Author Topic: Buying home in NE - balance MMM principles with high cost of living in area  (Read 6283 times)

mamamoney

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        Hello everyone! I've been reading, but this is my first post - thanks in advance for your thoughtful responses.

        We are looking to buy our first home, in the expensive northeast. We are looking at balancing future earnings in this area, with a home we can stay in, and then sell to downsize/retire in a lower tax/cost of living area.  In our early 30s, a newborn at home, and both of us work, and as a family, we are fortunate to earn an average of $300k/year.

        We have savings for retirement ($300k), emergency fund ($200k) and down payment ($200k); $50k for furnishings/updates/misc home costs/beginning maintenance account and $200k in additional investable assets that will be re-invested after home purchase (currently in stocks, but may elect to pay down mortgage earlier - thats another conversation.)  We have $20k in debt (car & student loans each at around 1%.)

        We aren't looking to liquidate our savings but are looking at making it a large enough home that we can host my out of state family/friends for gatherings; but not too large - think 2500 sq ft. Ideally it will be within walking distance to train so we can continue with one car. 

        for the area we are looking to live in, that means we think we can cap our home price at $900k, with a goal of $800k. This would include any necessary renovations in the first 3 years...after which we plan to do more maintenance than improvements. It will also keep our monthly housing costs around $4500 (PITI) which is what they currently are renting. And, moving to the burbs will cut down on discretionary spending on dining out, entertainment, etc. which will help future savings should remain strong as well.

        Are we thinking about this ok?  Any recommendations to balance an area of the country with high cost of living with MMM principles? are we crazy?

        *****ADDING CASE STUDY*****

CategoryMonthly
Comments
Annual
Salary/Wages$25,000$300,000
Pretax Health Ins.$500need to confirm this$6,000
Healthcare Flex Savings Acct. (FSA)$167$2,000
Pretax Commuter costs$400$4,800
FICA base salary/wages$23,933$287,200
401(k) / 403(b) / TSP / etc.$3,000At maximum$36,000
Employer Match$1I may have match at new employer$12
Income subject to IRS tax$20,932$251,188
Life/LTD Insurance$1need to check$12
Paycheck income before tax$20,931$251,176
Federal Total Inc.$20,932$251,188
Federal tax$4,4122015 rates, MFJ, stand. ded., 1 exempt.$52,943
State/City tax$733Guess, using .75% * Fed. Taxable$8,797
Soc. Sec.$1,225Assumes 2 earners paying$14,694
Medicare$375$4,499
Total income taxes$6,744$80,933
Add Health care reimb.$167$2,000
Income before other expenses  $14,354$172,243
Monthly Expenses:
Rent$4,500includes parking$54,000
Home/Rent Insurance$21$250
Fitness/Spa$225$2,700
Baby$300$3,600
Cable/Internet$175$2,100
Clothing/Shoes$175$2,100
Dining (Pizza, Restaurant, etc.)$875expect this to drop in burbs; clearly it can$10,500
Electricity$300$3,600
Fuel / Tolls$100$1,200
Groceries$500$6,000
Ferry - above pre-tax$150$1,800
Household Goods$200$2,400
Housekeeper$130$1,560
Insurance - Renter's/Life$50$600
Lunches$200$2,400
Medical (Doctor, Hospital, etc.)$100$1,200
Miscellaneous$600cash transactions; saving receipts to dig further$7,200
Phone (cell)$170$2,040
Movies/Music/Books$100$1,200
Travel/Vacation$1,000family in mid-west; vacations$12,000
Wine$250$3,000
Non-mortgage total$10,121$121,450
Loans:
Student Loan$120$1,440
Auto$590$7,080
Total Expense$10,831$129,970
Total to invest$3,523$42,273
Summary:
"Gross" income$25,000$300,000
Income taxes$6,744$80,933
After-tax income$18,256$219,067
IRA+401k/403b/TSP/457 (Savers' credit)$3,001$36,012
Living expenses$11,022$132,262
Non-mortgage loans$710$8,520
After-tax investable$3,523$42,273
Time to FIRE?:
Time to FIRE13.625years
Safe Withdrawal Rate4.00%percent
Real return on tax-deferred investments6.00%percent
Real, after tax, return on taxable investments5.10%percent
Expected retirement total tax rate17.00%
Current Savings
Taxable$600,000
Tax-deferred (e.g. trad. IRA/401k)$300,000
Projected Savings at Retirement
Taxable$1,985,173
Tax-deferred (e.g. trad. IRA/401k)$1,391,318
Total projected stash$3,376,491
Projected Expenses in Retirement
Non-loan, non-work expenses$121,450
Income taxes$24,875
Total$146,325
Total loan principal due$22,000
Stash needed for retirement @4.0% SWR$3,680,133
Need $303,641 more.


