One house, one spouse, one job
I recently posted a graph of my net worth (see bel0w) since I started tracking it in 2014 on twitter. Despite becoming an attending in 2012, I did not track my net worth early on. As you can see, it has been a slow and steady climb to a positive net worth. I posted this and the White Coat Investor stated this is a good case to discuss one house, one spouse, one job. A mantra for stability and progress.
See while I may have started in 2012, I have had 3 houses, 2 jobs, and 1 spouse. Of these, the houses led to my biggest financial mistakes, and even those were not terrible. So without further discussion let us go over the benefits and downfalls of these.
1 house? Nope 3 homes!
The mantra goes 1 house. This is because homes are expensive. They are expensive to buy (down payment, taxes, fees, titles, etc.), expensive to maintain (we have dropped a lot of cash on our recent home), and even more expensive to sell (6% commission to the realtors hurts). This is why I am not sure it is worth it as discussed here and here.
My history with home buying has not been great. The first home was bought in Nashville in 2008. This was a nice home. 800 square feet, 1950s, with an attached garage for 200K. It was within walking distance of a few restaurants and a park. Finally it was a few miles from work. Win win win. This was our first home and one I wish we had kept. It would have made a pretty sweet rental property, but who wants to mess with being a landlord.
Still in 2012, when we were moving to New Orleans, I decided to sell it. I broke even but if I had kept it until now it would be worth at least $370K based on Zillow estimates. Plus it would have made a great rental. All in all, the cost of buying, maintaining, and selling probably cost me more than renting.
Then comes 2013. Again I bought a home. This time in New Orleans and a brand new one for closer to $550K. It was a beautiful home in a gentrifying area. We lived in it for over 2 years and again decided to move. Maintenance was less as the home was new, but after sitting empty on the market for a few months and the costs of selling, I probably lost $25K on the deal.
This home was awesome though and I would do it again. I was next to a Mardi Gras walking club “The Jefferson City Buzzards” and found kung fu. I could walk to bars, restaurants, and Mardi Gras parade routes and made close friends in this neighborhood. So this one was worth it despite the hit to our net worth. Plus, we thought we would be in NOLA for at least 20 + years. Funny how life works out.
Then came 2016. For some reason I cannot stop buying homes. I think I need some professional help, and not from a relator. Hopefully 3rd time is a charm and I will either stop buying homes or not move.
This time we spent much more then before partly because of Northern California prices, partly because I wanted a view, and partly because I wanted to be close to work. If you look at the net worth graph, there is a bump in October when our NOLA home sell goes through and then a dip when we buy the Cali home in November. That hurts. We will see how time and the market treats us. If we stick around long enough I suspect prices will increase.
So the caveat about 1 house is true. I have probably blown 50K + (that is likely a gross underestimation) on buying and selling 3 homes in 8 years.
Lesson learned: If you are new to the workforce or in medical training, I would recommend not buying a house.
In fact, wait until you have worked somewhere for at least 3 years before buying and make sure you have a 20% down payment and some money in the bank for emergencies (10%). Sam at Financial Samurai lays it out well. If you don’t follow the 2 rules above, then don’t buy. It is an easier lifestyle to rent (no maintenance or desire to redecorate) and easier to move when you inevitably decide to do so.
So I am in agreement. 1 house (or no house) is the way to go if you can swing it.
The story is different if you are talking about rental real estate and that is not something I will cover today…
1 spouse? Yes!
Luckily I have 1 spouse and no plans to change this in my lifetime. Still sometimes things don’t work out. So please don’t jump into a marriage. Take some time to know each other. Understand each other’s desires, particularly about 1) kids, 2) location (where do you want to live), and 2) finances.
These 3 items can cause big problems if not understood upfront. If your personal beliefs allow you to live together before getting engaged/married, then do it. Nothing like making sure your personal habits won’t collide.
Divorce is expensive. Half of your assets can belong to your spouse depending on the state you live in. You do not want to get a divorce. Work hard to make sure your spouse and you are aligned and if troubles arise, please discuss them and seek counseling. Some things are much more difficult to repair (like an affair), but if it is something that is fixable and both parties are interested, then try.
Definitely in agreement here. So 1 house and 1 spouse!
1 job? Nope, 2 so far.
I take a different stance on this one. Particularly in the modern era there is a lot of discussion that millennials are flipping jobs. Most physicians are likely to leave their first job (at least based on my anecdotal experience and this study). This is another reason not to buy a house in the first few years of practice.
There are many reasons this happens. These include not knowing what practice model suites you after residency. Sometimes you will not be happy with the location or your partners will suck. You may also leave to make more money or for better opportunities. Sometimes you leave for family. That is what we did. We would have likely stayed in NOLA for my career, but when our son was born, our priorities changed. We outlined it in a SWOT before making the decision.
