March mortgage update: Why we bought a huge house and why we shouldn’t have

Last month (February):
Balance:$14,493.05
Years left: 1.083333333
P =$1,152.47, I =$61.93, Escrow =$809.48

This month (March):
Balance:$13,336.01 (actually it is 13,336.21 because wells fargo occasionally steals pennies)
Years left: 1
P =$1,157.03, I =$57.37, Escrow =$809.48

Amount saved from prepayment:  $0

Hey, look at that, only one year left!

About 10 years ago we bought a 3000 sq ft house.  Why?

1.  We had been living in small urban apartments and were dying to have more space.  Our master bathroom is literally the size of our first efficiency.  We had no concept of say, how 2000 sq ft would be.  We only knew small and that large sounded great.
2. We were sick of moving and didn’t want to move again unless we were leaving the town for new jobs (in which case we wanted to be able to unload the house quickly).
3. We thought we wanted a 5 br house so that there would be one bedroom for each of us and we’d also each have a study.  (We actually have a 4br plus study.)  We did not realize that we miss each other when we’re working in separate rooms and thus do not need our own studies.  (And DH has plenty of room in one of the walk-in closets to keep his boardgame collection, so he doesn’t need a separate storage room like his father has for hunting equipment.)
4. We had 55K saved for a downpayment (enabling us to get a 265K house using the 20% down rule plus fees).
5. I had a salary that would enable us to buy a 300K house (give or take) according to online calculators, which we knew was probably too expensive, but 265K seemed pretty reasonable.
6. The monthly payment on a 30 year 6.5% mortgage was less than what we were paying in rent in the city.
7. We told the real estate agent that the most we could afford was 265K, so he had incentive to make the nicest house we saw a little more than 265K.  Then the other real estate agent was informed that we could only afford 265K (I imagine, I’m not actually sure).  So we offered less than that and they countered with 265K and we said ok and didn’t move on to our second choice somewhat smaller 250K house.

3000 sq ft is too much.  It is expensive to air condition and clean and keep the lawn mowed.  We just don’t use about a third of our house because living in nowhere, nobody really visits us now that DC1 is no longer the only grandkid (oddly, we had plenty of visitors on the couch of our small apartments in grad school city!)

If we had to do it again, we would look for something more in the 2200sq ft range.  1200 sq ft, which is what we’re living in right now, is a bit small for the four of us.  If we’d gotten a starter home we probably would have ended up staying in it.  But we didn’t realize.

Why don’t we sell and buy a smaller one now?  Mostly because the amount we would save by cutting out say 800 sq ft doesn’t seem worth it to us with the hassle of moving and transaction costs.  And we do like the neighborhood, although the elementary school zone changed on us and now sucks (we’re hoping DC2 will get into the dual language program if zie doesn’t start K early). It’s also now a seller’s market instead of a buyer’s market so while it would be easy to sell the place, it would be much harder to find a new place than when we first moved out here.

So, the moral:  Just because you can afford a big house doesn’t mean that you should buy one.  More isn’t always better.

How did you decide what size house to buy/rent?  Do you always get the best and biggest that you can afford?

Link love!

Challenge update:
Goal: 4000 steps/day
Sat: 6,639 (I was sick and had trouble breathing)
Sun: 8 (walking through it on Sat didn’t help, so I spent Sun in bed)
Mon: 4,055 (still sick, but on the mend)
Tue: 7,047 (DH gone! Had to walk places)
Wed: 5,137 (still sick)
Thurs: 10,947 (much better! decided to walk DC2 to school and back)
Fri: 12,297(walked DC2 to school and back *and* walked DC1 downtown for lunch because Friday was a short school day for NO REASON)

Disney:  still racist.

Historical African American needlework in context

Tech companies, stahp hiring and coddling bigots!

Still loving true stories backward’s posts on career driven girls in YA literature.

What civil war nurses did after the war.

Protesting sexist dress codes!  (Because a boy’s inability to concentrate in a normal environment is still more important than a girl’s right to learn.)

John Kasich being sexist.

Of all the good G#$@#$ gall.

How American journalists reported the rise of Hitler.  (Interestingly, this was commented on in the Ngaio Marsh book from 1935 that I just read.  Could totally have replaced the word “Hitler” with “Trump” in that scene and the context would have been the same.)

