense that you are worried about prices rising even further in the meantime, but I don't think that's a good enough reason to make a rushed decision. I'm all for keeping up with the high savings and building the careers and seeing how you both feel about this in a year's time, in two years' time, and so on.

[daydreamer101]

How much is the house in the city about your current life, and how much about a possible future life with kids? You say it would be a more beautiful neighbourhood, but is it actually somewhere you really want to live right now, or somewhere you see yourself living later on?

I'm just wondering whether it might make sense to at least hold off the plan to move until you are closer to that phase of your life (potential job changes, potential children, etc.), rather than making any big changes now. Unless you actively dislike where you are living now, that is. I sense that you are worried about prices rising even further in the meantime, but I don't think that's a good enough reason to make a rushed decision. I'm all for keeping up with the high savings and building the careers and seeing how you both feel about this in a year's time, in two years' time, and so on.

I see myself living now and later on. I've always wanted to live in that location in the city. We are now getting to a point where financially we could do it.

Well, we are not going to move tomorrow....It's a jigsaw puzzle..

1) We have to sell the rental property - Our current tenants are friends. So we are waiting until they move out. Then, we will proceed.
2) We will need to sell our house - not sure when that will happen. UGH we won't want to move until we have the new house. Hate moving, so much work... We don't want to rent in between. Cannot do apartments again for the sake of our marriage. Sorry small spaces. We have lived in 500, 800 square foot apartments, and won't do it again.
3) We have to find the house and buy it.

This will probably take a couple of years. But if so, I want to start lining up the pieces.

[Watchmaker]

Some of my perspective has changed.....I'm actually trying to get away from penny pinching...CRAZY. For example, my grandma died 4 years ago. I SHOULD have bought my grandparents (who were in Mexico) an IPHONE so I could facetime my grandma every single day. I miss her voice....I could have had her record videos with the Iphone. But they had flip phones only. I SHOULD have just spent the money to take a 3 hour flight every couple of months to see my grandma. But I didn't. And now I regret it. I should have had a bigger house instead of living in a small apartment, so I could have my grandma stay for weeks at a time comfortably. I was so focused on FI 5 years ago....that if I had just dropped $10K, I could have made more memories.  I corrected it - i bought my parents and grandpa iphones in 2017. Haven't regretted it. My mom (US) talks to my grandpa (Mexico) daily.

I don't think this community would say you shouldn't buy your family smart phones so you can video chat with them. Now... some of us might have something to say about buying new iphones (if that's what you did) vs cheaper smart phones that can accomplish the same thing.

Regarding the house, it looks like you can likely afford it and still probably hit your goals. But don't let that hide the fact that you are still making a trade. You'll have the house in the nice neighborhood, but you will give something up (cash, freedom from work, flexibility, etc). As long as you've thought it through and you're happy with the trade, then go for it.

[Metalcat]

There were some instances were I might have been too frugal. But when you are worried about making sure you have enough income to make your goals but, also, help your family, it's a fine line. We, also, had a different income. I didn't know our income would grow to this level now.

We were just making decisions, trying to make choices. We have been frugal Mustachians. I still have my first car, a 2007 compact car, that I bought in 2012.

I'm just trying to figure out the roadmap. It's so hard.....

Try not to think of it as hard.

What you are faced with is having a TON of amazing options available to you.

Don't put so much pressure on yourself. In fact, maybe take some time to figure out where that internal pressure comes from, because it's really not necessary.

It sounds like you have every resource and tool you need to build a truly wonderful life. So just do that.
No need to make it all stressful. This is exciting, this is you choosing what you want your life to be, it should be fun. Intense, sure, but overall fun.

You're not choosing between cancer treatments here, you're deciding which path towards an even wealthier future you prefer.

