2015maybetheyear
Dryer sheet aficionado
- Joined
- Feb 4, 2015
- Messages
- 25
We live in Southern CA so housing is generally expensive. I'm 42, DW is 36, and we have 3 kids under 4. As I mentioned in my introduction, we are on the verge of ER this year. I wish we could downsize or move out of CA but with our young family we probably won't be able to do that for awhile. Besides, both sides of our family live in Southern CA, we've never lived anywhere else, and most of our friends live here as well.
As you can imagine our home equity as a % of net worth at approximately 20% is probably higher than ideal and probably higher than most people on this board (I've read through some of the prior surveys).
We have scrimped and saved to get to the point where we can ER but given the young family we're trying to get our SWR down as low as possible. In my original introduction I got a lot of good perspective on how hard it is to forecast expenses for young families and how imperfect SWR is as a result. If I try to take the blended average of the next 15-20 years...we're probably right around 3% (obviously home equity is not included in portfolio value for SWR purposes) which includes some discretionary expenses that can be cut (travel, etc).
Housing expenses are about 20% of our budget. We don't have a mortgage so for those familiar with CA probably realize we unfortunately are not a long time owner benefiting from very low Prop 13 taxes. The budget does include direct expenses (property taxes, HOA, home owners insurance + prorata share of umbrella insurance, regular maintenance, etc) and then a contingency for repairs, surprises, etc.
So...
1. I've been thinking hard about the trade-off of downsizing our house (which is admittedly very big at about 4k sqft) which would help lower our housing expenses and free up home equity to increase our portfolio. Thus increasing our SWR. This would obviously be somewhat disruptive...moving with 3 young children...potentially to a new cheaper neighborhood (which if we are going to do, we should do know before the kids start school?) or a significantly smaller house (maybe 2500 sqft) to make a big enough difference. 4k is obviously bigger than we need now but we were anticipating what it would be like with 3 teenagers and we convinced ourselves that it would be better to have a bigger home at the time. Maybe if 10 years into retirement portfolio has performed well and we have kept expenses in line we can upsize again...
2. On the other hand, I know that in 18 years DW and I can downsize housing significantly more than today to a condo or very small house...and also benefit from lower expenses of being empty nesters...who knows maybe one or more of our children may even gravitate somewhere outside expensive Southern CA? At that point even if we have spent a little more than desirable...perhaps somewhere between 3% and 3.5% for 20 years we can then probably drop spending, free up home equity significantly.
DW is probably more in favor of staying put but the conservative FIRE part of me is very tempted to further secure our future by getting SWR to 2.75% or below. In the end she will probably go along with whatever I think is best for our family. I'm obviously grateful to be in position to make this decision but really am struggling with this one and would be grateful for any advice or perspective on any of the above thoughts, information, etc.
As you can imagine our home equity as a % of net worth at approximately 20% is probably higher than ideal and probably higher than most people on this board (I've read through some of the prior surveys).
We have scrimped and saved to get to the point where we can ER but given the young family we're trying to get our SWR down as low as possible. In my original introduction I got a lot of good perspective on how hard it is to forecast expenses for young families and how imperfect SWR is as a result. If I try to take the blended average of the next 15-20 years...we're probably right around 3% (obviously home equity is not included in portfolio value for SWR purposes) which includes some discretionary expenses that can be cut (travel, etc).
Housing expenses are about 20% of our budget. We don't have a mortgage so for those familiar with CA probably realize we unfortunately are not a long time owner benefiting from very low Prop 13 taxes. The budget does include direct expenses (property taxes, HOA, home owners insurance + prorata share of umbrella insurance, regular maintenance, etc) and then a contingency for repairs, surprises, etc.
So...
1. I've been thinking hard about the trade-off of downsizing our house (which is admittedly very big at about 4k sqft) which would help lower our housing expenses and free up home equity to increase our portfolio. Thus increasing our SWR. This would obviously be somewhat disruptive...moving with 3 young children...potentially to a new cheaper neighborhood (which if we are going to do, we should do know before the kids start school?) or a significantly smaller house (maybe 2500 sqft) to make a big enough difference. 4k is obviously bigger than we need now but we were anticipating what it would be like with 3 teenagers and we convinced ourselves that it would be better to have a bigger home at the time. Maybe if 10 years into retirement portfolio has performed well and we have kept expenses in line we can upsize again...
2. On the other hand, I know that in 18 years DW and I can downsize housing significantly more than today to a condo or very small house...and also benefit from lower expenses of being empty nesters...who knows maybe one or more of our children may even gravitate somewhere outside expensive Southern CA? At that point even if we have spent a little more than desirable...perhaps somewhere between 3% and 3.5% for 20 years we can then probably drop spending, free up home equity significantly.
DW is probably more in favor of staying put but the conservative FIRE part of me is very tempted to further secure our future by getting SWR to 2.75% or below. In the end she will probably go along with whatever I think is best for our family. I'm obviously grateful to be in position to make this decision but really am struggling with this one and would be grateful for any advice or perspective on any of the above thoughts, information, etc.