I wanted to write this post to give you an update on what’s been going on in our lives in the last four or five months. If you saw my last post, my wife and I have paid off over $30,000 in student loan debt in 3 months earlier this year. Since that post, a few things have changed.
We are building a new home!
After buying my first home in 2018, we knew that this home would not be a home we would stay in for a long period of time. The home was originally purchased to be able to start house hacking and build equity in a property instead of continuing to rent. Our previous renter moved out last year, and we decided we wanted to take a break from house hacking when we got married. Our current house we live in is a little small for us and not in the ideal neighborhood that we want to be in the long-term. With that being said, our plan was to live in the first home for three to five years before moving into our next home.
However, things changed due to covid-19. The housing market in the Austin area has been going crazy (good for sellers, competitive for buyers), and interest rates kept falling. The home prices are on a massive increase with many people from the higher cost of living areas (like California) moving to Texas, thus increasing the price of homes in the area.
After researching for a few months, we realized that homes were selling very quickly, and if we were to wait for another one to two more years, we would end up paying $30-$60k more for the same type of house. If we waited, we are forced to move further and further out of the Austin area as well.
In June, we ended up putting down earnest money for our new home. The home will be located in Georgetown, Tx – about 30 min north of downtown Austin – and about 15 min north of our current house. Our new neighborhood is located in a good area with great schools, near many popular stores, and (my favorite) 5 min from a local lake.
My daily commute will be about 15-20 mins (vs. 45-60 mins at my old job). Another selling point for us was the house was located on a small cul de sac, so we won’t have to deal with a lot of cars driving by our house, and it will be a safe place for kids to play in the future.
How this affects our Debt Free Journey
After putting down our earnest money for the new home, we started routing all the extra money we were throwing at my wife’s student loans to saving for a downpayment for the house. Luckily we had refinanced our student loans with Sofi and have a low-interest rate of 2.92%.
After discussing our options, if we used up all our savings to continue aggressively paying down our student loans, we would miss out on the opportunity to move into the neighborhood we wanted (due to it being sold out), and the price to buy a similar home in a similar area would be pricier in 1-2 years.
For now, we are paying the minimum on my wife’s student loans with the expectation that we will resume aggressively paying them off once we are settled in our new home. However, that depends on the rate of return we are getting from investments as well.
Sell Current Home or Rent it out?
I would love to continue to own my current home and rent it out, but it seems unlikely the case at this point.
Reason 1 – The predicted rent for the home isn’t enough to produce significant cash flow. My current mortgage (including PITI and HOA) is $1576, and 1600 sqft homes in my area are renting for around $1500-1600. That margin seems too thin for the risk involved with being a landlord (potential maintenance issues, vacancies, the overhead of being responsible for 2 mortgages).
Reason 2 – I simply don’t have a massive home emergency fund to feel comfortable. In order to rent out my current home, I would like to have 6-12 months in a separate “Home Emergency Fund” to feel comfortable to cover any unexpected costs. We have been aggressively paying off student loans earlier this year, so most of our other cash is earmarked in other savings accounts.
Reason 3 – I want to be able to put down a significant down payment for our next home, and the proceeds of the sale of the house would greatly help with that goal. My goal with the new house is to keep the monthly payment (including PITI and HOA) to under 26% of our net income, and putting more money down will help achieve that.
I still have 3-4 months to change my mind and keep the home, but as of now, I am planning on selling. Our new house should be ready in February 2021.
Unexpected Curveball – I was laid off from my job in August
In late August, I attended my regular 1v1 with my boss, but this time I was blindsided that a member of the HR team was also in the meeting. I knew what that meant… I was being let go due to “the company restructuring, and my position was being eliminated.” I worked for a small-mid sized company that let go over 200 people since April.
Being let go was something I never really thought was possible for me. I had over 7 years of professional experience, I was always a high achiever at work and highly respected amongst my peers and stakeholders. It was a bitter pill to swallow at the time. I had been working 60-70hr weeks since March and thought I was clearly showing my value. I also thought I was in line to get a mid-year promotion.
This experience made me realize that relying on one source of income is not smart, even if it’s a high-paying job in an in-demand industry. The higher you get paid and the higher you climb up the corporate ladder, the riskier it becomes. Being let go made me reevaluate my side hustles and focus on the ones that have long term potential.
Finding a New Job
Due to building a new home, I needed to find a new (W2) job ASAP. It would be hard for me to get a new home loan without recent paystubs that were in line with the amount I was getting paid with my previous job. If I didn’t sign and put down earnest money for a new home, I would strongly consider using this time to experiment on working for myself.
The day after I got laid off, I spent all of the next few days updating my resume and reaching out to my former managers and work colleagues to see if they had known of any openings at their jobs. Unfortunately for me, in August, the unemployment rate was still high, and not many places were hiring. It was a tough thing to deal with at the time. I spent the majority of my days applying for jobs, meeting with recruiters, and preparing for interviews.
Luckily, I have experience in tech in Product Manager / Business Analyst roles, so I was able to lock down some interviews in early September. I applied for over 150 jobs in August/September and heard back from maybe 15 or so companies. I did many screening interviews with recruiters and did group interviews and hiring manager interviews for a handful of companies.
The whole experience was long and humbling. Most of the jobs required 3 or 4 rounds of interviews (which were all virtual bc of Covid). I was lucky to have the support of my wife and family and friends during this time. It wasn’t easy.
Finally… Some Good News
In late September, I finally got good news and landed a contract-to-hire role at a large financial company. I will be working with a software development team as a Business Analyst to build out new products for financial advisors. The contract will be for 1 year, and hopefully, if all things go well, I can get hired full time. If things don’t go well, I will have a lot more flexibility to pivot elsewhere after we close on our house in 2021. The position pays about $32k more than I was making at my last job, but I won’t have all the perks of being a full-time employee for the first year.
Taking Some Time Off
After accepting the job, I negotiated a few extra weeks off so I could do some traveling and relax before starting my new gig. I went to Utah to visit Arches and Canyonlands National Parks, and then a few weeks later, I visited Colorado and Rocky Mountain National Park. I was glad I took the opportunity to get outside to go hiking and clear my head before getting back into the work grind.
I also switched my medical/dental/vision benefits to my wife’s employer, which has great benefits. I took the last few weeks to knock out many appointments that I have been behind on for the last 2 years.
The rest of this year and early next year will be full of excitement and changes for us. There is a lot going on in the world, with our family/friends, and for us personally, that I hope will continue to get better. We are all doing our best to stay afloat during these tough times.
Stay safe and healthy!
Gary
Gary is the author behind Debt Free Climb, a blog that shows how to live intentionally, pay off their debt, build a side income, and travel the world
Gary's favorite free financial tool he’s been using since 2017 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments.
His favorite way to save automatically is Capital One Performance Saving, a bank that allows him to create multiple high-interest savings accounts and create an automatic savings plans for each account. He uses these features to meet short and long term savings goals.
His favorite way to save money on car insurance is by using Root, an app-based car insurance service. He saved $240 this year after switching from Geico to Root
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great post thnx for sharing
I will try to apply it those ideas
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Love the blog Gary! Your debt payoff story is truly inspiring. I enjoy hiking too – great pictures! Congrats on the home building as well! Austin, TX and the surrounding area is such a great up-and-coming place for young people. Keep up the great work!
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