Powerpoint to UH faculty re: new gun law on campus.  Full ppt here.

depressing if true (if results hold up)

tragic and so preventable

I think this post on agency pairs really well with our post on complaining– we are more sympathetic when people are complaining because they don’t have agency (or when they’re using their agency to reduce what the problem is, but less sympathetic when they use their agency to cause the complaining or to not try to mitigate it).

Summer camps for gifted kids and teens.

In case you wanted to know more about the man behind Mr. Money Moustache

Donna Freedman has been thinking about retirement.

Does your family qualify for financial aid?

Planning for job evaporation and what’s next

Did you know that you can look up your name on urban dictionary?

In case you ever wondered how much a house hunters episode is fake vs. real

stata can do some pretty cool stuff with MLM in the newest version

daria had a web page back in the day.

We did this as a Christmas present for DH’s grandma before she descended into Alzheimer’s (though with a book that had questions listed already).  I’m so glad we did.  Making up your own questions has to be even better.

the potato apocalypse

we’ve so far survived the week without whatever

#ObamaAndKids  Love it SO MUCH!  I really do hope a coffee table book comes out because I would totally buy it.  How can you not get teary-eyed scrolling through it?

ask the grumpies: Post-tenure motivation

CG asks:

What did you do differently after tenure to make your job better/more fun and renew yourself for the next several years, in terms of research, teaching, and/or service? Asking for a friend. :)

#1:  Here’s some links we collected back in 2011 back when we were … asking for a friend.  Here’s some of the stuff we thought we wanted and should revisit to see if they happened.  Here’s a post on what motivates us after tenure.

Really though, I have just been too busy doing stuff to think about better/fun/renewing.

Hm, now I’m curious about that list (answering for both of us)…

• an entirely new kitchen  NOT YET
• a raise EVENTUALLY
• developing an online course  PARTNER MOVED INSTEAD
• a vacation that doesn’t correspond with a conference WE TRIED THIS YEAR, IT KIND OF SUCKED
• a top tier journal publication NOT YET :(
• lower tier journal publications that are just fun even if not actually important from a theoretical or practical standpoint YEAH, BUT NOT ACTUALLY AS FUN AS HOPED–HOWEVER TOP FIELD STUFF CAN BE FUN!
• a raise SORT OF
• a sabbatical  YES!  OR LEAVE ANYWAY.
• another cat  YEP
• a house NOPE, MOVED INSTEAD
• boots YES AND THEY WERE AWESOME
• freedom to tell students to step off  NOPE
• fair grading  HAHAHA  TOO MUCH EFFORT THEN I QUIT
• more time with partner  YES!
• publishing fiction?  at least writing more of it  NOT YET
• hair dyed a cool color  THIS HAPPENED IMMEDIATELY
• a different research culture  AFTER QUITTING….
• a wider driveway  NO, SEEMS LIKE THERE’S PIPES OR SOMETHING
• a raise  MEH STILL UNDERPAID
• the ability to wear something other than suits to teach in  YES, THOUGH I HAD TO GET OLD FIRST
• figure out whether to do laser or electrolysis and do it I STARTED LASER AND DIDN’T FINISH

#2:  I quit!

Our academic readers should stop by and give better answers.  I’ll try to signal boost at other places to see if more folks can stop by.

RBOC

• Inside blog joke:  “New pet’s name at the shelter is currently bogart, but I’m going to change it.”  “You should totally change it to Alexicographer.”
• It is not interesting to watch laypeople argue about the definition of a jargon term.  Especially when that term is already ill-defined within the disciplines that use it.
• DH says:  ooh, I might be making progress!  it’s Science!
• DH gets seriously bad breath when he starts losing weight.
• I had sympathy for someone who was complaining about student loan payments and how they’re so far behind other people their age until I read about their frequent exotic vacation travel that they splurge on because they should be allowed to splurge on something.   Choices = consequences– you could choose to not take such regular vacations and then you could have the bigger house you’re begrudging other people or you could make a bigger dent in your loans.  Those people you’re complaining about could have chosen to go on vacations instead, but they didn’t, they chose the things you think it’s unfair that they have and you don’t.  Because somehow travel money is different from regular money used to buy boring things?
• Someone famous who used to comment on our blog (but who I have never met and hasn’t the slightest clue who I am either bloggily or professionally) is giving a talk nearby today.  I wonder if I should go.  [update:  I can’t because DH is out of town and DC1 has a piano lesson.  Booo.]
• I didn’t think it could happen, but I’ve actually gotten kind of tired of the food at Trader Joe’s.
• quote from current lab meeting:  “who’s got two thumbs and knows how to research?  I do!”
• just for funsies, here’s our potty tag

How to avoid pointless parenting anxiety

Here we’re talking about whatever the current guilt-inducing fads are.  I would give examples of what they currently are, but the truth is, I don’t know!  But like 5 years ago they were things like:  not bringing store-bought baked goods places, using the right kind of sunscreen, avoiding BPA, etc.  I think there were a lot more, but that’s what I remember.  (Disclaimer, we still use the old-fashioned neurotic fad approved sunblock, because DC2 is allergic to conventional kinds.)

