Where Do We Go From Here?

To summarize last post: feeling burnt out at work, no one knows how much time they have left, time is more important than money… At least after you have investments working for you. The only reason these conversations are even possible is because we’re slowly closing in on Financial independence (FI). Two decades of work and (mostly) smart investment decisions are finally paying off. Years of prioritizing savings over spending should soon make having to trade time for money optional. So what’s the plan?

Living a middle-class lifestyle in America is not complicated. The main ingredients look something like this:

But then again, people live longer now so retiring at 70 seems reasonable.

Achieving FI early, decades before the normal retirement age, is no small feat. The math is simple but the devil is in the details. And what happens after you finally achieve FI? There is no blueprint for life after a steady paycheck is no longer part of the equation.

We are not FI just yet. We can stop working and have enough money from investments to cover such basic needs as food, housing and transportation. That’s a big milestone. Knowing that your family will never go hungry and have a place to live is nice.

But we are spoiled. We live in a 3,200 sq. ft paid off house in the best school district, drive 2 cars, spend freely on travel, buy whatever food we like… We do pause before spending money – but not for the lack of it.

So we are in this transitional period where we know we can walk away from the jobs we don’t like if we’re willing to give up many of the luxuries we’ve gotten used to.

This fall we’ll have $12,000 per year in extra cash when our son goes to kindergarten. No more daycare bills!

With all this in mind it’s fun to think about where we might end up in the near future. Can we get to FI sooner? What will we do while we are FI? Will we still live in the same place?

Every work day during lunch I go out and walk a couple of miles to get some exercise and to clear my head. Good for the body, good for the soul as they say.

On these walks, left alone, I find myself thinking a lot. I’ve been rehearsing Escape from the Cubicle in my head for several years. Lots of ideas but only a few of them are what I’d call “actionable”.

I decided to write some of them down. I ran these by my wife just to see if I can get her onboard. I quickly found that some ideas that seem “actionable” to me sound bat-shit crazy to her. And one thing I’ve learned over the years is happy wife happy life, so…

Let’s look at some of the most recent propositions.

Option 1: Sell the big house and move into a rental condo we own. I wrote a post about this one before.

Pros: Add $400,000 to investment accounts. Both of us can quit now and take a sabbatical to figure out what’s next. Super low housing expenses and maintenance ($300 per month covers all housing bills). Less to clean. Good schools. Nice county park at the doorstep. Twenty instead of thirty minutes to the city. Can downsize to one car. Ultimate for travelling – can lock the door and disappear for months at a time. For example, we might want to spend a year living abroad.

Cons: Only 980 sq. ft of space with 2 bdr and 2 bthr is tight for a family. No personal/office/DIY/tools space. No garage. No yard. No grilling. Little room to entertain. Dark due to northern exposure and only 3 windows. Noise from neighbors. Schools not as good as where we live now.  

Option 2: Sell the big house, keep the rental condo and buy a top or a bottom floor apartment in the same apartment complex.

Pros: Add $300,000 to investment accounts. Both of us could quit now and take a sabbatical to figure out what’s next. Super low housing expenses and maintenance. Less to clean. Good schools. Nice county park at doorstep. Twenty instead of thirty minutes to the city. Can downsize to one car. Ultimate for travelling – can lock the door and disappear for months at a time. Southern exposure makes these units much brighter than our rental condo. Vaulted ceilings and skylights on top floor make the space more livable. Bottom floor units have access to green space and easy bike storage. Get to keep the rental condo to diversify income streams.

Cons: Only 1,120 sq. ft of space with 2 bdr, 2 bthr plus a bonus sunroom/office/play/nursery/guest room and 2 bthr is still tight for a family. No personal/DIY/tools space. No garage. No yard. No grilling if top floor (bottom floor – maybe). Little room to entertain. Noise from neighbors (top floor – minimal noise). Schools not as good as where we live now.   

Option 3: Sell the big house and buy a smaller house in the same neighborhood.

Pros: Add $150,000 to investment accounts. My wife can quit now and I’ll work the same job a couple of years to figure out the next move. Smaller housing expenses and maintenance. Less to clean. Best schools in town. Same community pool, walking trails, playgrounds, lakes. All the benefits of living in a single family house at half the cost.   

Cons: 1,500 sq. ft will be an adjustment compared  to the 3,200 we have now. No garage. Smaller houses sell for around $180 per sq. ft while ours would sell for $150. I feel like our house should appreciate soon since smaller houses are quickly catching up in price – especially relative to what you are getting (no garage, tiny yards). Feels wrong to sell our house for so much less on a per sq. ft basis to live 4 blocks away at a much higher per sq. ft price.

Option 4: Sell the big house and buy a smaller house in a different neighborhood closer to the city.

Pros: Add $150-200,000 to investment accounts. My wife can quit now and I’ll work the same job a couple of years to figure out the next move. Smaller housing expenses and maintenance. Less to clean. Good schools. All the benefits of living in a single family house at half the cost. Would probably buy a one-story rancher which is easier than living in our current 3-story house. Good “forever” home (no stairs). Fifteen instead of thirty minutes to the city. Nice established neighborhood feel. Mostly middle-class working neighbors instead of rich (or rich-wannabe) neighbors we have now. Keeping up with the Jones’s mentality where we live now goes against everything we are trying to achieve. I feel like our son would benefit from being in a “good school” vs. the “best school”. He is super smart but I worry about all the overachiever parents living around us that will push their kids to a breaking point in order to “excel”.  

