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Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:26 AM   #1
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Changing the balance of quality of life and financial independence

We're about to go through a major change of our lifestyle and relative financial independence, and its been an interesting experience to change my point of view on this matter several times over the last 5 years since ERing.

For those not keeping up, five years ago I voluntarily took a years severance pay from my megacorp and my profits from a good diversified investment plan fed by both the tech stock craze of the late 90's and profits from california real estate.

Not long after that, I found I liked this "not working" stuff and decided to keep it up.

Well before I found this site, or ever heard of an "SWR", I decided to scuttle the high flying lifestyle I had become accustomed to, sell my mcmansion by the lake and move to a cheaper, albeit less nice area where real estate was half the cost. And 1/10th the distance to my girlfriends house!

The smaller, lower maintenance home with lower costs worked out for me as a single man. The increase in crime and the loss of a lot of quality of life benefits was an annoying trade-off, but it was workable. With a conservatively invested pool of dough I pretty much had it made for life. I became well accustomed to the LBYM strategy and thought my old way of life was really a huge caricature of who I really wanted to be.

Then...we got married, had a baby, and moved in together. My wife being dedicated to her career planned to keep working, provided health care and an income stream. I converted my ER time to fixing up her old house and we sold it for a nice profit.

I changed our whole financial strategy to a far riskier, high long term return one that factored in the great benefits of fixed health care costs, an income stream and zero debt. A bond and REIT heavy portfolio became a high equity portfolio with a 2 year cash buffer.

My strategy went from hanging in there indefinitely to shooting for full lifetime financial independence. I defined that as having enough money that no reasonable situation could derail us financially. Education, illness, early retirement for my wife (who still doesnt want to!), long term care, etc.

After the big run up the last few years, we crept closer to the objective.

Some things started to gnaw on me. In no particular order: one was that things in the equities market had done too well for two long and I was having more and more trouble finding assets I wanted to buy at prices that seemed reasonable. The second was that the small house that served me well as a single man was a little tight for a married couple with a baby, three dogs and three cats. The third was concern about my sons education and my family's well being in what was becoming an increasingly crime ridden area that wasnt improving. Lastly, real estate prices in my old mcmansion neighborhood were plunging while holding relatively steady in our current neighborhood.

After a lot of discussion, spreadsheet action and serious consideration, we decided to trade our destination goal of bulletproof financial independence for a quality of life improvement for our son and ourselves.

We're moving back to mcmansionland.

A smaller one on a smaller property - but twice what we have now,virtually no violent crime, far better schools, tons of excellent recreation, retail and restaurants. Improvement in experiential affluence vs a degrading of financial independence.

There are some plausible financial benefits. We've taken some money off the equity table - in fact I've reduced our equity exposure to 25% - and put it into a relatively valuable home in a great area that should continue to appreciate in value. Going back to the "home as a bond" diatribe discussion this is a tappable asset that we can sell in 20 years when Gabe is off on his own and its time for us to cut back a little as we cruise into our 60's. We've got a lot less on the equity table, so our sleep at night factor improves. Should equities go through a little correction, which I am anticipating (dirty market timer!!!) I can step back in with some of our cash and feel good about what i'm buying. The public schools where we're moving to are some of the best in the state/country, so we dont necessarily have to pay for private schools for Gabe.

That having been said, its a quarter million out of our portfolio to get into the place although we'll own it outright) and an extra 8-10k a year in increased utilities, maintenance, and other expenses. A chunk of the initial outlay is for all new furniture to replace our 10-15 year old stuff. The house is also a much higher maintenance property than the one we're living in now and needs a bit of updating before we move in and a bunch as we go along.

At the end of the whole thing, we decided its best for our son, and that we should enjoy our lives more now while we're young and worry about being 100% financially bulletproof a little less.

Which also means that I'll be fixing up our new place, moving us into it, and then preparing our old home for sale. And then catching up with a lot of old friends we havent seen much of in the last four years.

So in a short while I may sink back into the forums earth foundation for a time.

Quite an adventure, this is...

Many thanks to the helpful and supportive people who shared their thoughts with me via PM's on this move. When everyone was totally behind it, it helped me get past the teeth grinding and ceiling staring until 2am stuff. My "team of experts" are the best around, anywhere.

Best comment out of all of it was "Too many people on this board are collecting rainwater and sifting broken glass out of the expired peanut butter. Forget that."
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:38 AM   #2
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Re: Changing the balance of quality of life and financial independence

Hmmm - looks like you've done your homework with your usual thoroughness - good luck and don't burn yourself out - that remodeling stuff can get addictive if you get on a roll.

heh heh heh - catch back once in a while.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:41 AM   #3
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Re: Changing the balance of quality of life and financial independence

Sounds like a smart move. Ten years from now you will be thinking how wise you were, rather than the "if only I had followed my instincts". Only thing I will ask is have you considered renting your current house? I was in a similar situation 25 years ago and bought the home we wanted and still rent out the house we had. However, being a landlord is not for everybody because there are headaches. Rental aspect was a question, not a suggestion.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:43 AM   #4
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Re: Changing the balance of quality of life and financial independence

Life happens while you are making plans.

