When I started this blog back in January of this year, I had the intention to retire within the next 7 years (6.25 now, but who’s counting?). I had done my homework, and realized that saving x amount every year and keeping our spending below a certain level would allow us to achieve this goal easily.
What I didn’t realize was how effortless things would become. I never imagined that money would start falling into our laps. And I couldn’t have imagined that we would have been able to blow our goal of 7 years out of the water.
But, that’s how things are currently shaping up, all because we choose to defy the standard American Dream.
In April we went on a search for a second house. The two primary motivators to move were to reduce our commute from Hell, and to reduce our monthly costs.
Our search led us a beautiful 1960s house, whose interior resembled that of a Cracker Barrel. There was country shit everywhere. Covering the windowsills, hanging from the exposed wood beams, stacked on the floor. Literally, the house was covered in — for the lack of a better word — crap.
Thankfully, we could see through the trinkets and wicker baskets. The house had a great structure and was in fantastic shape.
As far as size goes, it’s a few hundred square feet less than our previous house, but its listing price was $120,000 less as well. In mortgage terms, it would cost us $600 less every month.
The house’s amenities included a fenced in yard, hardwood floors, gas heating, a massive bay window, and an amazing sitting room with a fireplace and tons of natural light. The only thing that I really consider to be a downgrade with the new property is that it doesn’t have solar panels — a feature that we had installed a few months after moving into our first home. This is a situation that is easily remedied, as I’ve already been in contact with a SolarCity representative.
Within two weeks of having our house on the rental market we were able to rent it out for about $250 more per month over the mortgage payment.
The real magic that came out of the move was an increase of time and money from moving closer to our place of employment. We are able to sleep in an extra half hour every work day, and we are able to avoid afternoon traffic completely which saves us another full hour. The additional savings from the associated commuting costs aren’t too shabby either at around $275 per month.
So, how much money is the Moneyseed family actually saving from this move?
|Where the Money is coming from||Monthly||Annual|
|Rental Income (Amount in excess of mortgage payment)||$250||$3000|
|Commute Savings (Shaving off 16 miles round-trip)||$275||$3300|
|Mortgage Interest Deduction (Tax Return)||$3000|
|Total Saved Annually||$16,500|
|Total Saved After 6 Years (5% interest and inflation adjusted)||$96,150|
My calculations take us to around 2020, the same year that I plan on leaving the workforce for good.
From the move I was expecting to save a bit of money, but before moving in I couldn’t gauge exactly how much. At a conservative growth rate of 5%, I will be able to turn our newly found “extra money” into almost $100,000 (adjusted for 3% annual inflation) after 6 years.
Most American families — and probably Canadians too — deliberate on when they can upgrade their houses, cars and other material goods. I, on the other hand, look at these items and try to figure out how I can make or save money from them in some way.
Some could call our move a “downgrade”, but the way that I look at it, we are permanently upgrading our financial situation; because the savings won’t come to a halt on my retirement date. Having a successful rental property, and a reduced cost of living will be two factors that allow us to step away from employment without worry.
I don’t give a shit about the ideology of “moving on up”, because I’m not concerned about proving my worth by my material possessions. However, I do take pride in our abilities to both save money and beat the goals that we set for ourselves.
The next time you’re in the market for a new house, try going smaller, less expensive or both. You may feel like you’ve made it by living in that $400k+ house, but truly think about who you’re buying that new house for. And more importantly think about the financial implications.