The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: NewtoMMM on May 02, 2014, 04:21:33 PM
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Hi all,
I am new to the MMM but have always been a relatively frugal person, and as an engineer I understand numbers and math well enough to understand the potential.
I am recently married and we are living with my wife's parents renting a room for 500$/mo to give us the opportunity to save towards a house in the near future. Our take home income (after 401k contributions) is about 5k$/mo of which we spend 2k$/mo on all expenses, 2.6k$/mo to house savings (currently at 20k$), 400$/mo to travel savings (We made an agreement to include saving for regular traveling as we want to tour the world so to speak). We have no debts, car, or school loans at this time. We are mid to late twenties with no plans for children, total pretax pay is 111k$/yr (60k$/yr take home - post current 401k contributions) and we are living in southern california, with a dog and cat.
We are planning to move to the greater seattle area as I am hoping to attend the University of Washington (UW) to pursue a PhD, and we would like to buy a small home for the time that we will live there. During this time, our income will be dramatically less, assuming my wife brings home comparable pay to her current job, total pretax pay will likely be 52-56k$/yr. We are planning to find a home in the 180-220k range that will have a small yard to support the dog. We will have the VA home loan as an option as I am a veteran as well, which should help with acquiring the home with a low down.
I very much like the idea of the MMM early retirement strategy, though I understand I will likely slow my progress while pursuing my PhD, but that is something I am not willing to compromise. We feel constrained in our options for housing due to the dog, as it is hard to find a bargain home with a yard in our price range (we have looked extensively in so cal... one of the driving reasons I am looking towards UW for graduate school is lower comparative COL, plus friends and family in the area). Is it reasonable to consider purchasing a home under these conditions? Prior to moving in with the in-laws we rented an apartment with the dog and the no-yard route has been ruled a non-option after that experience.
Also, while my wife generally agrees with & supports my saving/financial strategies, I am not sure I would get her support to living this lifestyle. Any tips on getting your spouse to buy-in on this concept? My wife is not bad at managing her spending, but she does like travel (me too) & having things (been pushing for new car for a year, though she has a 2007 Yaris that is in great shape - my car is a 1997 in good shape as well) and I know she already feels like I push to save too much already....
Anyhow, the house decision is a big one and not somewhere I want to make a significant mistake on as it can have huge long term consequences for our financial freedom/ stability. I know I have a lot to learn on managing the finances to give us freedom in the future, and welcome advice and comments.
Thank you for taking the time to read my ramblings... help and guidance is much appreciated!
- Matt
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Here are some things to read about getting your wife on board:
http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/
http://www.mrmoneymustache.com/2012/03/27/selling-the-dream-of-financial-independence-part-2/
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Thanks for the links!
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Are you familiar with the NYT rent-vs-buy calculator? In your shoes, I would look *very* closely at the numbers before buying a house. There is a lot that can change in the course of a graduate career and unless you're finding amazing deals on houses in Seattle, I'd wager you'll end up way ahead renting unless you plan to live there very long term.
You can punch in numbers/assumptions here: http://www.nytimes.com/interactive/business/buy-rent-calculator.html
Of course that is only a first step - buying a house is a more complex decision than just running some numbers through a calculator. But it will at least give you a sense of what price range makes sense and what you can expect over various periods of time with various assumptions about rent/price increases and opportunity costs.
-W
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Are pets allowed in grad student family housing? Graduate housing is usually at a discount for the location - you would be close to the UW, which is always nice as the campus is beautiful and centrally located.
I would not buy in Seattle at this time, especially as a student. Prices for homes there rose quite a bit over the last year or two, and as far as I know they have not gone down. I would try to find grad housing (if that works with the dog) for the first year, then during that time, make an assessment of how much you like the area and whether you would/could settle there after graduation. There is no hurry, and any money for a down payment can be put towards your stash.
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In the end, up to you. Unless you plan on being in Wa a long time I would say no to buying in the short term. The link is well worth a thoughtful read.
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
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Any ideas other than maxing the 401k to shelter income for them? No kids, no house, they probably are not itemizing.
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Thank you all for the helpful responses, I will review and read in depth! My gut tells me that renting is likely the optimal option... but the wife's heart is set on owning, so we'll see.
I am definitely going to be pushing to max out the 401k this year (though no chance of that while in grad school..)
Thanks again!
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http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/
Buying a house is *almost* certainly a bad move financially, it sounds like. Convincing your wife is going to be the hard part.
-W
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Why are you getting your PhD?
If it's to teach, keep in mind that you will very likely relocate to get the first teaching job. If it's for future earnings, consider:
1. How much money will I earn over the next 15 years without the PhD, with savings compounded.
2. Vastly reduced income for 5-6 years, followed by increased income for 9 years.
Make sure number 2 is bigger by enough margin to make it worth studying your ass off.