Ether to FI: Shifting Focus from the “FI” to the “RE” and a Net Worth Update

PoF: I’ll start today’s post with a quote from Ether to FI’s very first guest post.

 

“Hello FIRE nation.  I am E.T.F.  You are probably wondering what happened to the missing “RE” in my name.  That was not an accident.  I will probably have many different occupations in my life, but I am on a mission to find work that I love. Charlie Munger working at 93 is my inspiration.”  -Ether to FI

 

It seems he may be having a change of heart. Interesting what the influence of a better half can do.

I try not to plan my life more than five years ahead. Beyond that, anyone’s guess is as good as mine as to what I’ll be doing and where I’ll be doing it. If you had told me five years ago, I’d have a side gig running an early retirement blog, I would have said “you’ve got the wrong guy.”

In a fun side note related to the quote above, I recently spent the night walking the same paths that Mr. Munger has walked for decades on Star Island. He was up at the time, but sadly, the 94-year old investing legend didn’t walk the same paths at the same time as me.

Ether to FI, the floor is yours.

 


Ether to FI: Shifting Emphasis from the “FI” to the “RE” and a Net Worth Update

 

I don’t know if this post will help anyone but myself. This is an ask the audience for advice post. A significant change is coming in the Ether to FI (E.T.F.) household.

The original title of this post was “Verbal Diarrhea” because once I started writing this post, the words just spilled out.  G.I. might have been my true calling.

Mrs. E.T.F. has caught the FIRE bug. Yes, with an emphasis on “Retire Early.” She came home and said, “we need to get out of the rat race.” I almost called Will Smith and Tommy Lee Jones, because I was sure an alien was inhabiting my wife’s body.

I have previously cajoled, begged and pleaded with varying degrees of success, but something has lit a match. Could it be her starring role as a guest poster? I don’t know, and frankly, don’t care because my wife is now on my exact same wavelength when it comes to finances.

She is listening to Choose FI like it’s a Top 25 radio station. [PoF: It’s not?!?] She is asking questions. She is scheduling net worth update meetings. We might reach our goal by next year at this pace.

Has this ever happened to anyone else’s significant other?  Please respond in the comments. Did I mention that I could not be happier? This is like waking up during the blizzard of ’96 and realizing school will be canceled for weeks. I just hope it continues.

 

We’re Buying a House

 

In other news, we are planning on buying a house. I will gladly listen to any advice on this topic because it almost feels like we are walking into a trap. You might think I am being dramatic, but interest paid to a bank on a lot of money is a lot of money. A lot is relative based on your neck of the woods, but six figures are “mucho dinero” to us.

set for lifeWe have been debt free since 2014, so I might just be dreading going back into debt. I don’t buy into the good debt myth; the Dave Ramsey part of my brain is screaming “all debt is bad.” This theory is running smack dab into reality.

If we are patient, I know five years from now we can buy a home in cash. Let’s just say patience is pretty low at this point. We will have enough for a 20% down payment in a few months. As soon as we reach that milestone, I think we can buy and pay off the house within five years, which will still keep us within the timeline to be FI in under ten years.

You might ask, what is the problem with that plan? On the surface, nothing. We are making a conservative purchase around 1-1.5X of our income, with a quick payoff plan. The issue is you are talking to frugal (E.T.F.) and frugalista of the century (Mrs. E.T.F.). Paying a few hundred thousand dollars to buy anything is not our idea of a good time.

 

Why Not Rent Instead?

 

Renting for the past 12 years has had positives and negatives. The positives have been having things fixed whenever they break by someone else. Having access to grills and pools that someone else maintains. The flexibility to move easily from one location to another.

The negatives — currently we have neighbors who make noise literally every night. It sounds like they are doing wind sprints.

We live below these guys.

Another negative is the limited sense of community in apartments. Everyone is in transition, so it seems everyone keeps to themselves.  We have also rented a house in the past. I will spare you the details, but that experience was a disaster, and the place was not cheap.  The extra expenses while paying off someone else’s investment property left a sour taste.

