List out All Possible Next Year Scenarios

There are a number of binary decisions I need to be intentional about making in the next year, so I need to be list them out and figure out what they imply so that I can prepare for them instead of reacting to surprises.

I.  Do I move out of the condo?

  • yes [need at least $40k for any scenario]
    • $10k in moving costs
    • rent or sell it?
      • rent
        • requires being a landlord
        • will require some money to fix it up some to fetch the best rental price
        • provides a net monthly income of ~$1500.  This is subject to my marginal income tax rate (42% combine fed + state).  i can write off depreciation, but since it’s based on the sales price and not the market value, probably not that great.  In this case, I’d want to spend as much of the $1500 on deductible net worth building activities, but I’m not sure what those would be if the only context is the condo.
      • sell
        • will require paying the commission on the sale ($30k ish)
        • will require money to fix it up to get the best price
        • will require me to decide what to do w/ ~$370k
        • i will lose the long term low cost property tax advantage
        • unlikely the market will drop down to 2009 levels again, but likely the market will drop some… more about that it simply can’t continue to increase at rates comparable to long term stock market return
        • Will be close to the $250k limit on tax free gains
        • i can still rent a room in a 2 bedroom for $1000
        • i can still start a business w/ low risk
    • what do i do with the furniture?
      • sell it
        • probably not worth it to refinish
        • i get what i get
      • store it
        • storage will probably damage it more due to temps
        • storage costs money, increasing the already absurd price i paid for it
      • sell some of it and store my favorite pieces
        • i really would like the gentleman’s chest to look at when I’m a geezer
  • no [requires the least effort, but I can’t pretend I’m happy here… so  I think it’s either build the life I want or gtfo]
    • fixed cost is $550
    • limited to jobs within 30 min drive of San Jose (i.e. Palo Alto or south)
    • I’m not thrilled by San Jose.  i don’t want to be here in 5 years.
    • I can strip down costs and retire early but it would take 10 years to save $500k
    • Requires me to live a pretty simple life due to high cost of Living in SJ
    • If I stayed here another year or two, it would be easy to build up a big cash hoard, and it wouldn’t be the end of the world.
    • If I stay in the condo, I’m likely not getting married b/c my spouse likely wouldn’t be here.

II.  Do I think about getting married in the near term?

  • no
    • are you going to date?
      • yes
        • this will cost money
        • what kind of person dates a 32 y/o nerd they don’t want to marry?
      • no
        • you will be miserable
        • lol yeah right
    • what’s your social life plan?
      • meetups
      • join pretentious Cornell Club / tennis club or something
  • yes
    • make babes?
      • yes
        • babies are expensive, in terms of time and money ($15k birth, $1100 monthly)
          • eh you can afford a baby, but it will delay early retirement if your wife is low income or high expense
        • babies are fun after the poop years are over
        • babies will probably force you out of the bay area b/c lifestyle wise, you really want a house and housing in the bay area will always be a crap deal
      • no
        • who is going to hang out with you when you’re a geezer?
        • without babies, you can drink more, travel more, etc.
          • you suck at drinking who are we kidding?
          • traveling is pretty cool… but it’s just a temporary break from your normal life
          • warm relationships are the key to happiness, and you can’t have a warm relationship with your spare time and money
    • weddings take time and money
      • prenup
        • pre-negotiate divorce settlement, potential kid custody, inheritance, etc.
      • let’s just assume I’d need $10k for a ring, a wedding, a honeymoon, because that’s double what I actually think the limit should be ($5k).
    • when the honeymoon is over
      • ok, likely you’re not going to be in SJ anymore, so you need a new job
      • if you’re not in SJ, then probably you just want to sell the condo ($30k)

III.  Do I focus on starting a business or on increasing employed compensation?

  • start business
    • decrease fixed costs
    • move somewhere cheaper
    • i would much rather do this than anything else.
  • increase compensation
    • graduate degree?
      • mba
        • more long term useful
      • technical masters
        • more $ with less change in day to day work type
    • more short term money but less long term preparation
    • clearly, if i could be financially independent in 2 years, i would do this.  so… what is the limit?  3 years?  5 years?

 

Ok, so what did we discover?  The marriage/baby scenario would cost at least $70k.  $30k to sell the condo, and let’s just say $15k for the wedding, $15k for a baby, and $10k to move.  It would also require me to find a new job in a different part of the country, one that probably pays less than my current job.  That $70k could also be used to start a business… but I think being in a stable long term relationship has such tremendous value that the $70k isn’t really the issue.

If I want to get married, then I shouldn’t bother paying off the condo b/c I’ll need the money to sell the condo, get married, move, make baby, etc.  I’d have a net worth around $450k or so.  Dual income, probably around $200k.  But with only one person working at like $50k, the monthly budget would def be tight for a few years if I was going to start a business.  Retirement maxing definitely wouldn’t happen, but we’d have enough in savings that we wouldn’t be anywhere close to a danger zone.

  1.  Work 2 more years and maybe sell condo for total of $600k net worth.  live somewhere cheap and try business until death.
  2. Sell condo now, work 2 years, and have $600k with less risk.  live somewhere cheap and try business until death.  Freedom to move.  Business makes family harder.
  3. Stay in condo, work for 1 more year, live in condo 2 years on $48k.  get job if fail.
  4. stay in condo, work for 1 more year, get part time contract work and start business in free time.
  5. rent condo, move in with sister
  6. sell condo, move in with sister

 

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