[daydreamer101]

Some of my perspective has changed.....I'm actually trying to get away from penny pinching...CRAZY. For example, my grandma died 4 years ago. I SHOULD have bought my grandparents (who were in Mexico) an IPHONE so I could facetime my grandma every single day. I miss her voice....I could have had her record videos with the Iphone. But they had flip phones only. I SHOULD have just spent the money to take a 3 hour flight every couple of months to see my grandma. But I didn't. And now I regret it. I should have had a bigger house instead of living in a small apartment, so I could have my grandma stay for weeks at a time comfortably. I was so focused on FI 5 years ago....that if I had just dropped $10K, I could have made more memories.  I corrected it - i bought my parents and grandpa iphones in 2017. Haven't regretted it. My mom (US) talks to my grandpa (Mexico) daily.

I don't think this community would say you shouldn't buy your family smart phones so you can video chat with them. Now... some of us might have something to say about buying new iphones (if that's what you did) vs cheaper smart phones that can accomplish the same thing.

Regarding the house, it looks like you can likely afford it and still probably hit your goals. But don't let that hide the fact that you are still making a trade. You'll have the house in the nice neighborhood, but you will give something up (cash, freedom from work, flexibility, etc). As long as you've thought it through and you're happy with the trade, then go for it.

Actually I had already bought my family cheaper androids at that point. But Iphones just made it easier. Especially for people 50+ who are challenged technologically.

[daydreamer101]

There were some instances were I might have been too frugal. But when you are worried about making sure you have enough income to make your goals but, also, help your family, it's a fine line. We, also, had a different income. I didn't know our income would grow to this level now.

We were just making decisions, trying to make choices. We have been frugal Mustachians. I still have my first car, a 2007 compact car, that I bought in 2012.

I'm just trying to figure out the roadmap. It's so hard.....

Try not to think of it as hard.

What you are faced with is having a TON of amazing options available to you.

Don't put so much pressure on yourself. In fact, maybe take some time to figure out where that internal pressure comes from, because it's really not necessary.

It sounds like you have every resource and tool you need to build a truly wonderful life. So just do that.
No need to make it all stressful. This is exciting, this is you choosing what you want your life to be, it should be fun. Intense, sure, but overall fun.

You're not choosing between cancer treatments here, you're deciding which path towards an even wealthier future you prefer.

You are right. It's a ton of a good choices. I know what the internal pressure is. I grew up poor. Now I can have stuff, but I can't help thinking I might lose it all or also, how can I enjoy myself or is enough money....It's psychology.

I agree with you that it should be fun. And believe me I'm fine, having fun! no worries. Just  trying to talk to people who have other perspectives other than my own.

[Metalcat]

There were some instances were I might have been too frugal. But when you are worried about making sure you have enough income to make your goals but, also, help your family, it's a fine line. We, also, had a different income. I didn't know our income would grow to this level now.

We were just making decisions, trying to make choices. We have been frugal Mustachians. I still have my first car, a 2007 compact car, that I bought in 2012.

I'm just trying to figure out the roadmap. It's so hard.....

Try not to think of it as hard.

What you are faced with is having a TON of amazing options available to you.

Don't put so much pressure on yourself. In fact, maybe take some time to figure out where that internal pressure comes from, because it's really not necessary.

It sounds like you have every resource and tool you need to build a truly wonderful life. So just do that.
No need to make it all stressful. This is exciting, this is you choosing what you want your life to be, it should be fun. Intense, sure, but overall fun.

You're not choosing between cancer treatments here, you're deciding which path towards an even wealthier future you prefer.

You are right. It's a ton of a good choices. I know what the internal pressure is. I grew up poor. Now I can have stuff, but I can't help thinking I might lose it all or also, how can I enjoy myself or is enough money....It's psychology.

I agree with you that it should be fun. And believe me I'm fine, having fun! no worries. Just  trying to talk to people who have other perspectives other than my own.

Yeah, I grew up poor, worked my ass off to get a doctorate, and made a ton of money. But you don't need to hold onto patterns from your childhood.
You can learn to process your childhood experience and not let it make your present reality more stressful than it needs to be.

It sounds like you have a wonderful life, your priority should be to enjoy it.

[joe189man]

I think the new house will possibly add $25K-$30K in extra...It's a bigger jump...