There are many other paths, but here’s one.   Most of this stuff is really easy to avoid if you don’t live in NYC or the ritzy suburbs of Los Angeles (or similar enclaves).  But if you do live in those places, you can still do the following:

1. Don’t read anything about parenting (mothering) on NYTimes ever
2. Stay away from parenting (mommy) forums
3. If you read parenting books pick them carefully (read: evidence based) and remember that one size doesn’t fit all
4. Send your kids to a (high quality, obvs) daycare that caters to working parents.
5. Avoid anxiety-inducing blogs
6. Avoid anxiety-inducing playgroups

And there ya go.  No more worrying about pointless parenting stuff.

Do you get swept up into ridiculous parenting anxieties?  The kinds that come with, “worried about other people judging me” attached?  If so, where do they come from?  If not, how do you avoid them?

Early sacrifice means more options later

I guess this post is very Dave Ramsey-esque.  But it’s true, if you “live like no-one else” you will be able to “live like no-one else.”  [Update:  To be clear, this is NOT a Mr. Money Moustache post.  MMM is more about being content with a flat level of consumption rather than enjoying a rising level.]

In economics, we learn about something we call consumption smoothing.  With this idea, if you knew your full lifetime income in advance, you would borrow early on at some interest rate and pay it back when you had money.  At some interest rate it would be worth having loans, even though it means you’ll be less flush later since you paid to borrow from your future self.

This simple model ignores two very important things.  1.  You don’t know your full lifetime income in advance so you can’t actually consumption smooth perfectly, 2.  People prefer to have gradually increasing consumption rather than flat consumption throughout their lifetimes.

Because we don’t know our full lifetime income in advance, there’s always the worry that we might borrow too much and hit a bad time that we can’t borrow our way out of.  Additionally, since lending agencies have no guarantee that we’ll actually pay things off, interest rates are much higher than they would be in a world of perfect certainty.  Plus, it’s not like our lifetime income is fixed– we can take on more or less work if we’re feeling worried or relaxed about finances.

Because people prefer to have gradually increasing consumption, that means it’s a good idea to pay things off early in life (after borrowing for education and/or transportation and/or other things that are true investments in our future potential), even if that means more sacrifice early on.  It’s a temporary sacrifice that will lead to more security and more freedom later, when we will enjoy it more.

This is why it wasn’t stupid to pay off DH’s undergraduate loans and to put money in IRAs when we were in graduate school, even though it was pretty clear we wouldn’t have a combined income of $36,000 in an expensive city our entire lives.

By spending less than we earned and investing the difference in loan-prepayment, retirement savings, and an emergency fund we were able to move for my job with the promise of only one income.  Later when we had real incomes, spending less than we earned and following the “rules” for buying a house (20% down, fixed rate mortgage, etc.) and car and so on allowed DH to quit a job he disliked without another one lined up.  Because of these early sacrifices, we’ve had steadily increasing or level consumption with only minor sacrifices when our income has dropped  dramatically or we’ve had major emergency expenditures.

Early sacrifice also meant that we could take risks that paid off.  Ironically, we probably wouldn’t have been able to make the ridiculous amount of money we’re making now if we were worried about money.  DH would still be working for the university making half his current salary or less because we’d have been too afraid to make that jump to let him quit without another job lined up.  So even though we make a ridiculous amount of money now (IMHO), I’m still glad we made those earlier sacrifices, because without them we might not be making a ridiculous amount of money now (or enjoying our jobs so much).

And now, if we do decide to move again, our lack of debt, healthy retirement savings, emergency funds, and low level of spending compared to our income mean that we’ll be ok for a long while even if we have to drop to one income, even if we’re living someplace crazy expensive.  We don’t want to move (permanently) to paradise right now– DH and I both like our jobs– but we could if we needed to.  Our early sacrifice means we can take a pay-cut and we can move someplace more expensive later.