FWIW, I applaud your decision. Sounds like you are trying to balance FI while meeting family needs, and staying the course on this new found freedom.

When you have kids, seems that much of the housing decision is quality of life, school district, and school district (twice is intentional). If you research and pick well, you can avoide the private school cost, and knowing your kids can play outside, move from one home to the next and be safe both outside and in neighbors' homes is priceless peace of mind and IMHO, essential for good healthy child development (physical and emotional).

As for financial future, I strongly suspect that you will be fine. Especially by applying your new and improved attitude about $$ and how it can be used to bring value to things that are important to you. You do what you need to do and enjoy the ride along the way.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:46 AM   #5
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Re: Changing the balance of quality of life and financial independence

Sounds like a reasonable plan to me, especially when the difference in neighborhoods' quality is taken into account. Agreed too on the emphasis of today's versus tomorrow's.

If I remember correctly, you're in Sacramento, right?
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 10:51 AM   #6
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Re: Changing the balance of quality of life and financial independence

You planned, you were/are young, and things (including priorities) change. Life.

Forgive me if I am reading too much between the lines, but I sense a bit of self-disappointment that you didn't quite stay the course you initially set out for yourself; the reshuffling of priorities away from minimalism, returning to a touch of the MacMiniMansion, butterflies about the market revealing that even an apparently comfortable and smartly diversified nest egg shouldn't be considered bullet proof, etc.

I think your introspection shows maturity, a flexibility in maintaining your new family priorities and an ability to make sensible changes when called for.Some might see it as buckling, but I see it as agility. It's OK.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:02 AM   #7
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Re: Changing the balance of quality of life and financial independence

Quote:
Originally Posted by unclemick2
that remodeling stuff can get addictive if you get on a roll.
Good. I need to lose ten pounds.

Quote:
Originally Posted by poboy
Only thing I will ask is have you considered renting your current house?
I can sell it for $320-330 and take a tax free capital gain of about 80k, or rent it for about $1100-1200. Cash flow just isnt there. Plus if I dont want to live near these people, I definitely dont want to have them as tenants!

Quote:
Originally Posted by Sandy
When you have kids, seems that much of the housing decision is quality of life, school district, and school district (twice is intentional).
Indeed. First time I've ever gone house hunting where the first two questions weren't about commuting and how much I liked the property but what school district was it in and was there room enough in the yard for our puppies.

These schools are CA API scored in the mid to upper 800's and some cross into the 900's and on the 1-10 standardization scale are 9's and 10's. The school near our current house is one of the best in the region, however its API scores are in the 650 range and its a 6. As one of my "team of experts" pointed out, there are good and bad teachers and principals in every school...and scores only tell you one part of the picture. But I'll take the gain.

Quote:
Originally Posted by Sam
If I remember correctly, you're in Sacramento, right?
About an hour north of Excramento now, moving to about a half hour east of it into the base of the Sierra Nevada foothills.

Only downside is my wifes commute goes from 15-20 minutes to about an hour and ten minutes...but its only two days a week and most of those are weekend days, so its a low traffic highway-all-the-way cruise in her new Lexus. Finally gonna get some use of the dang thing. And she'll eventually get a job at one of the brazillion hospitals down by there for about a 20% raise in pay, since that area pays better. Maybe 6-12 months of commuting tops.

Quote:
Originally Posted by Rich_in_Tampa
I think your introspection shows maturity, a flexibility in maintaining your new family priorities and an ability to make sensible changes when called for.Some might see it as buckling, but I see it as agility. It's OK.
All major change should bring about a lot of introspection and general gnashing of teeth. I dont accept change without good evidence to change, although a fair number of people here frequently accuse suggest that I'm resistant to new ideas or change. I'm resistant to change for lousy or crafted reasons.

Its less a disappointment and more making a huge effort to make sure I really understand the priorities and rationalizations. I spent a good week peeling back my own feelings to make sure I wasnt doing this for ME and creating the causalities to drive myself to the decision I really wanted.

This WAS a good lifestyle for the situation when it was chosen. Its simply not anymore and life is dang, dang short.

Well I gotta go...I'm doing my own "home inspection" today on the place prior to making the offer this afternoon. My realtor gets a little nervous when I show up with a ladder and a bag of tools to a home viewing

We've got a good situation here. The home is priced about 25k below market for what it is, probably isnt moving because its in a slightly less desirable neighborhood in town (which is enormously relative...its like saying its a bad beach house in malibu ; and the people who owned it didnt update a thing, so it needs paint, carpet, and all new kitchen appliances...shows bad but we look at the bones of a house, not the makeup. Owner has been relocated out of state on his own dime and has been trying to sell for two months with no offers. We have cash and can close in 12 days from acceptance.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:15 AM   #8
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Re: Changing the balance of quality of life and financial independence

Quote:
Originally Posted by Cute Fuzzy Bunny

We're moving back to mcmansionland.
Life is a series of adventures, grasshopper. Enjoy.