The specific feedback I'm looking for is if buying a house will interfere with us getting to $3M at 40 years. $3M is the goal. We have $1.17M now just in investments, and we don't plan to dip into those investments. We will actually use our home equity after selling 2 houses (~$300K) and just get a larger mortgage.

with some excel math, you can cut the $64k down to $28k allowing $36k to be spent on housing, and assuming 7% interest still hit 3.2 million by 40. So yes you can achieve your goals and buy this bigger house

i think the bigger question is why, why have both of you keep working, why stay in the city, why wait to have kids, Why do you want $3 million, if you have answers to those questions great, if not think about it.

Your husband can cover your living expenses, you both could move anywhere and likely reduce your COL and increase your quality of life

if you both adjusted spending to only what matters you could both walk away from work now, forever. you have $1.2 million saved at 31 years old, let that sink in.

i get that you put in the time to earn the degrees and the prestige at your company but it really doesnt matter, not in the end. what matters is time.

[youngwildandfree]

I'm similar to you in career/life situations. It doesn't feel fun trying to make all these choices, it feels stressful. For me, trying to envision life and optimize our money for situations with and without children feels like trying to play two games of chess at the same time.

BUT...I'm really trying to challenge myself on letting go of a perfect plan. We might not have kids. We might have kids with disabilities. We might work until we are 60. We might retire at 40. We might start our own business. We might run a rental empire. It's ok not to know right now. It's also basically impossible for me to predict which things will make us happy long term. So I'm focusing on what makes me happy now. Turns out spending as much money as I want on whatever I want is still resulting in a 50% savings rate (only a couple months in here....). The trick is zeroing in on what really makes you happy.

[Metalcat]

I'm similar to you in career/life situations. It doesn't feel fun trying to make all these choices, it feels stressful. For me, trying to envision life and optimize our money for situations with and without children feels like trying to play two games of chess at the same time.

BUT...I'm really trying to challenge myself on letting go of a perfect plan. We might not have kids. We might have kids with disabilities. We might work until we are 60. We might retire at 40. We might start our own business. We might run a rental empire. It's ok not to know right now. It's also basically impossible for me to predict which things will make us happy long term. So I'm focusing on what makes me happy now. Turns out spending as much money as I want on whatever I want is still resulting in a 50% savings rate (only a couple months in here....). The trick is zeroing in on what really makes you happy.

Exactly.

NONE of my plans worked out the way I expected, and I'm remarkably happy.

[daydreamer101]

I think the new house will possibly add $25K-$30K in extra...It's a bigger jump...

The specific feedback I'm looking for is if buying a house will interfere with us getting to $3M at 40 years. $3M is the goal. We have $1.17M now just in investments, and we don't plan to dip into those investments. We will actually use our home equity after selling 2 houses (~$300K) and just get a larger mortgage.

with some excel math, you can cut the $64k down to $28k allowing $36k to be spent on housing, and assuming 7% interest still hit 3.2 million by 40. So yes you can achieve your goals and buy this bigger house

i think the bigger question is why, why have both of you keep working, why stay in the city, why wait to have kids, Why do you want $3 million, if you have answers to those questions great, if not think about it.

Your husband can cover your living expenses, you both could move anywhere and likely reduce your COL and increase your quality of life

if you both adjusted spending to only what matters you could both walk away from work now, forever. you have $1.2 million saved at 31 years old, let that sink in.

i get that you put in the time to earn the degrees and the prestige at your company but it really doesnt matter, not in the end. what matters is time.

1) I like the city. I have no interest in moving to rural life, which is what some people contemplate. 2) As far as kids, I am just not ready for motherhood. I like my non-kid personal life right now :) It's nice. 3) I don't really want to stop working. The one who wants to RE is my husband. I've always been the primary breadwinner. The reason I want to have $3M at 40 is to have a really good level of financial security as we go into a decade where we will both have aging parents and maybe kids. 4) We have talked about moving to low COL place. I actually have dual citizenship, and my husband can get his dual citizenship through his grandparents for another country. But at this moment we are just not contemplating that change. So many factors....aging parents? etc. We are both the oldest siblings in the family and thus, normally we are typically involved in supporting parents.

I feel like I've definitely looked at many different scenarios. Part of being in the FIRE community. You get to see different lives. I am choosing right now to continue working. I rather have more money to be able to make choices.