Filing Status21=S, 2=MFJ
# of earners2
Total Income$251,188
Std. Deduct.$12,600
Act. Deduct.$12,600
# Exempt.1
Exemption$4,000
AGI$251,188
Taxable$234,588
Tax$52,943
Tax after n-r credit$52,943
# Children <171
Child Tax Cred.$0
EIC$0
Net Tax$52,943
Monthly$4,412
Mtg. Int. (guess)$0
State tax$8,7973.75%
Prop tax$0
Charity$2,000
Item. Deduct.$10,797
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« Last Edit: June 18, 2015, 05:31:08 AM by mamamoney »

Bob W

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        Hello everyone! I've been reading, but this is my first post - thanks in advance for your thoughtful responses.

        We are looking to buy our first home, in the expensive northeast. We are looking at balancing future earnings in this area, with a home we can stay in, and then sell to downsize/retire in a lower tax/cost of living area.  In our early 30s, a newborn at home, and both of us work, and as a family, we are fortunate to earn an average of $300k/year.

        We have savings for retirement ($300k), emergency fund ($200k) and down payment ($200k); $50k for furnishings/updates/misc home costs/beginning maintenance account and $200k in additional investable assets that will be re-invested after home purchase (currently in stocks, but may elect to pay down mortgage earlier - thats another conversation.)  We have $20k in debt (car & student loans each at around 1%.)

        We aren't looking to liquidate our savings but are looking at making it a large enough home that we can host my out of state family/friends for gatherings; but not too large - think 2500 sq ft. Ideally it will be within walking distance to train so we can continue with one car. 

        for the area we are looking to live in, that means we think we can cap our home price at $900k, with a goal of $800k. This would include any necessary renovations in the first 3 years...after which we plan to do more maintenance than improvements. It will also keep our monthly housing costs around $4500 (PITI) which is what they currently are renting. And, moving to the burbs will cut down on discretionary spending on dining out, entertainment, etc. which will help future savings should remain strong as well.

        Are we thinking about this ok?  Any recommendations to balance an area of the country with high cost of living with MMM principles? are we crazy?
I'm pretty sure you're trolling or on the wrong site right?

200K Emergency Fund that is hilarious!   

So  if you have 200K E fund and 200K house fund you simply buy a 400K place.  Easy peasy.  Or throw you other 200K at it. Or you could live big and throw the all the money at it.     

 [/list][/list][/list]

mamamoney

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not trolling but definitely not an expert MMM (yet!)

what would you do with the emergency fund if we don't put it toward a house and keep a mortgage? invest it all?

CanuckExpat

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I think what he meant was that most people would consider $200k a good chunk of a retirement fund, not an emergency fund. Depending on your spending levels, that could be anywhere from 4 to 10 years of living expenses.. it's a large buffer.
If it turns out that is actually six months living expenses, we might have something else to talk about.

I know your question was specifically about your housing situation, but I think more details are needed.
It might help to read this thread and follow up with those details too?

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

Bob W

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Wow,  so you are a real person?   Yes definetly do the case study!   We can help in a big way.   At your income and savings you could be fat retired in 3 years if you want,  or at least financial lay independent.      Please put the house on pause for a few months to discuss and learn.   Your life is about to blossom if you share your case study.   

waltworks

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Keep renting, work one or two more years (at most) and then move somewhere much cheaper and more awesome.

-W

mamamoney

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Ah - understand - yes, it is an emergency fund of many months of living expenses - we have both been laid off in the last 5 years so wanted to have that as something to point to for security.

I'm currently taking an extended maternity leave (the silver lining of getting laid off at 7 months pregnant) which is also how I started reading a bit here...it has already made me realize time is much more valuable than luxury coffee...and while I will go back in a few weeks,  I am much less inclined to want to haaave to work.