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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:17 AM   #9
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Re: Changing the balance of quality of life and financial independence

Sounds like you covered all the bases and came to the best decision for you AND your family. Life is not only short but it also includes lots of twists and turns along the way, enjoy this turn to a safer/nicer place.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:19 AM   #10
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Re: Changing the balance of quality of life and financial independence

Congratulations CFB!
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:24 AM   #11
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Re: Changing the balance of quality of life and financial independence

Yup, you've got to enjoy life as well! 8)

I know how stuff like this can happen, cause I'm older than you!

- Don't be surprised when you're closing in on age 60 and start thinking about an Immediate annuity for your old age!
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 11:28 AM   #12
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Re: Changing the balance of quality of life and financial independence

CFB:

Hmmm,

now versus later
now versus later...

I have thought much about the now-versus-later dilemma. I think and I think and I just can't seem to part with the stash and the security that it provides. You have done it and I commend you.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 12:45 PM   #13
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Re: Changing the balance of quality of life and financial independence

CFB.. best of luck! That's the kind of house to snag, all right -- the one that looks a little more tired than the neighbors' -- 'cause so many people will waltz right by if it ain't been "staged".

Small house I could live with. Crime and iffy schools are pretty non-negotiable if you have the wherewithal to flee. Speaking of cash, are you gonna pay outright or get a mortgage? [Not to drag out that whole general issue, 'cause, as you said, your needs have changed.. just curious what your personal decision is on that and why...].

I'm actually fairly upset that our rainwater collection is not working!!
But I eat only the finest imported peanut butter.. (that would be Smucker's Natural)
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 12:47 PM   #14
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Re: Changing the balance of quality of life and financial independence

Quote:
Originally Posted by Cute Fuzzy Bunny
Best comment out of all of it was "Too many people on this board are collecting rainwater and sifting broken glass out of the expired peanut butter. Forget that."
I can afford not to do that as I have a working wife with health care benefits!
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 01:07 PM   #15
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Re: Changing the balance of quality of life and financial independence

As I would expect, you have obviously considered your options carefully, CFB. From "knowing" you on the board, I would be really surprised if you didn't (despite your sense of humor!).

So, congratulations on the move!!! I'm absolutely certain that it will work out beautifully for you and your family.

ETA: Oh, by the way - - you don't have to completely LEAVE the board just because you'll be busier for a while. A lot of people manage to participate with fewer than 10,000 posts, you know.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 01:12 PM   #16
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Re: Changing the balance of quality of life and financial independence

First you make a decision, then you make it right. So, carpe diem and good luck.

So You reduced your equity exposure to 25%? You must really believe the mcmansion will appreciate, and if it does, this is a clear win-win choice. Oh, how's California real estate taxes. Could they be the snake in the woodpile?
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Old 02-27-2007, 01:18 PM   #17
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Re: Changing the balance of quality of life and financial independence

we've heard all about those mcmansions built on slippery slopes out in california. next thing you know you'll be trading in the rav4 for a porsche cayenne or, yikes, a convertible. it's this forum. there's too much lbym's around here. someone was bound to snap.
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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 01:49 PM   #18
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Re: Changing the balance of quality of life and financial independence

Great decision for your family! You are giving your son the very best start in life. We moved to a nicer, bigger home in a better area and school district when our oldest was in kindergarten. School quality is so important for kids and it also will help your resale value later.

You've done very well in your life, now you have given yourself permission to enjoy your wealth! I was the same way...often concerned that the hard-earned pile was going to get smaller. I've gotten over that and my life is much happier. Spending money and enjoying life to the fullest, within reason, makes life worth living!





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Re: Changing the balance of quality of life and financial independence
Old 02-27-2007, 02:21 PM   #19
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Re: Changing the balance of quality of life and financial independence

Good luck, CFB.

Sounds like you've thought things through and that this is overall the right decision for you and your family. I hope you keep posting even if only once in a while.
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Old 02-27-2007, 02:25 PM   #20
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Re: Changing the balance of quality of life and financial independence

Good luck CFB. Nothing wrong with doing the right thing for your family and for yourself. Sometimes folks on this board get too tangled up in their underwear about strick LBYM and forget to live. As long as you stay FI (having a working wife with health insurance will sure help) you should be fine. Even if the new place eats into your nest egg with all the upgrades and repairs; you will still come out ahead.

We decided to stay in the McMansion for a few more years for many of the same reasons you chose to go back. Security, space, privacy, convience and equity growth. Our equity is pretty safe in our house and the sale of the cabin will eliminate all other debt except the mortgage on the house.

Come back when you can. Most of us will still be hanging around.
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