Thank you for letting me know I can drop investments from $64K to $28K and can still hit $3M by 40. Oh the house in the city is not actually super big. Our current house is 1800 sq feet. The city house would probably be in the 1800-3000 sq. ft range. There is just a premium on land to live in the city vs. 1 hour away in the suburbs.

I'm similar to you in career/life situations. It doesn't feel fun trying to make all these choices, it feels stressful. For me, trying to envision life and optimize our money for situations with and without children feels like trying to play two games of chess at the same time.

BUT...I'm really trying to challenge myself on letting go of a perfect plan. We might not have kids. We might have kids with disabilities. We might work until we are 60. We might retire at 40. We might start our own business. We might run a rental empire. It's ok not to know right now. It's also basically impossible for me to predict which things will make us happy long term. So I'm focusing on what makes me happy now. Turns out spending as much money as I want on whatever I want is still resulting in a 50% savings rate (only a couple months in here....). The trick is zeroing in on what really makes you happy.

I am, also, trying to challenge myself to think differently. Live more in the now instead of always thinking about the future.

[joe189man]

Thank you for letting me know I can drop investments from $64K to $28K and can still hit $3M by 40. Oh the house in the city is not actually super big. Our current house is 1800 sq feet. The city house would probably be in the 1800-3000 sq. ft range. There is just a premium on land to live in the city vs. 1 hour away in the suburbs.

Right on, whatever works for you i would recommend checking the yourself to be sure. Any online compound interest calculator should work or make a excel to check. Never trust an internet stranger :)

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

[getmoneyeatpizza]

You can upgrade the house AND stay the FI course. Whether or not the house and commute implications are a good idea/decision is up to you.

A few months ago I went under contract for a better house, got super anxious it would screw up my FIRE date, and we ended up canceling the contract. In retrospect I regret it and when I really did the math later it only pushed my FIRE date back a few months. I let the pressure you describe get to me when I shouldn't have.

You can make a spreadsheet and see the actual impact on your timeline. I don't think it will affect it much. How is the mortgage 28k over? Seems like it should be only 15k ish over your current mortgage.

One thing this brings an opportunity to do, is get your house equity invested in the market earlier. If your rental unit is not a good investment just sell it. How much equity do you have now?

Also, I don't think you need to sell your rental and your house first. Just buy the new house and sell yours.

Also sorry but if you want to have kids you should think hard about it and do it now. Once you decide it could be too late.

[getmoneyeatpizza]

Like joe said, do the math. At a 5% return your 1.2 million would reach 2 million is 10 years doing nothing. If you scale back to saving 90k a year vs the 125k you'd still reach 3 million in 10.

Also this doesn't even account for adding the equity into the market as soon as the sales are complete. subtract realtor fees and say you get 200k

assuming 160k for 20% on 800k or 80k for 10% you could dump up to 120k into the market for you and let that help along your stache. Assuming only 90k a year in savings that gives you a 3.3 million stache in ten years.

[daydreamer101]

Thanks for the replies.

I did check the investment calculator. It's actually good to know that just by doing nothing we will reach 2 million in 10 years. $90K is the annual investment required to reach 3 million in 10. Which I think is very doable.

It all depends on sales from both our houses. But I think after realtor fees, taxes on rental house, we should net out anywhere from $250K - $300K in cash due to our current equity position. Since we only need $160K for an $800K house, then I could dump the delta in the market.

I think the challenge now is getting over the feeling of buying a pretty expensive house relative to what we have lived in before. But we are paying for location (city living versus suburb living). There is a premium to city lots; about $100K - $200K depending on neighborhood. I don't even know if we would spend $800K, but with the market the way it has risen, we may have to.

We always have the option to just stay where we are, in our current house, and do nothing. My husband is more on this side. We have always discussed reaching our FI number (which I've determined to be $3M) and then really starting to splurge once we have that net worth.

But COVID and other life events, is making me antsy to start doing it now...

Life decisions...all good life decisions...it's just hard to escape the mentality of what if we don't have jobs tomorrow?

[Linea_Norway]

Buying an expensive house is not a final decision. If you change your mind later, you can allways sell it again later. Keep in mind that it costs more to live in a bigger house (taxes, warming/cooling, maintenance, etc).