I'll do the 'case study' - stay tuned.  I'm sure there are areas we can cut back, and this would greatly help me illustrate the rationale to my husband...he didn't grow up quite as frugally as I did, but is interested in not working!

Thanks!
« Last Edit: June 18, 2015, 04:39:54 AM by mamamoney »

mamamoney

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CASE STUDY

CategoryMonthly
Comments
Annual
Salary/Wages$25,000$300,000
Pretax Health Ins.$500need to confirm this$6,000
Healthcare Flex Savings Acct. (FSA)$167$2,000
Pretax Commuter costs$400$4,800
FICA base salary/wages$23,933$287,200
401(k) / 403(b) / TSP / etc.$3,000At maximum$36,000
Employer Match$1I may have match at new employer$12
Income subject to IRS tax$20,932$251,188
Life/LTD Insurance$1need to check$12
Paycheck income before tax$20,931$251,176
Federal Total Inc.$20,932$251,188
Federal tax$4,4122015 rates, MFJ, stand. ded., 1 exempt.$52,943
State/City tax$733Guess, using .75% * Fed. Taxable$8,797
Soc. Sec.$1,225Assumes 2 earners paying$14,694
Medicare$375$4,499
Total income taxes$6,744$80,933
Add Health care reimb.$167$2,000
Income before other expenses  $14,354$172,243
Monthly Expenses:
Rent$4,500includes parking$54,000
Home/Rent Insurance$21$250
Fitness/Spa$225$2,700
Baby$300$3,600
Cable/Internet$175$2,100
Clothing/Shoes$175$2,100
Dining (Pizza, Restaurant, etc.)$875expect this to drop in burbs; clearly it can$10,500
Electricity$300$3,600
Fuel / Tolls$100$1,200
Groceries$500$6,000
Ferry - above pre-tax$150$1,800
Household Goods$200$2,400
Housekeeper$130$1,560
Insurance - Renter's/Life$50$600
Lunches$200$2,400
Medical (Doctor, Hospital, etc.)$100$1,200
Miscellaneous$600cash transactions; saving receipts to dig further$7,200
Phone (cell)$170$2,040
Movies/Music/Books$100$1,200
Travel/Vacation$1,000family in mid-west; vacations$12,000
Wine$250$3,000
Non-mortgage total$10,121$121,450
Loans:
Student Loan$120$1,440
Auto$590$7,080
Total Expense$10,831$129,970
Total to invest$3,523$42,273
Summary:
"Gross" income$25,000$300,000
Income taxes$6,744$80,933
After-tax income$18,256$219,067
IRA+401k/403b/TSP/457 (Savers' credit)$3,001$36,012
Living expenses$11,022$132,262
Non-mortgage loans$710$8,520
After-tax investable$3,523$42,273
Time to FIRE?:
Time to FIRE13.625years
Safe Withdrawal Rate4.00%percent
Real return on tax-deferred investments6.00%percent
Real, after tax, return on taxable investments5.10%percent
Expected retirement total tax rate17.00%
Current Savings
Taxable$600,000
Tax-deferred (e.g. trad. IRA/401k)$300,000
Projected Savings at Retirement
Taxable$1,985,173
Tax-deferred (e.g. trad. IRA/401k)$1,391,318
Total projected stash$3,376,491
Projected Expenses in Retirement
Non-loan, non-work expenses$121,450
Income taxes$24,875
Total$146,325
Total loan principal due$22,000
Stash needed for retirement @4.0% SWR$3,680,133
Need $303,641 more.


Filing Status21=S, 2=MFJ
# of earners2
Total Income$251,188
Std. Deduct.$12,600
Act. Deduct.$12,600
# Exempt.1
Exemption$4,000
AGI$251,188
Taxable$234,588
Tax$52,943
Tax after n-r credit$52,943
# Children <171
Child Tax Cred.$0
EIC$0
Net Tax$52,943
Monthly$4,412
Mtg. Int. (guess)$0
State tax$8,7973.75%
Prop tax$0
Charity$2,000
Item. Deduct.$10,797

starbuck

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Umm, don't take this the wrong way, but you buy A LOT of food for 2 adults + baby. ($875 restaurants + $500 groceries + $200 lunches + $250 wine = $1825 each month!) This could be a very very easy place to target. Even cutting this in half would still blow many forum members grocery budgets out of the water. Those cable and phone bills are easy targets too. We went from $140 to $30 a month when we switched to Ting, and didn't even notice a difference.

