I have always been good with numbers and I don’t really care for bad financial surprises, so I have always tried to have a handle on whatever bad money news might come down the road by forecasting out our budgets. The following is an actual (but edited for pseudo-anonymity purposes) excerpt from an email that I sent to my wife right before we changed our budget / lifestyle –
Current Mortgage Payment is $945
Ideally looking to move Fall 2019
Preschool for Kid #3 – $640
After School Care for Kid #2 – $280
Kid #1 – No After School Care
Fall 2019 Total = $920
We currently pay $1640 per month ($680 for the younger kids and $280 for Kid #1)
$720 difference in daycare costs between Spring 2015 and Fall 2019
$400 from payments we had been contributing to our emergency fund (which should be funded by now)
Not factoring in salary adjustments, that should put us at $2065 for maximum mortgage payment…
At first glance, this seems like nothing more than astute financial planning – I was finding money for the mortgage payment for the house that we felt that we needed. However upon further review, I was willing to increase my mortgage payment by more than double without thinking about why or if this was even necessary. My other calculations (not included because they were very convoluted) deemed that we could get a house in the $285-300K range with that payment, which would have put us in three times as much debt as we were currently in.
To this day, I maintain that we needed to move from the house that we lived in at the time. It was a large house, didn’t have a whole lot of maintenance issues, and the school district was very good. In fact it was in a township that – as a high school kid, going to city public schools – where I thought all of the “rich kids” lived. It had a semi private deck & patio, a small yard, off street parking and tons of built in cabinets.
It was close to the city, my family, and equidistant to both of our workplaces. It was very familiar to me especially, as my mother’s best friend’s family had lived there when I was little, and I played there often. Also, in the years immediately preceding our purchase of the house, I spent far too many nights – of my misspent 20s – partying there with friends – so there was definitely a good level of emotional attachment to this house for me.
On the downside, it was located on a very busy street connecting two small suburbs – we never really let our kids off the property because most cars would zoom by at 45 mph. The front door was a 20 step climb from street level, which was OK for us long legged adults, but a strain for the little ones, especially in winter.
The neighbors (the X factor in any personal real estate transaction IMHO) were not horrible but they left a lot to be desired. Maybe we never “really clicked” with them, but they seemed to have their own priorities and late night drinking and domestic altercations were among the top. Last of all, the house was old, and no while no huge maintenance costs had reared their head in the 6.5 years that we owned it, it was only a matter of time.
To pick up on the story where we left it in the last post, a few weeks after we found out about the whole financial independence movement, we decided on a whim to go to some open houses that were in a much more palatable price range (under $200,000). One house in particular checked a lot of boxes for us – four bedrooms, a large yard, a great school district, it was a little further out from town but actually closer to both of our offices.
It was well under our new budget, and actually the same price that we planned on listing our current house at. It needed a lot of work – as it turns out, much more work than we, or anyone for that matter, was willing to take on. But at the time, we were enchanted, and the listing agent put us in contact with another real estate agent at her office and we hit the ground running.
A few days later, I got home from work and my wife had some game-changing news for me – we were expecting our fourth child!
This certainly had an effect on the math that we were using for forecasting out any financial independence goals. First and foremost, if we both continued to work – this would be one more child that we would need to be paying for childcare for over the next 5-6 years. After a few stressful days of epic spreadsheeting, we got a better handle on how the future would work out for us. We were still dead set on moving, and we decided to optimize the rest of our budget once the dust cleared after the move.
Our current mortgage was really reasonable and only being around $80,000 in debt was very appealing, but our current house / neighborhood just was not working for us anymore. From an outside perspective, the most fiscally responsible thing to do would have been to stay in our house and optimize as best we could, but this was one of those times that happiness needed to trump frugality.