If your husband wants to FIRE, I would let him do so. Child care would in that case not matter as a FIREd husband could take care of the child. You might like working now, but things could change in the future.

If you are 30, that might be a good age for getting pregnant. You might not have forever to make that decision. But it is also okay to choose not to have a child if you like your life without them. Maybe you can talk to your husband about that option?

[youngwildandfree]

If you are 30, that might be a good age for getting pregnant. You might not have forever to make that decision. But it is also okay to choose not to have a child if you like your life without them. Maybe you can talk to your husband about that option?

This is unhelpful. I'm sure they are aware of decline in human fertility, and they specifically asked for people not to go here.

[lutorm]

I think living in a nice, walkable place brings a lot of quality of life, but if the price is not only paying more but also a 1h commute (I assume that's one-way?) then it would be a hard pass for me. I mean, what's the point of paying to live in a nice place if you're not there to enjoy it? I think people have a tendency to undervalue time over physical goods. But only you can make that judgement.

[ethereality]

I've dealing with similar dilemmas, will likely also support aging immigrant parents, and we're a similar age. I recently read Die with Zero and found it to be helpful in reframing my old thought patterns. Maybe you'll find it interesting too!

[TheFrenchCat]

I think living in a nice, walkable place brings a lot of quality of life, but if the price is not only paying more but also a 1h commute (I assume that's one-way?) then it would be a hard pass for me. I mean, what's the point of paying to live in a nice place if you're not there to enjoy it? I think people have a tendency to undervalue time over physical goods. But only you can make that judgement.

Agreed.  My father-in-law has an hour+ commute and it's awful for him and his family.  Basically every work day is entirely focused on that.  His commute time+work time+decompression time is the whole day.  Plus, he has a risk factor for clots, so it's extra bad to be sitting still that long.  Contrast that with my husband who has a half an hour commute who gets home at 4pm and gets way more time with me and our daughter.  What kind of area is your work in?  Could moving near there be possible?  Or would that make your husband's commute longer?

Also, just wanted to mention that kids don't have to be expensive, especially with a parent home to support them, or only working part time.  I work part time from home so I can take care of our daughter, and it's been wonderful.  I anticipate some costs going up a bit as she gets older and more into clubs/sports/etc. but it really doesn't have to break your budget in most cases.  Our biggest expenses related to her have been saving for college and paying for education (pre-school and Catholic school). 

[Cassie]

You guys have done a great job of saving and not everyone wants to retire very young.  You certainly can afford the new house but since I hate driving the longer commute wouldn’t work for me.  I would think hard about that but some people don’t mind. My oldest son and his wife were on the fence about having kids and eventually decided not to. Now almost 50 they are very happy with their decision. I also think you are smart to recognize that you aren’t ready now if ever.  I also understand not wanting to move to a LCOL just to have reduced expenses. Living where you want can really add to quality of life.

[daydreamer101]

Thanks everyone for the discourse:

1. On kids - I did mention there was no point in asking about whether we wanted kids... But I don't mind touching on it briefly. While I understand, my most fertile years are about now, I am just not ready to have kids. While you may say, nobody is ever ready...well there's not ready and just not ready. Like no desire to be pregnant or with kids right now. There is a huge list of reasons that I have and since I am the female in the relationship and my body would be the one carrying it, I have a right to that list. Lots of couples now choose not to have kids, and I actually know quite a few high income, professional couples who chose not to have kids. It's ok. Life is more than  fine. :) It's not depressing.

2. Commute - I totally get everyone's comments on commute. Normally, I have a 34-45 minute commute to work even though  I live 10 miles away (street traffic, lights, etc.). The commute in the city will be 35 - 60 minutes away, 26 miles one way (highway miles). Yes, my commute will increase, but since we will be moving to a hybrid office schedule, I will only have to be in the office 3 days a week. I want to be close to things in the city :) So at this point, after much debate, I can handle the commute. Have I mentioned we live in a huge metroplex?

3. By the way, I have lived before 5 minutes away from the office (walking distance). All I do is replace the commute with more work....it's a character habit...