What does that mean if you’re not a poor grad student in your 20s?  It’s never too late to start.  If you still have loan payments dragging down your monthly expenditures and/or you don’t have an emergency fund and/or you haven’t saved enough for retirement, then you can still drop your consumption and temporarily increase your income to get rid of monthly obligations and to get yourself onto sound financial footing.  It may hurt at first temporarily, but the hedonic treadmill means that as you gradually add consumption back in as you get on firmer footing, you will start feeling pleasure again even at levels that are lower than what you started with.  And you’ll still have hope and you will know that the future will be brighter, as opposed to a future that is full of worry that ends in catfood.

tl:dr:  Often times you have to make sacrifices for financial security, and it feels better the earlier you make them because it’s easier to increase your spending than to have to cut it.  If you’re financially unhappy and didn’t make sacrifices before, now is the best time to start!

Have you ever had to make sacrifices for your financial future?  Do you wish you had sacrificed more or sacrificed less?  Have you been able to have steadily increasing (or steady) consumption over your lifetime or have you had to cut back ever (and how did that feel at the time)?  How did you live when you graduated school?

link love

This week in steps. Turns out 3500 is harder to come by than 3000. So much with the pacing.
Sat:  9334
Sun: 3536
Mon:3812
Tue:4529
Wed:3610
Thurs:3520
Fri:  (will update after I’ve paced at least another 1K…) : 3581

DH should be enjoying my stepping because I’ve been volunteering to do a lot of errands that I’m usually quite happy to let him do, usually involving picking up or dropping off the kids by foot (I even walked them to get haircuts last Sunday!).

Intersectionality exists!

I don’t think we skipped that sentence, but boy howdy did we have long conversations about inappropriate ethnic stereotypes with A Secret Garden.  You’ve got to be taught, before it’s too late, before you are 6 or 7 or 8…

DNLee discusses Formation as a black academic.

History behind Formation.

birth control alcohol pairings

Note in that last tweet, the woman has to be *better* qualified, not equally.

The only thing that surprised me in this article is that women don’t say closer to the same thing as the men.

Bernie, we love ya, but MATH.

It is not a coincidence.

Sometimes when a bigot who has harmed millions of people dies and you can’t help but giggle.

Accusations! Context! Math!

Do you LOVE tea?  How about being more like Gwyneth Paltrow?

I endorse this (warning: language describing an abomination)

somewhat similar to our upcoming Monday post

whoops!

there are no stupid college majors

The article on college savings is pretty bad (as are MOST of the articles on college savings written by personal finance bloggers– they repeat the same misguided stuff– I suppose I could Monday money post a rant on the topic one of these days given how tired I am of leaving the same, “Well, actually…” comments everywhere), but this comment by a college registrar is SPOT ON.

burnout, creativity, and the tyranny of production schedules

I’d always assumed top people changed careers because they got bored, not because they wanted to prove or disprove their impostor syndrome.  Really interesting idea.

How did I not notice this bonus BCN?

Did you know this about Hugh Laurie?

Really interesting twitter thread by Courtney Milan.

Books that feel like home and the false neutral.

I don’t know why this person says sorcerer to the crown takes after Jonathan Strange instead of say, anything by Mary Robinette Kowal or Caroline Stervermer or Patricia Wrede or any of the other modern “Jane Austen/Georgette Heyer with magic books” (a genre that we have loved since ForEver).  It didn’t seem much like JS & MN at all, especially in the way that unlike EVERY OTHER modern “JA/GH with magic book,” JS&MN had pretty much no women (which, I assume, is why it given more credit than its superior literary sisters).  Other than that, a great analysis of the book, especially in terms of the racial themes.

When chickens go wild.

 

Ask the grumpies: Resources for asset allocation?

Susan asks:

Since I got on top of my finances (I wrote to you before about this), we got married, and now I’m the finance person. My husband has similar values as me (spend < earn, save) which is good. He also believes in ‘put it in index funds’ – also good, but that’s where his thoughts stop. So he had all his 401k money in vanguard s&p500; no bonds. I need to have a conversation with him about asset allocation, ie, a choice of some percent of bonds. I plan to show him a morningstar chart of total market and total bond plotted over 20 years, and point him towards the bogleheads wiki. What other resources or reasoning can you suggest for him, and others who need to learn a bit more here? Preferably more concise than not, as I know the longer the page, the less likely he’ll actually read it.

(I know about target date funds, but we’re past that already for several reasons, including a sizeable taxable acct, and a sucky choice of funds in his 401k where the only reasonable choice is the 500 fund; my 403b is great, so that’s where most of bonds are)

This is a fun question.