Your income puts you in a very strong position to be 'fat retired' as Bob W says, in a very short period of time if you can get your spouse fully on board.

ShoulderThingThatGoesUp

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1. With your savings, you're very close to financially independent with reasonable expenditures in most of the country. Including where I live, an hour and a half from New York City. (Some people work 4/10s in New York City living out here, taking the bus in. Not for me but I'm sure their savings rate could be awesome.)
2. Either way, your expenditures could be far lower. You spend $250/month on wine. That's intense, but what really catches my eye is $300/month on electricity. I don't know how this is even possible. I spend $50/month on electricity.
3. You have two line items for renter's insurance.
4. Somehow beyond your $875/month in food, you also have $100/month in "lunches" and $500/month in groceries? You spend more on food than our total monthly expenses aside from property tax.
5. How are you spending $300/month on your baby? What does this include?

You have a great income. With a few changes that you probably won't notice after six months you can be essentially free from all financial concerns.

waltworks

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Holy money-burning disaster!

There, I got it out of the way. Now for some useful advice:
-Why does your baby cost $300/mo? What actual items are you buying? Realistically that expense should be zero. You can easily get clothes/etc from friends or at garage sales for minimal $.
-Cut the cable and watch you some Netflix, or stop watching the idiot box altogether. Should be able to drop this by at least $100 if you shop around.
-Go get a used jogging stroller for one months worth of gym/spa membership and cancel it. All you need is your own body to stay in shape.
-$175 a month of clothing and shoes? That is more than I spend in a year. Does your spouse need lots of formal clothing for work or something?
-Eating out is just crazy over the top. Learn to cook.
-Electricity is insane. We live in a 4200 sq foot house and spend $30-50/mo. Figure out how you are doing this. Electric heating?
-What household goods do you mean? Are you buying $200 worth of bum wipe and paper towels every month or something?
-Lunches should be included in dining out, yes? Have spouse bring lunch from home.
-Cell phone is crazy high. Lots of options here, go read IP Daley's superguide.
-Movies/music/books - stream these, or get them from the library.
-$250 if you are smart and know your wine should come out to a bottle a night (or more if you buy in bulk/find a boxed wine you like). Is that what you're doing or are you blowing money on expensive wine?

I'm not going to touch your vacation, housekeeping, or crazy $600/mo "miscellaneous" category, which are all also pretty much indefensible, but I think you get the idea - you guys are blowing through money just about as fast as you conceivably could. Saving/investing $3.5k is honestly pathetic - that's what many similar families here save on 1/4 of your gross salary.

In many places in the US (nice places, not Detroit or rural Montana or something) you would already be FI with a $900k stash. If your spouse loves their job and you are psyched to go back to work... great. If not, and you want to spend more time with your kid(s) and enjoy those next 10-13 years a lot more - start thinking about spending completely differently.

Good luck!

-W

ShoulderThingThatGoesUp

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What makes the $300/month even crazier is that they must live in New York, so it's not like their place could possibly be huge. My finished attic has electric resistance heat (the rest of the house has gas-fired steam radiators) and my highest electric bill this winter, when the electric water heater was failing (replaced it with gas), was $99. That was 673 kWh - my electricity is expensive.

waltworks

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I got the impression that it's a standalone house, and if it's all electric heat (plus AC?), and poorly insulated, I think $300/mo is possible.

Otherwise, yeah, no idea how you'd do that. Leave the fridge open all month with the toaster running inside it?

OP, you should target (as an easy to reach target) saving $5-6k/mo while you think about what you want from life.

-W

mamamoney

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Thanks...and yes, I'm blushing with stupidity/embarassment! I grew up on a farm, with good examples of frugal/content living from my parents/grandparents vs. the always striving/working 'adults' here in NYC - this feedback from you with that foundation is exactly what I need to hear to get our house in order...and get hubby on board.

We weren't tracking spending til early this year, so while we are late to the game, I was relieved it wasn't worse, frankly.  Now I have YNAB and you MMM'ers and I think we'll figure it out. 