Specific to us, the community we currently live in is not where we want to live long term. Our oldest is starting school soon, which is primarily driving the move.

bankofamericaWe don’t live near either of our families, so establishing roots has taken on new significance after having children. Roots = buying a house in a decent neighborhood + near an elementary school + near a park + joining the neighborhood association + the white picket fence + the 2.5 kids + the obligatory pet.

The list I once made fun of in my twenties is precisely what I want in my thirties.

The question I am asking myself is how much is too much?

We are a family of 4, so based on conventional wisdom, we need at least 4000 square feet, a pool, 1 acre of land and a 4-car garage (the sarcasm is free).

Our ideal home is 1600 to 1800 square feet per Mrs. E.T.F. I would prefer 2000 to 2500 square feet. Mrs. E.T.F. thinks we don’t need as much space as I want. I don’t know how you can hide from your children in 1600 square feet.

 

Net Worth Update:

 

We have made some steady progress over the last few months.  We are also in the process of simplifying Mrs. E.T.F.’s holdings and consolidating them through one provider. Next post will primarily focus on net worth and goals for the next full year.  Ten months into the process, I am proud that we have stayed on track.

PoF, we are coming for you!

 

Ether_to_FI-Net_Worth_6

 


Track your investments for free with Personal Capital. That's how I track the PoF portfolio.  

 

[PoF: You’ve made “some steady progress”? Is that what you call over $100,000 in two months? Dang! You’re crushing it. The cash bucket alone has grown by $55,000. Keep up the great work, good luck with the house search, and I look forward to the next inspiring update!]

 

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E.T.F.: I am reaching out to you guys, what mistakes did you make with your first housing purchases?  What would you have done differently? Any advice will be helpful.  Please leave it in the comments.

 

 

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42 comments

  • Understandable reasons why you want to buy a home. If the plan is to pay it off that quickly (5 yrs) than try to get the shortest mortgage you can swing as the interest rate will be the lowest.

    My mistake was buying 2 houses in residency (actually got lucky with the first one and 2nd one lost money).

    My forever home was a 30 yr mortgage but paid it off in 9.5 yrs once I hit the fire bug.

    Tough to go back from being debt free to debt but as I said if you’re 5 yr plan rings true it’s not the end of the world to do it

    • druggedzebra

      While I agree with the shortest mortgage possible, make sure you are getting an advantage (lower interest rate). For example, we just refinanced about a year ago (great timing!) and the 30 year, 20 year and 15 year were all the same rate. So, we took the 30 year with no intention of it lasting 30 years, but we now do have flexibility in our minimum payment if needed.

    • Ether to FI

      Hey Xrayvsn and Druggedzebra,

      Our plan is to get the lowest rate possible while trying to maintain flexibility. We will likely get a 15-year mortgage, and attempt to pay it off in 5 years. This shortened timeline had also helped us focus on the maximum price we are willing to pay. Thank you both for the comments.

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  • TimR

    You are being very reasonable by purchasing a house that is only 1-1.5X your annual income. With two kids, I would suggest going for the larger option (2000-2500 sq ft rather than 1600). You can always choose not to use the extra space, but you don’t want to have to turn around and buy a new house in a few years if quarters are getting cramped. A house with some space is one of the best splurges we have made for our family.

    • Ether to FI

      Hey TimR,
      I already like you, especially because you are agreeing with me. My reasoning to my wife is that there will be a time when there are four adult sized people in the house. Since we are planning on staying put, we should get a house between 2000 and 2500. Thank you for the comment.

    • Van

      Generally, I’ve found a “budget” of 400-500 sq ft per adult seems to work well — and agree with the later comment by Lynne that the layout makes a big difference. For example, I lived in a condo of 1200 sq ft with two people — it was all on one floor, open plan, and the layout made it feel small — or rather that the other person was always there. Now we have two people in 800 sq ft, split between two floors. The space is smaller and there is no wasted space, but we aren’t on top of each other and can “get away” if needed.

  • We aren’t far behind you in the house buying phase. We will be buying in the next 6-10 months. Have to rid ourselves of this student loan debt, first.

