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Thoughts on downsizing home to reach FI earlier

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  • StarTrekDoc
    replied
    Windshield time is real and I hate it.  Anything over 20minutes is a waste IMHO.

    So is living in a home (age, size, school) and community where you're happy and fits your desires.   It's all those to balance with your job choice - hours/location -- to make that precious work/life balance.

    The spreadsheet is instrumental for the commodization of opportunity cost of time to help.  Remember though is doesn't translate easily to $$$.  More importantly, is convenience and location of time with family and after work activities

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  • SPlum
    replied
    We have been thankful for websites and forums such as this to help solidify and encourage us in what we value while going through this life in medicine.

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  • SPlum
    replied
    Physician on Fire, it is exactly what you mentioned regarding the time in the car which initiated the thoughts of moving. Initially, it was questioning if we were optimizing our time and quality of life… Then it led to the financial implications of a potential move.

    We are not residents. We are a bit over a decade out of training and have had such a paradigm shift from when we were residents. We started off our careers in medicine ready to work, work, work but got burned by that with bad practice partnership experiences. Over the past eight years we have completely shifted our view of medicine in order to Attempt a balance with a life where we can raise our children while both be involved in patients lives and the practice of medicine. We don't need the big house, or fancy cars… We really want a Life where we can truly invested in our family. We are completely fortunate we have careers which allow us to invest in other peoples lives, as well, but it is not what we live for. It would be worth the effort of moving if it could simplify logistics and allow us to be more present in our downtime .

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  • ENT Doc
    replied
    Is he a resident?

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  • adventure
    replied
    So, in deference to END Doc's analysis, and Johanna's reminder not to be too emotional, I'll echo part of the advice commonly given to residents.

    Do you have time to deal with selling, house hunting, buying, all the realtor/finance implications, moving, remodeling, contractors, painting, etc? While it's clear the extra commute time has a cost, all of the above does too. If you might stay put for 30 years, the commute time will likely total more than the time spent on "the move". Residents often simply don't have the time, so consider what else you may plan on, or need to accomplish in the next X months.

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  • adventure
    replied


    See attached file.
    Click to expand...


    I like posting of data. Nice.

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  • Zaphod
    replied





    The area is closer to the office and schools by 10 minutes, so that would cut down on driving significantly, as there are no buses for school transportation. 
    Click to expand…


    This is huge, as @ENT Doc pointed out. You’ll save 20 minutes on every round trip. If you or your spouse brings the kids to school in the morning, picks them up in the afternoon and one of you commutes to work, you’ll save an hour of driving every day between the two of you. That’s a lot of time, gasoline, and wear and tear on two vehicles.
    Click to expand...


    And wasted life. Time in car doing errands=wasted time you never get back.

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  • PhysicianOnFIRE
    replied




    The area is closer to the office and schools by 10 minutes, so that would cut down on driving significantly, as there are no buses for school transportation.
    Click to expand...


    This is huge, as @ENT Doc pointed out. You'll save 20 minutes on every round trip. If you or your spouse brings the kids to school in the morning, pick them up in the afternoon and one of you commutes to work, you'll save an hour of driving every day between the two of you. That's a lot of time, gasoline, and wear and tear on two vehicles.

    Leave a comment:


  • ENT Doc
    replied





    Curious to hear your all’s thoughts. 
    Click to expand…


    That is a pretty awesome spreadsheet. Did you just now create it?
    Click to expand...


    Took about 45 min.  Was an interesting question.  Curious to see how the sell decision stands up to other assumptions/changes.  Just thought it was interesting that both the net worth and the FI goal was improved by making the switch.  Probably because you're not tying so much investment up in something that gets about the rate of return of inflation and instead investing in stocks/bonds getting 6%.  The commute issue was bigger than I expected.  Dropping the $100/hr opportunity cost (not unreasonable since it affords more time with family which is invaluable) may change things, as will the mortgage interest deduction if added.  Anyhow, hope it helps.

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  • jfoxcpacfp
    replied


    Curious to hear your all’s thoughts.
    Click to expand...


    That is a pretty awesome spreadsheet. Did you just now create it?

    Leave a comment:


  • SPlum
    replied
    ENTdoc, that is AMAZING to see. Thank you! That is massive food for thought...

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  • ENT Doc
    replied




    Thank you, WCI for changing the way we approach our money and our lives. We bought a lovely home, but over the past few years our mentality towards FI has changed and we want to be more aggressive in reaching FI.  We are now considering downsizing in order to reach FI earlier, but would be interested in thoughts regarding doing so.

    We bought our house 4 years ago. The mortgage is currently $640k at 4.5% 30 years.  We have no debt other than the mortgage.  The mortgage is less than 2x our salary and our monthly payments with escrow are 20% of our net monthly income. We had two bad partnership experiences (ugh) which cost us financially. Now we are in a new position, where we are trying to “catch up” and focus on saving as much as possible. We are not looking to retire early, as we have longevity potential in our careers.  We just want to hit financial independence sooner.