A few answers:
- Baby...not sure, diapers, a few toys...maybe some mis-allocated Amazon orders. I'll dig in.
- Food...budget will be paid attention to and cut. Hadn't really thought about it as $2k/mo - thank you Starbuk for pointing that out. Sometimes I gloss over basic addition.
- Wine...Some of the wine was for parties, other was higher priced, and we have a stockpile/fridge..can be limited for sure.
- Electricity...it is insane. We live in a rental apartment building with electric heat, stove, and big windows. Very non-energy efficient but with a newborn at home there wasn't much we could do in the winter. It actually was as high as $600/mo, the $300 is an annual average.
- Commute...ShoulderThingThatGoesUp - you make a great point. I would love to live elsewhere but the commute would be killer, and we aren't sure that we could get jobs elsewhere (industries are focused here; would both need major career changes) so I'm thinking adopting MMM tenets is a better route for us as we may be silly spenders but we actually aren't interested in labels/etc.
- Clothing...he needs dress clothes, I needed different sizes during/post pregnancy. Should be lower again.

And thank you WaltWorks for pointing out that the savings is pretty pathetic, and for the good feedback on other categories/target savings.  I think I have some shopping for cell phones / cutting of bills to do!

waltworks

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I'll keep picking on you about the electricity - what did you set the thermostat to? If you are sharing walls/floor/ceiling with other apartments, I have a hard time imagining needing that much heat even with awful windows. Bundle up the baby and leave the thermostat at 58 at night/65 during the day or something like that. Babies aren't so fragile that they need tropical temperatures.

Constructively, you might look into clear plastic window coverings/insulation. It's temporary and can easily be removed so your landlord can't get pissed, and you can dramatically increase the efficiency of the apartment for a relatively small outlay. You can get the stuff at any hardware store, or online.

I agree that you might have to change careers if you move - to not working, or doing something you enjoy for minimal pay! If that sounds good, start thinking about it...

-W

mamamoney

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Yeah WaltWorks, it is terrible!  We probably had them too high - they are on 68 at night and 72 during day - but each room has it's own thing, and pretty sure they eat energy turning off/on. We do only have 3 rooms, but one is 2 walls of windows. Should've done plastic, I grew up with that during the winter, but didn't think about it.

What do you think about us buying a house? Not a crazy one, but one we can live in, do a little work on, and sell in a few years to relocate/downsize money tied up in a house.

With this feedback, it seems we can do that, cut our spending, increase saving and work for a few more years before relocating.  I like what I do but I love having the freedom to be home with our son right now, and can only imagine how good that would feel to be a permanent situation.  I could start an Etsy store for fun, sew some stuff, start a little woodworking or gardening or daily hikes...lots of good reasons to get serious about this.  It will take a little educating/convincing the hubby so I need to get as many ducks in a row as possible first.

waltworks

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Unless you want to stay where you are long term, buying a house would be a terrible move.

Go run the NYT buy vs rent calculator here if you are curious: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

If your spouse loves his job, you are fine to keep doing exactly what you are doing indefinitely. My guess is that he doesn't love it *that* much that he'd pick it over living elsewhere and going on hikes/starting a woodworking hobby business/whatever. But if that is not his mindset, you'll have a bit of convincing to do. Lots of good advice on that on the forum, poke around and you'll find plenty of threads on SO-convincing.

There is of course the middle ground of just staying where you are and cutting back on day to day expenses. I'm guessing you could get your FIRE time down to 6 or 7 years that way if you wanted to. So lots of decisions to make. Your spouse probably has never thought about the *possibility* of doing anything but continuing to work indefinitely.

-W

ShoulderThingThatGoesUp

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If you love NYC and won't live anywhere else, only then consider buying. Otherwise you could retire within a decade to places much less expensive, and the capital you've built up will go incredibly far.

RelaxedGal

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We aren't looking to liquidate our savings but are looking at making it a large enough home that we can host my out of state family/friends for gatherings; but not too large - think 2500 sq ft. Ideally it will be within walking distance to train so we can continue with one car. 

Think long and hard about how often you'll be hosting get togethers. Will they be in the winter, all around a big table (e.g. Thanksgiving, Christmas) where you actually need that much space at one time?  We've had 25 people over for a barbecue in our 1500 sq ft house, some ate inside around the table, some around the patio table, some ate in a later "shift" because they were watching the kids play on the swing set.  I don't know how much outdoor space you'll get in NYC/NJ, I'm 45 minutes outside Boston and here in the suburbs lawns are common.

Does your 2500 sq ft include a guest room for those out of town guests?  How often will they actually stay with you?  And are you sure they'll want to stay with you, and a baby crying at 3am?  My husband's family is happier in a hotel when they visit (I think they're relieved that the guest room went away when the baby was born).  They appreciate some privacy, and the nearest hotel is just under a mile away.

starbuck

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What do you think about us buying a house? Not a crazy one, but one we can live in, do a little work on, and sell in a few years to relocate/downsize money tied up in a house.

No, I would not buy right now. There are a lot of transaction costs that only make sense if you're staying there long term (at minimum, 5 years.) Also, it's a lot of goddamn work fixing up a place. Satisfying work sure, but work nonetheless. I'd suggest writing out your 5-10 year game plan, and go from there. If FIRE is really what your family wants, you'll also need to figure out if your plan involves relocating to a low cost area (personally, ours does not.) Us MMMers looooove our excel spreadsheets.

I think you mentioned upthread upsizing to a 2500 sq ft living space? With only a three person household, that's A LOT of space. And that space is gonna cost you, especially in the urban Northeast. So make sure it's something you really value (and need) and understand the opportunity costs associated with it. I certainly understand the emotional pull of being able to customize your own living space, but that will come at a steep premium ($800k houses?!?) for your situation.

mamamoney

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I'll look for the SO threads...I think he thinks retirement early is unattainable unless you have $10million dollars...I've started sharing some info but am sure I can learn something from others who have been successful!

What is it about buying a house now that would be a terrible move? Wouldn't it help as a another way of saving? (Not that I expect it to appreciate for us to retire off the house sale, but more as we can sell it, get cash out and re-invest/purchase a smaller home in the future.  We would plan to stay at least 5 (and I don't know that we can get our act together, decide where to move, and pull the trigger to retire before 5 years anyway!?) 

Starbuck - understand transaction costs, good point about the game plan needing an update with this new learning I'm adding/changing.

RelaxedGal - yes, they would stay, but you're right outdoor space can make less inside work well.  I may be thinking more about the entertaining as my family was just here for our son's baptism and it was a significant cost to them; I'd love to make it easier for them to visit. 

ShoulderThingThatGoesUp - we love NYC but would definitely live somewhere else.

The calculator is great WaltWorks...we had used it to decide to buy.  It shows that we would have to find a place to rent for half of what we pay now, or stay for only 1-2 years, for renting to be better.

What am I missing??

You are all amazing. Thank you for helping me see things differently - this would be a big change but one I think we can do!!

Lis

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In defense of the electricity bill, it's not too surprising for this area (Westchester county, right above the city). My parents are attempting to sell my grandmother's vacant condo (oh, legal woes), and the only electricity they're using is a lamp on a timer for a few hours a day (so it looks like it isn't vacant). Electricity for that costs ~$130. You have your delivery charges, and your tax on delivery, and the meter reading charges, and tax on that, and all this other bs. My electricity bill for my ~700 sq foot apartment was over $50 with only 1 kwh used the whole month.

Not saying you can't cut back, because you certainly can :) Unfortunately, it also comes with the high cost of living-ness.

If you don't mind me asking, where exactly are you looking to buy? Westchester and the surrounding counties are cheaper (well, CAN be cheaper). If you're looking for any suburb suggestions or have any questions about Westchester, feel free to pm me!

CanuckExpat

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People are going to give you a lot of advice that involves moving, that is not surprising, and not a bad thing to consider, but in your case I wouldn't think it's a given. You guys make a very good income, sounds like it's not portable (finance I assume?), and you enjoy the living in area. With that income level, you would be fine where you are and still able to retire very early in a very expensive place. Congratulation... of course, that's all contingent on getting your spending in control. If you decide you do want to move, that's also a good option, but make sure you make the decision for the right reasons.

A couple blog posts that might be handy on the topic:
Reader Study: Getting Rich in Manhattan… on $65k/year
Get Rich With: Moving to a Better Place

As a data point, some quick googling tells me that the median household income in NYC is ~$50,000. Most people in NYC live a pretty good life I assume. You make much more than the average New Yorker, if you just trim your spending to match theirs, or less (hell even more), you will be putting away a large surplus each month.

It's simple really: make more than average, spend less than average.. you are set.