4. I don't want to move to a LCOL city....I have a life in the city. At this point I'm ok trading in some more years of work for a life. It may change in the future, but I'm trying to live more in the present.

[Zamboni]

I understand where you are coming from. If you enjoy city life, then living right in the city is much better.

Here's what I think you should do: shop slowly for two things right now:
1. A JOB in the city near the neighborhood you like.
2. The home in the city in the neighborhood you like.

Because commuting an hour each way truly does suck. Plus, it will be longer on high traffic days. You can reprogram yourself not to exchange the commuting time for work time at the office. Just schedule something regularly for right after work time is supposed to end, like an exercise class or cooking class or a cultural/community event or teaching an immigrant English lessons or just helping a neighbor or something. This worked really well for me: "Sorry, gotta go or my tennis opponent will be upset" or whatever. Would it be better to spend two hours per day in the car? Or one-two hours per day doing yoga or tutoring a lady in English? Your choice! Seriously, long commutes are terrible for the environment, terrible for your health, and dangerous relative to living closer to home.

Are there jobs in the city? Usually there are . . . I would probably target that first on the list, while daydream window shopping on Zillow for homes. You should really look at a lot lot lot of homes in that neighborhood before you buy anyway, to avoid buyer's remorse. You don't have to pull the trigger fast, because there will always be another house. Heck, sometimes you miss buying the one you "want", but then it's right back on the market again anyway, but now it is fixed up!

[Cassie]

If the housing market is hot like ours is looking without intending to buy would be frustrating. The OP may not want to change jobs if she likes hers. It’s tough to give up something good for the unknown.

[daydreamer101]

I understand where you are coming from. If you enjoy city life, then living right in the city is much better.

Here's what I think you should do: shop slowly for two things right now:
1. A JOB in the city near the neighborhood you like.
2. The home in the city in the neighborhood you like.

Because commuting an hour each way truly does suck. Plus, it will be longer on high traffic days. You can reprogram yourself not to exchange the commuting time for work time at the office. Just schedule something regularly for right after work time is supposed to end, like an exercise class or cooking class or a cultural/community event or teaching an immigrant English lessons or just helping a neighbor or something. This worked really well for me: "Sorry, gotta go or my tennis opponent will be upset" or whatever. Would it be better to spend two hours per day in the car? Or one-two hours per day doing yoga or tutoring a lady in English? Your choice! Seriously, long commutes are terrible for the environment, terrible for your health, and dangerous relative to living closer to home.

Are there jobs in the city? Usually there are . . . I would probably target that first on the list, while daydream window shopping on Zillow for homes. You should really look at a lot lot lot of homes in that neighborhood before you buy anyway, to avoid buyer's remorse. You don't have to pull the trigger fast, because there will always be another house. Heck, sometimes you miss buying the one you "want", but then it's right back on the market again anyway, but now it is fixed up!

I'm very used to scheduling after work activities after work in the office. Before COVID, I would do my workouts after work at the office gym, meet up for dinner with girlfriend, etc. I would the same the days in the office. I get long commutes are terrible, but then what about where you live? That's important too.

As far as looking for jobs in the city, that's totally an option for the future, but I'm not going to switch jobs just for a shorter commute. I have long term incentives with my company, so now it's a bit harder to switch jobs unless the right opportunity comes. My salary is what has gotten us the ability to be able to make the move.

We have been browsing houses (open houses, showings) for the past 18 months... It's harder to find houses in the city because the houses are 1) unique 2) neighborhood is important for us, and there are only 2 neighborhoods I would move for 3) mentally preparing ourselves for spending more money on housing.

The benefit of buying in the suburbs, is houses are similar, etc. The benefit of buying in the city is that the house is unique! It's not cookie cutter.

My husband and I go back and forth on wants, needs, money. We are definitely the people who think about the future. What if our parents need more help financially? If we move to a more expensive house, can we still help if necessary? Is this house big enough for parents if they have to move in? Is the lot big enough for a guest house in case parents need to move in?

Sometimes I think we are way too responsible. I don't think our siblings are having similar thoughts. Actually I know they are not.