Cons: Most ranchers are 1,100 to 1,500 sq. ft with tiny closets, no master bedroom that will fit our king-size bed (we’re spoiled!), no master bathroom and small 10’x10’ rooms. Everything is outdated. We would need to gut and add space that works for us while staying under 2,000 sq. ft. No garage. No pool (would consider adding our own). No sidewalks.  

Option 5: Sell the big house, buy a similar size house on the Outerbanks, NC and rent out part of the house for income.

Pros: We always wanted to live at the beach! My wife would quit her job and live permanently in Southern Shores, NC with our son. I would split my time between the OBX and our hometown for a while staying with my mom while in town for work 3-4 days per week. Plenty of living space. Good schools. Bike everywhere. Laid back lifestyle. More moderate climate (not as hot and not as cold due to ocean). Lower property taxes. Ability to generate income from renting out a “wing” or the entire house. Opportunity for me to get into another line of work – handy man, property management, Jeep tours, fishing, kayaking, boating, whatever. Finally do what I like instead of chasing the highest $.

Cons: Am I seriously considering spending half a million dollars to live on a sandbar whose main purpose is to protect the mainland from storms? While the climate is rapidly changing? While the oceans are rising? While our president is calling climate change a hoax and rolling back pollution regulations? Homeowners insurance is expensive and can easily rise to the point where it won’t be affordable. Evacuations due to hurricanes and storms. All of this will impact the rental/tourism income that happens to be the foundation for this option.     

Option 6: Sell the big house and buy two houses on one plot in Costa Rica. Live in one house and rent out the other one to tourists.

Pros: When we were in Costa Rica a little over a year before the November 2016 election, I said to my wife – “I think that Donald Trump will win”. She said – “You are crazy” so I proposed a bet. If Trump wins we’ll sell everything and move to Costa Rica. We shook on it. Guess what – Trump won and we’re still here!

I loved Costa Rica. It is such a refreshing change from all the BS that’s happening in the US. I could really see us living there.

One of our Airbnb hosts was from Canada. He bought a plot with 2 small properties and then built a small treehouse where he lives renting out the other two houses. He was one of the happiest, relaxed, content people I’ve ever met in my life. His girlfriend was leaving her crazy life in DC to live the pura vida life in Costa Rica. If this couple can do it – why can’t we?

We could buy property on a hill so there’d be no worrying about the rising oceans. A simple life, a focus on connecting with people and the environment would provide a great foundation to build upon for our son. Consumerism doesn’t exist. He could go to a private school that is accredited in the US with a clear path to any college in the US. We would all learn another language and culture. We should have enough in rental and investment income to live simply and comfortably for a foreseeable future.

Whether we move back after a few years or stay in Costa Rica longer, we’d have one cool story to tell. Living in another country long-term is on our bucket list.

Besides…

WHO HASN’T FANTASIZED ABOUT SELLING ALL OF THEIR SHIT AND MOVING TO PARADISE?!?!!

Cons: It’s scary! We’d be moving away from a familiar environment to a place where we don’t know anything and can’t even speak the language. Culture shock is real. We don’t know how quickly we can ramp up the rental business. Private school is not cheap ($400-700 per month). A permanent visa is available to anyone who invests over $200K (buying property counts) but it’s not cheap. Health insurance is available but it might run $400 per month. We might miss the seasons. We’d be far from our families and we’d leaving our moms behind just as they’re starting to need us more.   

Option 7: Keep the big house as a rental combined with one of the first 4 options.

Pros: Two rental properties producing cash flow every month is better than one. If my hunch about the direction of prices in our neighborhood is right, it might be a wise choice to hold on to the house. Safety net – have a beautiful house on standby to move back into if living in a smaller place doesn’t work out.  

Cons: Renting out a 3,200 sq. ft house sounds daunting. I feel like it would be harder to rent since how many people need 5 bedrooms? Maintaining two old HVAC systems, old roof, old water heater and all the other stuff in a 20-year old house is expensive. I can take my time to DIY while we live there but renters will want it fixed ASAP which means insourcing might not be an option. Adding another rental will use up more of my spare time.

Option 8: Enjoy the status quo.

Pros: Not having to move. Plenty of space. Best schools. Comfortable living. Stability. We do like our big paid off house very much. Maybe I could rethink my employment so that summers are free. This would mean quitting where I work now and looking for shorter projects. When we travel in the summer we could pay someone to take care of the house.

Cons: Nothing changes. Both of us continue to work the jobs we don’t like at least for a couple of years. Feels wasteful to have so much space for just 3 people and a cat. Lots to clean and maintain. Thousands in deferred expenses coming up (roof, 2 HVAC units, driveway, water heater). Continue to live further away from the city.  

So there you have it. Will we pull a trigger on one of these? Will we end up doing something else? Who knows! One thing for sure – it’s fun to be able to entertain these options.

We are moving in the right direction. Just need to figure out what’s next.