    We like our home- it was a custom build (not by us) so the house is solidly built and relatively new.  It is not in need of renovation or any real repairs. We do not like home repairs and it is a relaxing place to come home to. We bought the home after a foreclosure so we could sell it for a profit which we could roll into a new home to keep a new mortgage low. We are considering if it is worth it to sell the home , and likely walk away with over 100K after realtor expenses, to put it towards a smaller mortgage. The area we would look to buy would be in the same district, but in an area where the property values are stronger and will hold value more than where we currently are. The downside is that any home we would look to buy would need a degree of renovation (think mid-60s ranchers). Our previous home was a money pit and we do not want to repeat that experience.  The area is closer to the office and schools by 10 minutes, so that would cut down on driving significantly, as there are no buses for school transportation.  We would want to keep the new mortgage under $450k and put it on a 15 year mortgage. It would feel good to be saving more. An older home may be stressful in the repairs and renovations needed.

    We like the idea of spending less on housing and saving the difference, as well as having a smaller mortgage in the long run. But moving into an older home means that some of the potential financial savings would be consumed by home repairs and renovations.

    Perhaps the wisest option is to stay put and just focus on our savings in other areas.

    We are curious of any thoughts or inputs.

    Thanks!

     

     
    Click to expand...


    See attached file.

    I think the optimal decision, based on the assumptions made in the model I did, is to sell and get the 15 year mortgage.  Of course, this may change based on the assumptions made, of which there were many.  The big assumptions I made were that you had 0% down on the new home, aren't using any additional cash, seller pays closing costs, and that you plowed your entire $100k into remodeling the new home (finished in 1 year at which time it adds 60% of the invested value to the home).  You can play with the numbers highlighted in green to see how things change based on new assumptions.  I also didn't fiddle around with the mortgage interest deduction (assumed this is a non-factor) because I don't know your situation.  But you'll see that under these sets of assumptions your net worth actually increases by $1.5M 26 years from now, with a break-even for net worth at around 3 years, if you get the 15 year mortgage home.  You absolutely reach FI faster by selling and getting the new home, with a reduction of fixed costs of $3,400 in 15 years.

    Curious to hear your all's thoughts.

    Leave a comment:


  • SPlum
    replied
    Thank you, everyone, as I really appreciate and value all of the thoughts and insights!

    I think that the biggest issue is that we have a different mindset now compared to when we bought the home, as I don't think that I would buy our home today.  If it were a car payment, I would dump the car...it  is just not as easy to dump a house.  :? That being said, it is good to hear the perspectives and remember that there is a significant benefit to having a peaceful retreat to come home to, and not a fixer upper.  If we decide to move, it would need to be a move to better accommodate  our lifestyle, not in an effort to reach FI earlier. And I need to remember to not beat myself up for making a choice that was not a bad one, just not what I would choose today. I also have to catch myself from getting too intense (which can sometimes happen in reading about FI) about how much to cut back, remembering that we are in a good position with saving and the future plan if we continue the course. As mentioned, the turtle wins the race.

    We are currently living on around 70% of our take home and we are maxing out our pretax options (401K 401K IRA IRA SEP). We have no other debt, which is a relief. With our extra income, we are considering a combination of investing in taxable accounts as well as paying down the house, and then for the longrun, we should be set.

     

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  • Fullhouse11
    replied
    The numbers almost always favor staying put because of the transaction costs.

    It helped me when I stopped considering our house as an asset, it's more like a student or business loan.  It's something that we will always have (or put it's equity in another home) but it's not something that we draw upon for income (unless we are lucky enough to have Airbnb property like the homeowner above). I still count it on my net worth number, but not my FI number.

    I would focus on investments first, then paying down the mortgage second.  A good year is when you can put money in your 401k, backdoor Roth, 529s, taxable investment account and pay down principal on your house.

    To be FI, living on a lower % of your income is the goal.  So if your income is going toward investments and paying down the house, then in 2025 (maybe) when your house is paid off and your investments are full, you will feel FI because you are used to living on 50-70% of your take home.  Cut costs somewhere else.  Automobiles is my first choice.

    Leave a comment:


  • ENT Doc
    replied
    There is a lot to consider here, and I would never make a conclusion based on what you have said.  So far for the move decision we have:

    Pros:
    1. Lower monthly payment (mostly due to taxes) and overall payment
    2. Faster achievement of FI by 11 years (4 years into 30 year and will change to 15 year)
    3. Same school district
    4. Closer for taking kids to school and work
    5. Some repair costs will increase the value of the home (not completely wasted)
    6. New home holds value better

    Cons:
    1. Repair/fix-up costs
    2. Needing to make up for #1 by either paying lower down payment, increasing mortgage, plowing the $100k into it
    3. Needing to move/moving costs
    4. Possibly lower tax benefit (may be negated by #1 in the Pro list)
    5. Impact of repairs on psyche

    So I don't think this is a clear decision either way.  I would do the math on the above and see if the potential benefits (particularly the ability to reach FI earlier which is the whole idea here) outweighs the downsides (both monetarily and emotionally).  Personal decision.  But do the math.

    Leave a comment:

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