So far, we are still looking for houses, but discussing everything above. We just saw a house with an amazing lot...but it's still priced high...we're thinking about it.

[daydreamer101]

Update on this thread.

Still no house purchase.

We have narrowed it down to 1 neighborhood in the city. Most of the house were built in the '30s or are getting torn down and replaced with new builds (super big and nice). I keep circling back to a specific architect style. Only about 30 houses in the neighborhood and in the $950K to $1M range, even less than 10. In 2018, the house would have been in the upper $600s.

So at this point it's wait for the house to pop up and buy the house.

Or just not buy a house and stay in our current house.

         - Based on market appreciation - we can net $200K from our current house
          - based on market appreciation - we can net $200K from our rental house (that was our first house). But tenant has expressed interest to rent until the end of 2023.

Ugh at what point is it acceptable to buy a $1M house. $2M net worth? $3M net worth? $5M?

[affordablehousing]

It's always acceptable to buy a $1m house if you want the house and decide you can afford it. I really don't like the idea there's some forum "scripture" about one way or another. I say go for it. We saw neighbors across the street live in decrepitude for decades because they wanted to save the money on a remodel. Then they sold their house to retire, and fixed it up REALLY NICELY, did very well in selling it, and retired to the burbs. That said, they spent 25 years wishing they had been able to enjoy their space more. Maybe they wouldn't have been able to retire yet had they remodeled earlier, but IDK. Sounds like you're going to win no matter what, so this seems a good time to get what you want.

[jsap819]

Update on this thread.

Still no house purchase.

We have narrowed it down to 1 neighborhood in the city. Most of the house were built in the '30s or are getting torn down and replaced with new builds (super big and nice). I keep circling back to a specific architect style. Only about 30 houses in the neighborhood and in the $950K to $1M range, even less than 10. In 2018, the house would have been in the upper $600s.

So at this point it's wait for the house to pop up and buy the house.

Or just not buy a house and stay in our current house.

         - Based on market appreciation - we can net $200K from our current house
          - based on market appreciation - we can net $200K from our rental house (that was our first house). But tenant has expressed interest to rent until the end of 2023.

Ugh at what point is it acceptable to buy a $1M house. $2M net worth? $3M net worth? $5M?

You don't need people in the forum to tell you what is acceptable or not. If I followed people's advice when we were in the process of buying a home back in 2015, then we technically couldn't afford the house we settled on as the value was 5x our yearly income with a net worth of only 200k at the time. We loved the neighborhood and wanted to raise a family in a good school district and generally safe environment. It worked out for us as the house appreciated nearly 50% since and we were still able to max all of our retirement space since our income projection was high. We were just disciplined in our investment plan and keeping discretionary expenses at bay. Today we are Lean FI and hopefully be able to pull the trigger in a few years if we stay disciplined.

So only you know the risks. If you're secure about your current job, then pull the trigger as long as you're willing to take the risk. Based on your numbers you can afford it. We did and it ended up paying off. Just make sure you have a plan or willing to adapt when it doesn't.

[daydreamer101]

Thanks for replying JSAP and the advice.

We have been conservative the past 10 years. Invested, bought less house. I'm proud of our progress, but, also, feel like we could have taken a couple more risks.

Part of that is me. So hard to peel back the onion on years of austerity (growing up poor). Also, I never want to be poor again. My husband has followed the lead.

Let's see...how it turns out.

[daydreamer101]

We ended up not upgrading the house. Still in our current house.

We did find and agree on our target neighborhood in the city. I, also, have my eye out on 10 houses (this neighborhood is very unique). But the house will be in the $1M-$1.25M range...The houses also don't come on the market very frequently. The homeowners hold on to these houses for a long time.

If we sell both houses - we could get ~$500K in equity and roll it over to my dream house and location. But I'm not secure enough to feel close to spending that much money yet.

So we just decided to stay for right now. Try to get in a better financial position. Thinking once we have $2.5M-$3M in investments, we can reevaluate. Should happen around 35-37.

Right now we are on a trajectory to get to $5M by the time we're 40 in stocks with our current savings rate. I don't want to put that at risk with my dream house.