Wednesday, August 24, 2016

A financial evaluation of moving

As you've probably read from my previous couple of posts on this topic, we are trying to decide if we will move back to Seattle at the end of the school year, or stay in California. There are a variety of factors to understand, but I'm going to evaluate only the financial ones in this post, as they are the most clear & measurable.

If we move back to our house in Seattle, what changes financially? To build any sort of a model, I've made assumptions. I've tried to call them out, but it's not a perfect science - more of an approximate.

Total Budget Numbers:

If we stay in California (assuming we keep our housing price fixed at $5200/month, which, is super conservative & assumes we don't buy & continue to find places to rent) - monthly budget = $14,750. Our monthly budget includes all of our standard fixed monthly expenses + amortized yearly expenses like summer camps, gifts, travel, etc.

If we move back to Seattle, and use our currently earmarked "California house down payment fund" to pay off our HELOC (because, we don't need to buy another primary residence) - monthly budget =$8,820.  

What's driving the $5,930 difference between the two budgets?

  • Paying off our HELOC on our Seattle house frees up $1,000/month
  • Our primary residence expense reduced from $5,200/month (CA rent) to $3,000/month frees up $2,200/month. 
  • We stop paying for expenses on our Seattle house (now categorized as "primary residence expense"), as this is the gap not made up for by our current renters. This frees up $1,000/month. 
  • Because we will no longer need such a significant salary for me to save for a down payment aggressively, I plan to find a job where I can work around school hours. This saves $1,100/month in childcare, but does still include summer camps. 
  • It also includes a laundry list of other small savings, like less travel (closer to family), less frequent house cleaning (I'm assumed to be working a more flexible job), 

The numbers don't completely add up, because some things are more expensive in Seattle: gas (we drive more, to see my parents, visit our vacation house, ski, etc) 

You'll notice that I've only tried to estimate the cost/expense side here, and I've made no assumptions about income. That's because there are too many moving parts around the earning side. 1) we won't be paying state taxes 2) I won't be earning at the same level, which should reduce our federal taxes, and 3) we don't know how much M will be making until he actively starts searching for other jobs. 

The income side is definitely less predictable, but what we do know is that moving to Seattle reduces our required monthly income by a giant margin - nearly $6000. This provides a lot of options & flexibility for my work, schedule & our family life. If we chose to, we could also use the rest of our "California down payment savings" and either completely pay off our vacation house, or greatly reduce the mortgage principal. I think we'd lean more toward buying an investment/rental house, though with the cash flow. 

As you can see, there is a very compelling financial decision to be made for moving. The rest of the picture, of course, is that M & I both have stock through our employers that vest every month. Because of that, leaving at any time means we void all future vests, which is a staggering sum of money.

For me, money is a means to an end that will allow us more flexibility & a better lifestyle. I'm hoping that we can utilize the time we've spent in California renting & turn that saved down payment money into an opportunity for us to need less monthly income. I'm very excited about the possibilities, but again, there is more to this conversation than just money. More to come on how we're thinking about all of this!


  1. It is tough to leave high paying jobs...that said lifestyle improvement is hard to put a price on. We did it and our lifestyle today is loads better than it was when we made a lot of money. Part of that came through self-employment though as we have a lot more freedom there as well. Very tough decisions my friend!

    1. So difficult to leave - you are correct on both accounts. Hard to measure the lifestyle improvement, particularly while it's being held up against a very direct income measure.

  2. Looking at just the financial I would definitely be moving back to WA. If your renters aren't covering your carrying cost by $1K that's $12K a year of your income you are siphoning off. $12K may not worry you or be a big deal but most people(including me)would have second thoughts about that. 8-)
    With that, the exorbitant CA rent you pay each year, plus a vacation home mortgage, together it's a huge amount of money, even if you do have higher salaries in CA.

    I also think a wise move, if you go back to WA and have $6K less in living expenses per month would be to pay some mortgage principle off on either the vacation or the primary WA residence rather than taking on more debt with a rental property with that monthly savings. At your ages(and with your health issue)aren't you worried in the least about overextending yourselves financially? When you talked about buying a home in CA earlier in the year and taking on one of those jumbo sized mortgages without divesting any of your other properties(and the mortgages that go along with them)I really was concerned about what your levels of debt would become if that came to pass.

    Things happen in life you can't see coming and as you move into your 40's and 50's it might be prudent to lighten the debt load so you have more to save and invest. I know it's not consumer debt but still, you have 2 college accounts to fund(and your kids are only 8 or 9 years from needing them and that time will go me!)plus all this other mortgage debt.

    If I was in your situation I might pay a few hundred dollars to go get the advise of a CFP/certified financial planner who charges by the hour and is not just a glorified stock seller working on commission. He/she might give you a different perspective on how you are handling your money. Just getting advise from someone qualified to give it may aid you in making the best financial decisions for y'all going forward.

    Do you lose the company stock you have now if you leave? If not, why worry about stocks you haven't earned yet? I don't think that's a good enough reason to stay at a job, given all the other reasons to leave CA. Money is not the end all and be all in life.

    Also, while you may spend more living in WA on seeing parents/family, etc. no longer having traveling expenses from CA to WA for this expense seems to balance those costs out somewhat.

    These are just my initial thoughts after reading your post...worth about what they cost you. lolz

    1. All good points, thanks for raising.

      From our side, we have just over 40% of the property paid off, so I'm not terribly worried about the what ifs on the mortgages. Worst case, we would sell one of the properties. We also have saved quite a bit for retirement - just a smidge under $1M, and about $60K in the kids college accounts. Any time you have this much invested in real estate, it's a risk. What if there was an earthquake or a tsunami that's not covered by homeowners insurance. . . it's not risk free. But, assuming nothing as tragic as all that,I feel like we are pretty solid.

      Oh, and as soon as we ran the numbers on a CA house, it was clear that we needed to divest the Seattle house. :-)

      We are considering all of the real estate as part of our investment/potential retirement portfolio. So many decisions!

      And yes, I'm obviously very aligned with you on moving somewhere less expensive. ;-)

  3. I would probably move back because it seems like the only way you will be able to quit your job. The other thing you don't mention in this post is if you don't sell within 3 years of moving is that the gain on your WA house become taxable when you do sell. I would either move back or sell and put that money into a CA house. If the gain is $500,000 and you are taxed at the 40% bracket, that would be $200,000 for Uncle Sam. I couldn't stomach paying that much.

    1. Agree, we need to figure that out as well. We're aware of the tax limitation. It's graduated, so we still qualify for part of the deduction, but not the full amount. Either way, not excited about handing that over to the government either. ;-) Another great financial motivation to move.