    We won’t have the 20% down because our timeline forces us to move first. There are school reasons for our oldest on that one, unfortunately. That said,
    her are some tips:

    1) shop around to get the best rates and services for lending/mortgage
    2) don’t ever tell a realtor (even yours) what you would pay for a home. They both get paid from the selling price. So, if you tell a realtor you’d pay a certain amount, don’t be surprised when the counter offer comes in right at that number. It’s a conflict of interest you’d be better served to avoid.

    TPP

    • Ether to FI

      Hey TPP,

      I agree with both point 1 and 2. I told Mrs. ETF the realtor is not our friend, she is trying to get a commission. She thought I was being over the top. The realtor’s commission is a fraction of a much larger number, so while we might want a lower price, it is against their best interest. While I have an ethical realtor, she is still a human being, and if I was in her shoes I would also want to be compensated the most I can for the job I am doing. Thank you for commenting.

  • SG

    I believe simple rules to follow is house <2x your annual income. For extreme FIRE I would recommend closer to 1x-1.5x annual income. Just be sure that you plan to be there for at least 7+ years. I think of the mortgage as a negative bond. It is a hedge against inflation, and I try to invest aggressively (high savings rate and allocation of primarily equities and alternatives). We took at a 15 year on our forever house, but will likely end up paying it off in 10, although the interest rate is 3.15% and after tax is somewhat lower.

  • It’s funny how as you begin to get ahead financially your goals change. Before you actually have money you develop a set of goals and make a plan. After you have some money saved you start to think differently.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

    • Ether to FI

      Hey Cory,

      It seems my goals will continue to change as I continue to make progress. My motto is “be content but never complacent.” Thank you for commenting.

    • SG

      I also think that you realize that your life is actually better by living intentionally with the money you spend. You can live with intention in many different aspects of life, such as health and fitness as well. Certainly by living with intention in personal finance you can achieve your FI goals.

  • Steady progress is right! You’re killing it ETFI(RE)! I just wanted to say that I was just like your wife and it was my husband who was all aboard the FIRE train long before I was. It took months and many attempts to draw me into the mindset, but suddenly it clicked and I was all in. It’s great that you guys are on the same page now and having 2 people working towards the same goal is way better than just 1. Keep crushing it and I can’t wait for the next update!

    • Ether to FI

      Hey Mrs.WOW,

      Thank you for commenting. I am still holding on to plain FI, but we know that will change if the wife decides to FIRE. There is no way I am going to work as she heads to Greece. I hope that problem happens sooner rather than later.

  • InvestmentPenguin

    What sort of administrative fees do you have associated with the 457 and 403b’s?

    I’m looking at a potential employer that has good Vanguard low expense ratio options, but the administrative fees alone are 0.18%, 0.50%, or more depending on the vendor.

    • Ether to FI

      Hey InvestmentPenguin,

      Your question prompted me to check with my vendor. I checked last year and they told me my employer is paying all the administrative fees. I called back 1 year later and it is still the same. My employer also confirmed they pay all the administrative fees as a benefit. The only fees I pay are the expense ratio of the funds. Thanks for commenting.

  • Lynne

    To be able to get away from the kids, buy a “split” floor plan, where the master bedroom is on the opposite side of the house from the kids’ rooms.

    My house is only 1600 square feet and while it’s almost too big for me alone, I think that might be a tad small for a couple with 2 kids, who are only going to grow larger and start enjoying more obnoxious tastes in music. It’s true that you don’t want to feel forced to buy a bigger house later nor be faced with building an expensive addition, assuming that’s even an option. So buy something that you think will work when your kids are hitting their teens, in that great school district you want. Houses in good school districts and relatively low crime areas tend to hold their values and make reselling at a profit much more likely.

    And one more note, 1600 square feet is less than the norm these days, and would likely be harder to resell. Check with your realtor concerning what size house tends to sell well in your target area.

    As far as repairs go, well you can find a good handyman to do those things since your time is best spent elsewhere, either at work or enjoying your limited free time with your family. A somewhat newer vintage house would be less likely to be a money pit of repairs, and I should know, since my home is 40 years old and repairs are a regular occurrence.