Elderwood17

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Maybe I lived in the Midwest too long....... I thought you were buying a house in Nebraska!

trobertson79

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I own a 2200 sq ft house here in Boston.  We live with 9 people in this house (housemates + our children + children of housemates).  We still have space for the Grandparents to come visit.  We have barbequeues where 10 people might show up.  It's really unnecessary for you to have 2500 sq ft for a family of 3.  If you got a 700 sq ft 2BR you could host family in the living room (or kick the kid out of their room to the living room to give family a room for the weekend). 

Remember that an empty room isn't doing anybody any good.  So if you have an empty room in an expensive place like NYC sitting around you should be thinking in the back of your head "I'm pissing money down the drain" every second it's empty.

mamamoney

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Ha Elderwood - there was a time I would've thought the same as I grew up in the midwest, but alas, we are buying in the northeast!

Thanks Lis - we're looking in NJ as in-laws are close by to help with kiddo, specifically trying to find a pocket in Bergen county. A couple towns have lower taxes so are leaning toward those.

CanukExpat - thanks, good to hear that if we can figure out the math, we don't haaave to move. I think we will at some point, but it is all about the right reasons, and we don't have those ready to point to moving yet. Appreciate the links, they were helpful reading!

trobertson79 - yes, we could, and we lived in a 450 sq ft apt when we were first married and are currently in a 1000 sq ft one and have hosted family & friends in both. We'll see where we net out.

Anyone have any direction on renting vs. buying? I've been searching / trying to find POVs on here and haven't found much additional.

waltworks

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I think there are too many subjective aspects to the buy/rent decision for you guys for most of us here to make a recommendation. If the NYT calculator is giving you a thumbs-up to buy and you're pretty sure you want to be in the area for a while, then it comes down to what you personally want to do with your future.
-You have some out of control spending but lots of money coming in.
-You have a young child. Priorities often change as kids start growing up.
-You have family far away but it sounds like also family close by.

This is a recipe for... spending some time thinking about what you want in your family's future. IMO buying a house is putting the cart before the horse. Once you know what you want in the next 5/10 years, then you can make a better decision. It might be worth trying some improved frugality on everyday expenses (cutting FIRE date to <10 years) and to see if you want to stay in NYC. It also might be worth going on some extended vacations/trips to places you think you might want to live in the future to see what life is like in a lower COL area (check out Santa Fe NM - a personal favorite and lots of outdoors/culture/fun at a very reasonable price compared to NYC).

Basically, you're in a great position. And you are doing the right thing studying the issue and questioning how you're living your life. Best of luck, keep us in the loop!

-W

trobertson79

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If you would buy or rent a place of basically the same size, and if you plan to stay put for a long time, you'll come out ahead buying generally.  But what happens is people decide to buy the biggest monstrosity they can find under the lie that "it's an investment" when they would have been more practical with their needs while renting.  So maybe decide to buy a place no bigger than the place you currently rent?

CanuckExpat

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I think the Bogleheads wiki summarizes the main take-away of the rent vs buy dilemma succinctly:
Quote
There is no definitive answer for owning vs. renting a home. There can be a financial answer as to whether it is cheaper to buy or rent. However, other considerations such as emotional, environmental, and flexibility can sometimes outweigh decisions that may not be financially justified.

Though I think they over-state the simplicity of coming to a definite answer even in financial terms.
The various calculators are handy, but they still rely on you making reasonable assumptions.

Unless your crystal ball is clearer than mine, this can be hard, especially in markets where you might just as easily have 10%/year appreciation, or another massive price correction in a matter of years.

So again: other considerations such as emotional, environmental, and flexibility can sometimes outweigh decisions that may not be financially justified :)

IMLEGEND

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North Jersey is a great place to live to have the accessibility and the advantages of NYC without the NYC price tag. As someone who just recently purchased a home there on 1/3 your house hold salary it is definitely possibly.

I don't know what towns you are specifically looking in, but if maybe if you change the town while still looking in Bergen County and maybe reducing the size a bit you can get something for much less then $900k. I am not going to say anything about your current spending as it seems everyone else has already done that, but realistically you can very simply boost your savings by buying a smaller house in a slightly cheaper town. If you bought a house for $500k after you put down $200-250k you will have a mortgage of $2000 - 2500 and instantly increasing your monthly saving.

Just my $0.02