Categories
Frugality House Hacking

2020 Financial Goals

Our Current Housing Situation

This year our rent is due to go up by $100, bringing it to around $1460.

A few details about our living expenses:

We rent a 3-bedroom house on the outskirts of Portland with a fully-fenced front yard and backyard.

Call it hedonic adaptation, but we’re very attached to our 3-bedroom, no roommate situation. Due to our very different wages, my boyfriend and I split the rent about 36/64. That brings my rent payment to $864 per month.

Cheap for what I get, but also more than I want to be paying.

The two extra rooms we have function as:

  1. A guest bedroom/art studio/office (The Multipotentialite Room) We usually have 1-2 overnight guests per month. This room handy saves me from crawling over air mattresses in the living room when people stay over. (Also, it keeps me sane because I need my introverted quiet time in the mornings.)
    I also use this room to set up my folding craft table; I use it for sewing, watercoloring, calligraphy, etc. When I meet with freelance clients over video chat or work from home, this room is my go-to.
  2. A recording studio My boyfriend is a musician and has his recording equipment set up in this room. When we have more than one guest staying with us at a time, they are wedged on the floor between his guitar amps and desk.

The Goal

I want to figure out a way for us to lower — if not eliminate — our housing expense. My ultimate goal is for us to cash flow our house; i.e. our tenants or roommates would cover the mortgage, leaving us some cash left over as profit.

Having a monthly rent payment this high has been getting in the way of my other financial goals. One of those goals is to achieve a 50% savings rate, allowing me to retire in my 40s.

To this point, I’m able to put between $1000-1700 away per month out of my $3300-ish after-tax income. (I’m an hourly employee, so the figures can vary.)

The Plan: Save for a down payment

This year, I’m going to reduce my Roth IRA contribution to start saving for a down payment. I want to pursue either a house hacking situation, or purchase a duplex or triplex for ongoing rental income.

I’ve found multifamily homes in the area ranging from $235,000-375,000. With an FHA loan, I need at least $8,225 for a down payment.

I’m going to break that up into two rounds of saving:

  1. $5,000 from January-June.
  2. $5,000 from July-December

(Mini goals make the world go round.)

Screenshot from YNAB budgeting app. Shows that savings goal for $5000 by June 1 is 31% complete but underfunded by $88.68 for this month.
My savings goal set up in the YNAB app. I’m underfunded this month because I accidentally left my automatic transfer to my Roth IRA active. Ooops. 😬

My Holdups

I’m unsure of how to balance my retirement contributions right now. I want to max out my Roth IRA for the second year in a row. But continuing to do that while I save for a home will slow down my ability to save for a down payment. (Especially when we’re planning a Hawaii trip win June with some family members.)

My Dave Ramsey roots tell me to put retirement on hold while saving for a down payment. On the other hand, the math nerd side of me doesn’t want to pull entirely out of the market.

I’ll probably end up throwing a little bit into my IRA every month. I don’t want to miss out on the magic of compounding interest.

Then more questions arise:

Do I try to look for a higher paying job?

Do I do freelance work to bring in extra cash to throw at my house savings?

I’m a huge proponent of hobbies, free time, and the whole anti-work movement in general. Thinking about selling even more of my time for extra cash hurts my heart.

Then — where are we even wanting to live?

We’ve been talking about leaving Portland for years now, but we’re still here because of my boyfriend’s music career. So while he’s still in the band, we have no definite action plan.

While I don’t have any answers yet, I know that our housing payment is a problem that needs fixing. And the only solution that makes sense to me is to start saving for something cheaper and income-generating.