    • Ether to FI

      Hey Lynne,

      I agree with all your points, I almost copied and pasted your thoughts into a text to Mrs. ETF, instead, I will just tell her to read your comments. Your last point is my favorite. Whenever the phrase “this house has character” is spoken, I go running. My brain automatically starts deducting character from my paycheck. Thank you for commenting.

  • Vagabond MD

    Interestingly, I am moving in the other direction. Now that I am FI by nearly any measuring stick, working part time, and having shed the fog of burnout, I actually like my work again. I am in the process of negotiating for my dream position (part time, of course), one that allows me to work alongside my good friends and possibly move to a very desirable recreational area.

    The point is that how you feel about your medical career may (will?) fluctuate over time.

    • Ether to FI

      Hey Vagabond MD,

      Ten months into my career, and I already question how anyone in any job can do the same thing for 40 or 50 years. I think after 20 years maximum, I will need a change. It might be working in a different state or doing a different type of job within the organization, or doing something completely different. No one lives forever, so I want to explore everything life has to offer. Thanks for your thoughts.

      • I guess everyone has a different calling. The good news is that your profession affords you the flexibility to switch goals as your passions change. Looking forward to seeing what comes next!

  • Ginzu

    May I humbly suggest a symbiotic wavelength versus an exactly the same. A sign and cosign complement to your wife…better decisions soon follow.
    My mistakes have been repeated over the years of house buying. Usually (read ALWAYS) too much house. The secondary mistake to too much house is too much stuff. The tmh, then tms, ultimatley leads to too much dust. A strong correlation exists to these sequential mistakes.

    • Ether to FI

      Hey Ginzu,

      Symbiotic sounds so much better. Will take into advisement. I grew up in a house that was big and led to too much stuff. All that stuff remains, as the house occupants have left. I am working hard to copy Goldilocks, and find just right. Thanks for the comment.

  • My wife thinks I’m joking around about retiring by Age 40.

    I’ll tune the radio to Choose FI in the car, maybe just maybe I can wear her down…

    • Ether to FI

      Hey Mouse,

      I like the strategy, that is how I started. I would always play podcast and books whenever she was in the car. Even my kids started asking, “podcast?”. It has to become her idea. Don’t use my first strategy of shoving FI down your wife’s throat. It leads to vomiting all over you. Thank you for commenting.

  • Strong work, young grasshopper! I think many of us crusty older curmudgeons could only dream of being as together, as focused and as fortunate to have already flipped our spouse to join us as you seem to be.

    The are many doctor house blooper confessionals if you choose to look in the physician finance blogger universe, PoF being the case study that with time and a doctor income you can recover from most house mistakes.

    In the meantime, my wish list if I had it to do over ( for 2 adults and 2 kids):
    -2400 sq ft +/-200
    -near library
    -great “enclave” public schools
    – parks
    -public transportation or bike friendly
    -support system (family, spiritual community) nearby
    -near groceries (Costco, Trader Joe’s, etc)
    -one spare bedroom/office for visitors
    – open floor plan with good flow
    -designed to function for 99% of events (aim for utility in daily living, not hosting holidays, and you’ll be fine)

    Best of luck on your home, you are already ahead of the vast majority of your peers.

    Fondly,

    CD

    • Ether to FI

      Hey Crispy Doc,

      Your list is exactly the list I want. I want every room in my house lived in, or its just wasted and expensive space. I especially like the spare bedroom/office for visitors. I want a room with a murphy bed, that primarily functions as the office/homework/study room for everyone in the house. Thanks for your great comment as usual.

  • Aamir

    Love these posts! Helps set some goals and see what’s doable for those of us stil in residency.

    How have your Roth IRA account increased so much in value since the last post? Is that simply investig style/market returns because both IRA accounts have gone up more than the back door limit. Just wanting to make sure I’m not missing anything thanks!

    • Ether to FI

      Hey Aamir,

      It was a combination of depositing $5500 in each account since the last post and a small part due to market returns. We will front load next year in January. Most of our growth currently is from the sheer force of savings, the market has not started driving our sails yet. Thanks for commenting.

  • I would also look at a 5/1 ARM — fixed for the first 5 years and may offer a lower interest rate than the 15 year mortgage. That’s what I did wtih my residency condo.

    Also, be sure there are no prepayment penalties.

    Cheers!
    -PoF

    • Ether to FI

      Hey POF,

      That is an idea, I have thought about. I will probably just do the 15 year fixed due to the flexibility that would give if we have not paid it off at the 5-year mark. My primary concern with ARM’s is that interest rates have only one way to adjust currently which is up. Who knows what five years from now will bring. Thanks for commenting as always.

  • Gasem

    You have competing priorities. You want to pay the least while predicting the future need. You also don’t have teenagers as I understand it YET. When I bought my house I wanted something slightly above what the average earner could purchase, say available to the upper 35%. I didn’t buy the Dr house though they spent a year trying to sell me the Dr house. Dr houses are poison IMHO. I wanted a place I could sell at par value if the job evaporated and not take a haircut. That was my first goal, risk management. When I started we did trauma which later got farmed out to tertiary centers so I need to be close if I was going to sleep in my own bed. The bylaws said 30 min but I wanted to be a little closer. I did not want any part of a HOA. We get a lot of rain so local flooding was an issue. Schools are schools except for inner city train wrecks so I didn’t pay much attention to that criteria. There are 2 high schools either adequate. We wound up home schooling anyway and had to convert a room into an class room so a little larger house was a blessing.

    What I bought was 2 story 2400 sq ft under air on a couple acres with a pool unincorporated. The house was a builders home and had a few extra features. His garage stalls were extra long to fit his long truck. I enclosed the excess length moved a door and added a workshop for myself under air. We also had a 33×12 enclosed porch. I glassed that in tiled the floor, added air and turned that into a party room/gym so my 2400 turned into about 3200 for about an extra 5 grand after my modifications which was folded into the loan. I also added a spa house to the pool. The property already had a 40ft unattached out building/garage on the back of the lot. I knew this would be a primo selling point feature for the local market where 4×4’s and ATV’s boats etc abound. This house fit my lifestyle and was completely affordable. Since the mortgage was tax advantaged I just got a 15 year and paid it off on schedule and put my excess money into something that would pay me back aka a retirement portfolio. I set up the mortgage so it would end about the same time daughter #1 was headed to college so I would have no perceptible change in cash flow If I needed the extra money to pay for college. That was my backup plan for college. I had primary college accounts also which proved adequate.

    The point is the enemy of the good is the “better”. Getting cocky with this hack and that hack to shave $500 is a waste of time. Your house is where you live, not an investment so maximize the livability. If that costs a few bucks it’s well worth it. Plan out how a house is going to augment your life given the constraints of your life and go buy that house. Worry about the finance later. Don’t be stupid about your purchase but don’t focus on price over lifestyle advantages. Your lifestyle far outweighs in the long run. My house is worth about twice what I paid, from a financial perspective it’s a wash given taxes and upkeep.

    • Ether to FI

      Hey Gasem,

      Your wise words are on display as always. The consensus from all the comments seems to be around 2500 square feet, which you seemed to optimize to its full potential at a reasonable price. I am still looking for the house that will fit our lifestyle. I will let you know when I find it. Thanks for the comment.

  • It was my wife who introduced the idea of FIRE into our marriage about 18 months ago. I jumped all over the idea and went binge reading on blogs to learn more about it. She actually did retire from her teaching gig last summer. Although we have achieved FI, I am still working because I value the access to broader healthcare that I can get via my workplace insurance (I am living with a chronic illness). But I am definitely getting impatient with working and feeling that at some point I will take my chances with the marketplace insurance coverage.

    We bought our first and only house back in 2003 and paid it off last year. I think the biggest mistakes were jumping in too quickly and buying too big a house.

    We saw the house and had an offer on it 24 hours later. Our goal was to keep the price of the house down, but that meant we needed to go with an older house. We didn’t really appreciate all the work you need to put into maintenance and upkeep. I consider myself “hammer challenged” and in hindsight, we might have been better off just renting, because in the end of the day we hate the home maintenance part. Lots of times things wouldn’t get done purely because we didn’t want to make a phone call and have someone come out to do the work!

    As for it being too big, we were 26 at the time, just married and thought we would have kids. So we bought a 3,000 plus sq foot place. Well 16 years later we don’t have kids (decided not to), so at times big chunks of the house go empty (although the in-laws occasionally live with us when they are not traveling about).

    Good luck with the home purchase, and congrats on having your wife on board with FI(RE).

    Something to keep in mind about a smaller house….less stuff you have to buy and less crap you accumulate over the years!

    • Ether to FI

      Hey Dragon Guy,

      I like the term hammer challenged. We are leaning towards an updated house, even if it means a smaller house. The idea of constantly working on the house is not on my top ten list of things to do. Glad you and your wife are also on the same page. The housing search continues. Thank you for your input.

  • GRE blooming

    As R. Kiyosaki notes, your house is NOT an asset. It does not (unless AirBnb’ing or renting out a room) bring in Cashflow.

    I wish I had read CASHFLOW QUADRANT right after residency but, 13yrs after will have to do…

    Buy a house (esp a SFR dwelling) because of all of the great things it makes you feel– sense of permanence, enjoying good neighbor relations and sense of community, making changes to a place so its truly your own (not someone elses’ place) etc… but from a pure financial side– better off buying a investment property than your own house… or a hybrid– make that 1st house a DUPLEX, triplex or 4 plex then have those tenants pay your PITI whilst you sit pretty on the build up in equity…!

    If purchasing a house, get in for the 20% down and DON’T pay it down as fast as you can… rather, take that money you would have done in paying it off and use it wisely on investments… why pay down a 5% mortgage if you can earn 8-12% or more on a RE investment(classic arbitrage) … 8% is actually a fairly mediocre-poor return on a RE investment… plus many other major benefits to RE investing vs other spheres (Amortization (tenants paying down your mortgage), major tax benefits (passive income comes in a depreciation lets you essentially keep that cash tax free by paper write downs), hedge against inflation (RE prices over time rise at or above inflation historically), LEVERAGE (100k investment in stocks takes 100k (unless you are doing options)) vs 100k investment in RE would enable purcasing at 80% LTV of a 500k property… ) among many others…

    Good luck with the house and keep up the ideas of FIRE. Love it.

    PS this was written by a MD who is passionate about F.I.R.E. and mine would be slightly different acronym– Financial Independence via Real Estate (investing)…. esp large scale MFR in places it makes sense.

    • Ether to FI

      I am a big fan of the cashflow quadrant. Buying this house is definitely not an investment, its an enjoyable liability. I understand the argument to pay off the house slowly, but it does not fit into my modus operandi. I am happiest when I owe nothing to anyone. Therefore this house will be paid off as rapidly as possible. After that, I want to start investing in real estate for cash flow, so I might be reaching out to you. Thanks for the comments GRE blooming.

  • Amanda Leigh Stock

    If you are worried about mortgage interest, you could compare the cost to rent to the cost of the interest + maintenance over the five years. Might work out ok.

  • I grew up in a four-member family in a 1400 square foot house, and I don’t remember ever feeling low on space, particularly after my parents renovated the basement so we had a second family room/den. And that was positively luxurious compared to the 1500 square foot home where my Dad had lived with his four siblings and parents (with one bathroom!). Society keeps inflating our sense of how much home we need, even though we quickly get used to the space we’re living in. Smaller homes also come with the advantage of taking less time to clean and generally attracting less clutter.

    Whatever you choose, good luck with it! I have been postponing buying a home for years, but at some point I will follow suit and finally do it.

    • Ether to FI

      You just highlighted my internal struggle. More space= more things. I was the kid who would throw my parent’s things away because I hated clutter. They were not too happy with their mini minimalist. When we make the final decision on the home purchase, we will be focused on making sure all the space we buy is used. Thanks for your thoughts.

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