Of note, consider sticking with a job until you are vested in your 401k. I pulled out early and had to give back 50% of my matched dollars. For me, mathematically it still worked out because my current employer matched $11,000 more than what my prior employer did. This is not the case for everyone, however; so if you can stick with the job until vested then you will likely come out ahead.
So 1 job is not necessarily the best decision. It is good to enjoy your job, but if an opportunity arises, you should be open to going and hearing out the employer. You can always say no, but you can rarely get the opportunity back if you don’t listen the first time.
Conclusion
So what is the point of all of this. Well I guess it is to suggest being careful in buying a home. I sure have not been and it is some of the biggest financial mistakes I have made. Even with my current home which is likely 1000 square feet more than we need.
Stick to one spouse. Take your time in finding them and discuss all important aspects of life before jumping head first. Love and compatibility are both important. Don’t ignore either side of the equation.
Jobs come and go. Try to pick a good job. Stay until you are vested in the 401k (typically 5 years). Keep your eyes out for opportunities both internally within your organization and externally to a new location, etc. if possible. It is not always a bad idea to switch jobs.
So there you have it. 1 house, 1 spouse, and a few jobs. What do you guys think about these ideas?
Having 1 spouse is the most important out of the 3 to aspire to. Buying homes and changing jobs can be the right move, under certain circumstances. So can divorce, of course, if absolutely necessary but better to get marriage right once.
Only death do us part in the Groovy household. Mr. G has had many an opportunity to become a free man and end up on an episode of “Forensic Files.” Luckily, that’s not necessary.
Those selling costs would be overwhelming to me. I’d wait and hope for appreciation, too.
Oh man. You do not want to end up on the forensic files…I have seen many a people’s lives ruined by a bad spouse, so it definitely is good to get it right the first time and probably also the biggest decision people make.
The costs to sell a home are crazy. Maybe in the next few years they will go down with the use of websites, etc. Who knows…but yes I hope the market continues to go up, up and up.
I might have a record here. I’m slightly early retired but I had one job for my entire career. The company changed hands twice but I stayed with it and at the same location. I have been married just once as well for over 30 years now, nearly 40 actually. We are in our sixties now and just climbed a 14’er together in Colorado, run together for 18 miles a week and play a lot of tennis among many other shared and separate hobbies. And rarest of all I’ve had only one house in my entire life and still live in it with said wife and it is an eight minute drive from my former career. I was/am a 401k millionaire and then some and that is including the fact that the company did not offer a 401k until I had been employed for ten years. I also had a stay at home wife so we achieved FI on one salary of which we gave over 10% to church and nonprofits from year one. The house was paid for many years ago and was always and still is modest but more than we need. We live well but are frugal by nature and very happy with life. Oh and we also raised three millennials that have six college degrees among them(including two engineers and an MD) and no college debt. And none live with us! Great post!
Steve, this is great. I think it is rarer to live in one house these days but definitely possible if you have the ability to choose wel. And 3 kids with no school loans! That is wonderful. Congrats to a life well lived and more to come.
Congratulations on all that, Steve! Sounds like you achieved a wonderfully balanced and rewarding life. Impressive climbing too!
I think I might have the record on all these 3 things the other way…but life is still good! 🙂
We all have our individual roads to success…the key is to keep pushing towards success.
I agree that one house, one spouse, and one (or a few!) jobs is probably the most straightforward path to financial independence for most of us.
Your point about staying in a job long enough to be vested in 401(k) matching funds and any pension benefits you might qualify for is a good one. In many situations, those who receive annual bonuses should try to time their departures shortly after those have been paid to maximize earnings, but it’s not always possible.
One house certainly makes sense because of the significant potential transaction costs you mention, but as people’s circumstances change I’d be willing to be somewhat flexible here. The biggest mistake I think people can make with housing is buying more house than they really need to keep up with/impress the Joneses or have enough space for that one time every couple years when large amounts of friends and family happen to visit at the same time. The ongoing expenses associated with a house that’s too large, in terms of higher taxes, more maintenance and repairs, electricity and heat, larger insurance bills, etc. can be significant.
And one spouse is certainly the simplest model, but if a relationship is irreparably damaged and both sides are miserable, it probably makes sense to move on and try to be happy, regardless of the financial implications.
Thanks for a thought-provoking post!
Thanks for checking out the post. I am currently a person with a house that is too large. We know it, we are not trying to impress anyone, but here we are. I think part of our hesitation is selling are the closing costs, commission, etc. If it would not cost of $60-70k to sell the house we would likely jump on it more quickly. That being said, if in 2-3 years it has appreciated $200-300k, then I am out. I will sell it, take the equity, and pay off my student debt becoming debt free in one swift move. Then I will rent for a while and determine if I want to buy or stay renting…I see benefits to both.
As for a job, I told my boss I was leaving prior to bonuses being distributed. My bonus was definitely smaller then the year before, but I felt it would have burned bridges to wait for the day after the bonuses to turn in my resignation. So I missed out on $20k + (which does hurt) but that bridge remains in tact.