Ok, so first, that morningstar chart is the place to go for what you’re asking, as is the Bogleheads Wiki.  So thank you for answering your question.  :)  Walter Updegrave has some good articles on asset allocation as well, but they tend to be based on specific situations so you’re probably best off with the Bogleheads Wiki.  (Note:  Updegrave recommends this questionnaire from Vanguard to figure out what % mix is right for you– according to it I should be 100% invested in stocks(!).)

Second, for the question you didn’t ask, asset allocation is both more and less complicated than it initially seems.  Which really means the experts understand the basic idea, and there’s heuristics (ex. 120 – your age in stocks, but there are many others) to use that generally won’t get you into trouble, but we really don’t know what the ideal portfolio mix is.  Even target-date funds will have different glide paths because they have different underlying beliefs about what the appropriate asset allocation is.

Your DH’s choice of 100% stocks may actually be a valid choice.

Including bonds in your portfolio is mainly important because the stock market is volatile over the short term, even though it generally goes up over the long term.  If your time horizon is long before you’re planning on taking assets out and you’re not very risk averse, then you may not need that many bonds because  you can trust that the market will eventually get better after a crash.  Bonds are safer than stocks and don’t track stocks, so they help to smooth out volatility in your portfolio.  However, bonds also give lower returns on average.

It is recommended for most people that you have some safe assets in your portfolio, because most of us don’t have infinite investing time horizons and there’s all sorts of unexpected emergencies that can happen.  Those safe assets don’t have to be bonds, though bonds are nice because although not as safe as an FDIC insured CD, they generally have higher returns than said CDs.  But if you have a lot invested in cash or CD ladders for whatever reason and you don’t yet have a huge 401(k) portfolio, you might not need bonds yet.  On the opposite side, if you have huge amounts of wealth and are planning on passing your inheritance on rather than drawing it down, you may also tilt towards stocks away from bonds because your horizon is infinite (though at huge amounts of wealth you should probably be looking at more complicated ways to dodge taxes).

IIRC, you’re (plural) in your early 40s but doing catch-up retirement savings.  That means your time horizon may be longer than that of many people in their 40s, meaning you might be willing to take on additional risk.  However, just because you may see yourself working longer doesn’t mean that the labor market will agree.  So having a more traditional bond allocation may make sense.

Now, does the bond allocation have to be in your DH’s portfolio?  You’re married and will most likely have to reallocate investments should you get a divorce.  So no, not at all.  My DH’s current portfolio has no bonds because he probably has the same stupid retirement company that your DH does– the only affordable thing is the S&P 500 fund.  So we also tilt more towards bonds in my Fidelity account.

So, bottom-line– it sounds like you already know what to do.  But your husband may be right about his asset allocation based on his levels of risk aversion.  This is something that you two may have to compromise on, but you’ll (plural) still be ok wherever you end up within that compromise.  It’s not like he’s 100% invested in company stock, which would truly be dangerous.

when are we sympathetic to complaining

Disclaimer:  This post is NOT talking about complaining about tragedies or things like chronic illness, death, etc.  If you are in pain, or you’ve lost a loved one, or have experienced trauma or been harassed, etc. we will always be sympathetic.  This is more about trivial complaints or complaints that are less trivial but are still more in the annoyance spectrum– things you could probably change but have chosen not to for whatever reason.  You know, like me complaining that democrats don’t even show up on the ballot and we have to drive a couple hours to get to Whole Foods when we could, in theory, quit our jobs and move across country to Paradise.

We are sympathetic to (or at least not irritated by) complaining

1. that isn’t chronic (because chronic complaining gets boring) and

2. that doesn’t seem entitled (I guess because entitled complaining makes me feel like I deserve more too but I’m not going to get it so that makes me irritated and I’d rather feel like I have agency)

3.  that is entertaining or funny (but not repetitive I hate Mondays that is trying to be funny but isn’t)

4.  that is about the weather (because we’re from the midwest and find it soothing)

What kind of (non-tragic) complaining are you sympathetic to?  What kind irritates you?

weird thing: Or how not to get people to volunteer more

I went to a conference for a volunteer thing.

While I was there, an organizer took the podium and yelled at people for not being there all day and had even harsher words for those who weren’t there.

Then for those of us who were there, zie yelled at us for not doing more.  And for not engaging with the speakers more.

It wasn’t cajoling, it was scolding.

Once again, xkcd really says it best: