Our Worst Financial Mistake (Thus Far)


In May 2006, we sold our Chicago bungalow and went to live in England for Will’s ex-pat assignment through his work.  Initially we were slightly concerned that we would not be able to sell our house quickly since we shared a driveway with our neighbor–an oddity of a few areas in Chicago neighborhoods which didn’t have alleyway garages.  We were delighted when we received, after our first open house, an offer very close to the asking price.  On the whole, our Chicago house brought us a decent profit after only six years of living in it.

We fear that this relatively successful housing experience might have produced too-rosy an impression on our minds about the prospect of home ownership.  After all, it was the first home Will and I bought as a couple–right before we got married–and we were able to sell it without any of the hassle (well, ok, maybe just a little hassle) we expected would come along with the process of unloading a house right before moving abroad for a year.  We were ecstatic to be free and in the clear, without a mortgage, without the responsibilities of home maintenance–and that constant yard work!

As the ex-pat assignment neared its conclusion, we started to shop around for another home.  We came back to the Chicago area in February for a home-shopping trip, but, of course, we had no clue in Spring of 2007 what catastrophe was about to hit the housing market…

Suffice it to say that, given only a profitable experience with the housing market, we plunged right in and blithely purchased our second home together: a new construction mid-rise condominium in a suburb bordering Chicago.  (Every single element of that description now would make us run screaming away from the housing market!)

To date, this purchase has been, by far, our worst financial mistake, one that we rue every single day!

In case others are contemplating a (rash) decision on a home purchase, here are a few items that we would suggest for (re-)consideration:

  • Why are you buying that home?  We realize that a growing family might need a house or at least a townhouse where you need not fear that your neighbors would complain about the noise your children make as they go about their daily business of growing up–playing, stomping, banging on pots and pans, etc.  Maybe you have dogs that need to run around and need a back yard?  But if you are buying that home because EVERYONE ELSE buys a home at your age/economic level/social circle, then you should re-examine whether you really NEED/WANT a major purchase that could possibly drag you down more than can be offset by whatever break you might get on your taxes from interest payments and property tax credit.
  • “Real estate,” regardless of the fact that it IS tangible and concrete–ie, unlike stocks and bonds–does not necessarily produce a profit.  Like they say about past success not being an indicator of future earnings, we’ve discovered that our profit from the first house now pales in comparison to the loss we’re taking on our second purchase.  If we were to sell our condo right now, at the market price for it, we would we able to get only 55% of the price we paid for it.  That’s up slightly from 1-2 years ago when we could only have gotten  about 40-45% of our purchase price, but no one wants to buy a home and hold onto it for 10 years (we purchased in May 2007), so that we could sell it for 55% of what we paid for it, right?  Which leads to…
  • Buying a home can tie you down SO much more than renting.  After we walked the Camino de Santiago in the summer of 2013, we realized that we were interested in pursuing a different sort of a lifestyle–less work, more travel, greater flexibility, etc.  But, alas, we have a home that we cannot unload without a huge financial loss!  Thus, we are stuck in limbo, wishing to be elsewhere (check out our “Retiring Abroad Series“) but also wanting to avoid a major fiscal mistake.  Because, after all, if we are patient and hold on to the property, perhaps the market will turn around enough for us to take ONLY a 20-30% loss…?  (In case you do not know, Chicago-area housing, especially for new construction condominiums, never really rebounded the way other housing markets elsewhere have.)
  • But it’s also important to be clear-eyed about what you’re losing while hoping for housing prices to rise back up in your area.  Part of the problem with our condo is that we have some structural problems left unfixed by our developers–who quickly absconded to another country once the housing crisis hit.  With no other recourse to getting our problems fixed, our home owners’ association has been levying hefty special assessments for many years now (and will continue to do so for the foreseeable future)!  So perhaps selling the condo a few years ago at 40-45% of our original purchasing price was possibly the wise option after all?  In other words, it’s crucial that we recognize when there are apples-to-oranges comparisons of financial hits we’re taking.

The only thing that makes this home-ownership (slightly) less nightmarish is that we (mostly) enjoy living in our unit and in our town.  If those positive factors also showed up in the negative column, we really should have left long ago, despite the steep costs of cutting our losses…

 

Posted in Home, Money, Retirement Planning | Leave a comment

It’s True: You Do Spend More Money When Not Working!

It has been an embarrassingly long 6 months or so since we last posted, and there are lots of reasons why this website has been dormant for so long.  The last time we wrote, there were unresolved questions about exactly what path Will would take: Leave work a year earlier than originally planned, or uproot us to the west coast to keep working for the next couple of years at least?  Well, we did decide to take the package buy-out!

Will’s last day with his company of 15 years was 12/31/2016.  And, frankly, it was absolutely fabulous for the next 6 weeks or so!  It seemed that every week–sometimes twice in one week–a check got deposited into our bank account.  Final regular pay, part of separation pay, rest of buy out, unused vacation pay, quarterly bonus, last year’s annual bonus.  You get the idea.  Our thought: We should do this taking a buy-out thing more often!

Of course, his regular paychecks stopped after 12/31, but we didn’t take much notice of that since other checks were coming in to compensate for their losses.  And then after about mid-February, pay-out-related direct deposits stopped as well.  Will even got an email from the HR person assigned to his case that he wouldn’t be hearing from her anymore.  While it was a very short acquaintance of 6 weeks or so–and all by email–it seemed like we were losing a kind and beneficent ally, and we mourned the import behind the receipt of that final email.

Hard truth: We needed to face the fact that we might be past the accumulation phase of our lives.  Given the younger-trending workers in the high-tech industry, whether Will goes back to work full time might not be up to him…

It felt slightly disorienting–and admittedly unpleasant–to wrap our head around the idea that, barring extraordinary investment gains, our net worth would only depreciate from this point forward.  While I am still working for now, my salary would essentially be going toward financing our living expenses rather than adding to our savings.  And besides, how much longer would I work if Will decided to stay “retired” past his “gap year”?

Then another little problem asserted itself.  Will now had “time to kill” before my Spring semester of teaching was over in May.  So he planned a bucket-list type bike trip across the country.  (At the top of the post is his loaded-down bike as it takes a ferry ride in Alabama.)

Wait, there’s more!  Since I was granted my sabbatical leave (full year at half-pay), we would only have half my regular income starting August but more “time off” to spend money.  Wanting to take full advantage of our time off together–just in case Will decided to go back to work after my sabbatical was over–we outlined some grandiose plans that included a couple of lengthy international trips and a cross-country road-trip (this time, together, in a car, with Katie!).

While this all sounds like “first-world problems,” it’s probably a learning curve that many new retirees face on some level: Wanting to do everything possible, as soon as possible, while we are youngest and most able to enjoy some time off–but trying not to go broke in the process.

We clearly need to scale back our ambitions, or we will not be able to finance our retirement.  We pledged to take the next few weeks to figure out what reasonable modifications we can make to our extravagant plans.  On one hand, we want to “make the most” of possibly our ONE year away from full-time work.  On the other hand, if this year turns out to be the first year of our possibly 40+ years of retirement, we need to set the right tone of moderation and frugality.

How to find that balance?

 

 

Posted in Money, Retirement Planning, Travel | Leave a comment

Wanting an Uncomplicated Path towards FIRE

20150913_090215

Will and I walk our dog Katie on this path at least once a day, and, really, right about now, we could use a straight and uncomplicated path like this one.  No decisions, nor offshoots.  Just flowers happily in bloom on either side.

It turns out that we’re not great with making choices because we fear–don’t others?–that we might make the wrong choice.  After all, having choices means that there are options.  That means that you are making a choice FOR a particular option and thereby choosing AGAINST the other option.  And, no, choosing both is untenable.

(As a side note, I did try that method once when we were on a cruise to Alaska.  At dinner one night I asked my server which he recommended between the crab legs or the lobster tail.  It being a cruise, they brought out BOTH main courses for me.  Since I cannot let good food go to waste, I ended up eating both.  Sadly, I didn’t learn my lesson then and found myself repeating the fiasco with the dessert choice.  I came back from the cruise seven pounds heavier and resolved never to do that again–both cruising, AND “choosing” both options.)

The problem is that our FIRE journey had been fairly straight-forward up to now.  Once we discovered wonderful personal finance blogs and the FIRE community, we never looked back.  We set up our Vanguard accounts, increased our investments, reduced our spending, and had a wonderful time living this new virtuous life of greater frugality.  We very much enjoyed seeing that countdown clock go down every day, and we even came up with ways we could lower that number even more substantially.  All was great!

Then we unexpectedly hit a snag in the form of a fork in the path we were walking towards.  I mentioned in another post that we might be retiring one year earlier or another couple of years later than we originally planned on.  Even more recently, I talked about the idea of taking a “gap” year.  It all has to do with whether or not Will is ready to face either an earlier retirement or a transfer to another (and more expensive) part of the country.

So, we are working out all the twists and turns:

Money: Right now, we have less than we planned to have for our original date of FIRE.  And, of course, that also means another year we have to fund without Will’s high-tech salary.  On the other hand, many people would claim that we do have enough to live on, just not enough for us to feel completely comfortable about it.  Is this just another manifestation of the dreaded “one more year syndrome”?

Health Insurance: In order to cover exorbitant costs of medical insurance these extra years without Will’s salary, I will need to continue to work another six years.  Or, we will need to find something reasonable with Affordable Care Act.  Right now, those prices–for our current income level–seem a bit high, and not something we wanted to pour our retirement savings into.

Boredom: I know Will is going to get bored if he’s the only one retired.  His friends are still working, many probably for at least another 15 years.  I will either need to work (for insurance–see above) or we will need to spend down some of our hard-earned savings.  While he has some bucket list items planned (bike across America–yay!), he knows that these items won’t cover 45 years of retirement.  What will he DO while he is the only person retired from work?

Sense of Self: Will is fairly progressive, but he lives in a society that is still patriarchal and has traditional perspectives about whether a husband should enjoy leisure while his same-aged wife is working full time to provide household income and insurance.  Will he suffer real or imagined slings and arrows of self-doubt once he actually retires?

Career Advancement: On the other hand, if he did take the transfer, he most likely would be advancing in his career, with a nicer title and more authority.  Presumably he would be earning more as well.  And, in any case, his salary will be higher (technically) to account for the fact that the new location has a higher cost-of-living.

Life Dreams: Lately we are turning over in our minds the idea that we are given this one life.  What should we do with this life?  Surely it wasn’t to sit in meetings 80% of our working hours?  Aside from bucket list items, shouldn’t there be larger goals we want to pursue?  And is it even possible to figure out what we want to do and where we want to go and who we really want to be when so much of our life-energy now is taken up with work?

As you can see from the progression of the posts over the past few weeks, we are gearing ourselves up this earlier-than-expected retirement scenario of Will’s.  It’s just not easy though to pull that plug…

 

Posted in Home, Money, Retirement Planning | Leave a comment

How We Had Our Lowest Monthly Spend in a Year!

20160904_181928

We’d been keeping track of our expenses as per usual, but the final results still surprised us.

Every grocery shopping trip, every massive Costco run, every fill-up of gas, etc. got duly recorded, but August turned out to be our least expensive month in a long, long, time.  Sadly, we’re lacking readily available computerized records earlier than January 2015 (and I’m too lazy to dig up the paper records), but we spent less this past than any month in 2015 and 2016.  By a substantial margin…

How did this come about?  Here’s a post-mortem of sorts, and the findings–when not cringe-worthy for showing us our excesses–are both laudable and promising.

We Actually Returned Unwanted Items!

First, the shameful truth: We didn’t always return items that did not work out for us.

Perhaps it’s because we frowned upon people at Costco who returned clothing they’d worn for months or perishable grocery for the full purchase price–come on, seriously?–and we didn’t want to be like them.  (And, really, we do think that some people abuse the generous return policies not generally found in other stores or countries.  Don’t try that elsewhere before asking first!)

But perhaps we’d gone to the other extreme of thinking that we won’t be like those annoying other consumers.  There were times when we decided that we’ll live with our mistake purchase as due punishment for having made a bad buy.  We sometimes rationalized it too by saying that the clothing we got on a huge sale would be welcomed (with their price tag still on them!) by Goodwill or Salvation Army or Amvets.  They will go to some good use, etc.  Or, we got too lazy and never got around to making the return and then felt a bit sheepish about returning brand new items six months after purchase.

Once we started counting our dollars more (yes, we skipped counting pennies), we decided that we can certainly return some items without necessarily turning us into consumer parasites.  So we returned brand new sheets that didn’t fit our mattress.  We returned two curtain panels (out of four) once we discovered that we could make-do with another set of two we already had.  (Not quite perfectly matching, but who looks at hem-lengths of sheer curtain panels anyway?)  We returned a six-pair package of cotton shoe liners when we actually opened the package and saw that they had annoying adhesive inside the liners that were not advertised on the outside.  Perhaps we could live with one pair we didn’t want to wear, but why be stuck with six?  So the whole package got returned.

Well, lo and behold, as we became more picky with what we kept, our expenses dropped as well.

We Are Optimizing the Way We Eat Out

Last year, we came across the revelation that we tended to spend less money AND enjoy our restaurant experiences more when we were intentional about when, where, why, and how often we went out to restaurants.  That has made all the difference in dramatic reductions in our dining budget.

This year, we went further in optimizing our dining experiences.  An earlier post talks about how we opted for nice lunches instead of for more expensive dinners, how we frequented BYO restaurants and familiarized ourselves with which nights each of our favorite restaurants had prix-fixe menus available.

Another option we’re taking advantage of involves restaurants, microbreweries, and “beer markets” that allow you to bring in food from outside while enjoying their alcoholic beverages.  Our most recent evening out involved us getting some wonderful take-out BBQ and bringing it over–two doors down–to a place that offered a vast selection of beers.

We sat outside at an outdoor patio table, and Will contentedly sipped a session IPA while Katie lay by his foot with a bowl of water at her side (courtesy of the restaurant).  Spare ribs, “burnt ends,” beef brisket, pickles, caramelized brussels sprouts, sweet potato casserole, and a Smores pie sandwich=$25.  Two specialty beers plus tip=$14.  We’d gladly spend another $39 for such fulfilling experiences, and we know that we’ve spent several times that much for dinners we didn’t enjoy nearly as much.

We’re Discovering that Entertainment Doesn’t Have to be Costly

Above, you can see a photo from our latest trip to downtown Chicago.  Yes, it was just yesterday (Sunday before Labor Day) so not part of our August budget.  But still, it’s good to see that we’re carrying over our lessons month-to-month.

In any case, the picture above is from the Jazz Festival in Chicago’s Millennium Park, on the lawn of the beautiful Pritzker Pavilion.

Two round-trip rides on the Chicago Transit Authority=$9 for the two of us.

12-piece fried chicken dinner (with rolls and a pound each of potato salad, cole slaw, and macaroni salad), several bunches of organic grapes, and donut holes for dessert=$26 to feed us and our three friends.

Two bottles of wine=Free!  Well, not exactly free since we purchased them at some point in our lives, but it was good to be able to bring them to our entertainment rather than having to purchase over-priced and inferior wine at the concert.

Free world-class jazz concerts, good friends, a warm early September day, plentiful food and drinks for $35.  Why spend more?

Posted in Food, Home, Money | Leave a comment

Some Do’s and Don’t’s of Traveling Abroad…

20160829_180346

It was a conversation we were to remember with bitter irony for weeks–months, years–afterwards.

We had just arrived in Spain and gotten ourselves settled in a nicer-than-expected Barcelona hotel.  We were excited about getting a three-course lunch and then sightseeing the rest of the afternoon.  Once we figured out the hotel room safe, Will asked if I wanted to put anything in there aside from our passports.  I was about to put my wallet in as well, but he asked if I might not want it with me.  I wasn’t going to carry a separate purse, but he offered to carry our messenger bag with our travel guidebooks and camera and put my wallet inside it as well.  Laughing (oh, how we regret this now), I impishly replied: “Well, only if you promise not to let it get stolen.”

Well, I think you all know what happened that day.  The details are irrelevant–and a bit embarrassing and painful to recall.  Let it suffice to say that we came to no harm, and that we didn’t even realize we were being robbed as we sat in a crowded and noisy Barcelona restaurant, enjoying our gourmet meals.  Will had the bag draped behind his chair, and a pair of men simply cut the bag’s strap from behind.  Precise and well-executed.

Of course, there are several lessons to be learned: Be aware of your surroundings, be vigilant in a new city, lock up your valuables in a hotel safe (duh!), and hold on to your bag!

But aside from these obvious lessons, there are a few more as well:

DON’T BE SMUG ABOUT YOUR TRAVEL EXPERTISE

We readily admit that EVERYONE warned us to be careful in Barcelona.  We loved the city, but it was one that many guidebooks–and friends and colleagues–rated as the western European city in which one is most likely to become a victim of theft.  But all that just rolled off our backs.

The Spain trip was coming at the very end of a year-long stay in England, and we’d already visited Norway, Ireland, France, Italy, Switzerland, Wales, Scotland, Belgium, Austria, and goodness knows how many areas within England proper.  We had become so “expert” at flying in and out of Stansted, using Ryanair, familiarizing ourselves with each different city’s metro system within hours of arriving.  Surely, we need not be reminded to be careful!

Hopefully we didn’t really think that we were immune to being robbed, but we weren’t really registering the possibility either.  Never again will we be so complacent because…

YOU FEEL PRETTY STUPID WHEN YOU’RE FACED WITH YOUR STUPIDITY

Which is exactly what happened when we were filling out a report on the theft.  I’m not sure why we even bothered to take the time out to go to the police.  I believe we thought we needed some proof of theft so that we would have an easier time getting me a new driver’s license, new bank card in England, and expediting new credit cards to us.  In any case, we took a cab (thank goodness Will still had his wallet on his person), and we visited the Barcelona police.

We were interviewed by a young woman who spoke excellent English–a fact which made our own deficiency in Spanish more humiliating.  Will, who actually knew some Spanish, was spared most of the ridicule, but I felt pretty stupid during the whole process as she queried whether it’s possible I really did not know the language of a country I planned on visiting for two weeks.  (I didn’t really feel it was the appropriate time to mention that I spoke some French and that I could read a little Latin.  And my first language was actually Korean.  But, all that aside, it was indeed true that I did not know any Spanish.)

Then she asked us to catalogue everything that was inside the stolen bag, and approximate the value.  This part was even worse.  Digital camera (it was 2007, and we didn’t all take pictures with our phones), guidebooks, but most of all my wallet.  Containing?  A US Driver’s license, several credit and debit cards, and way too much cash in pounds and euros.  (In our defense, we’d JUST arrived in Spain from England and had gotten some money out.  Thus, we had substantial amounts in both currencies.)  She asked, incredulous: “And you were carrying all that in your bag?”

We left the station knowing that we had been idiotic, and that nothing could quite save us from our own stupidity.

IT’S INTERESTING TO SEE A CITY AS A LOCAL WOULD

Well, it was clear that we weren’t going to get ANYTHING back.  So that meant that we now needed to purchase new items: new bag and camera to start with.  Our second day in Barcelona had us shopping, not as tourists who fancied a memento but rather as people who actually NEEDED these items.

Instead of tourist areas, we sought more reasonable prices at mid-level department stores frequented by locals.  Would you believe that there is a lot LESS English spoken there than in tourist areas?  We found ourselves haltingly explaining what happened to us–with urgent references to our pocketbook Spanish phrase book–and were heartened to discover that hardened sales clerks were immediately more sympathetic once they found out why these obvious tourists required a bag and a camera.

In retrospect, Will and I actually enjoyed our interactions that came about because of the theft.  We too often confine ourselves to the sightseeing areas, and so we don’t really ever have contact with people who don’t immediately switch to flawless English and who don’t really believe that their livelihoods depend on pleasing tourists.

SUCH EXPERIENCES ALLOW US TO MAKE CONNECTIONS WITH LOCALS

A few days later, we were in Granada to visit the wonderful Alhambra.  On a wet and dreary afternoon, Will and I took respite in a tea house for a break from sightseeing and the inclement weather. To dry our wet umbrella a bit, we hung it off a table ledge–though Will’s new bag was plastered to his body.  (Yes, yes, closing the stable door after the horses are gone.  Tell us something we don’t know.)

An elderly lady who was by herself seemed concerned.  She pointed to the umbrella and was clearly expressing her worry that some nasty no-good individual would come along and swipe our (5 euro) umbrella.  Ah, how thoughtful of her.

My Spanish having vastly improved with the repeated use of a few key words in Barcelona department stores, I engaged our new friend in discussion.

I started, “En sábado” (on Saturday), “en Barcelona, nos han robado!” (some no doubt wrong verb tense of “we were robbed”).

She gasped, and I warmed to my theme.

“Mi bolso,” I declared, almost proud to produce something so grand as the theft of a purse!  She repeated, aghast at such treachery, such tragedy, “Bolso?!”

I nodded, sad but sage with experience.  Then I muttered uncharitably under by breath, “Mi marido es stupido.”

 

 

Posted in Travel | Leave a comment