To buy a house or to rent when you have the cash

There are many calculators and advice columns about whether to rent or to buy but every single one of those assumes you don’t have the cash to buy a house outright. In this case paying a mortgage is a way to force you to build equity and that is definitely a good thing. But what if you already have this equity in the form of cash? Let’s explore this case.

Let’s suppose you are choosing between buying a house that costs $350K or renting at $2500 a month and you expect to stay in this location for 5 years. We will assume you have the $350K in cash and you will receive $2.5K a month and any money you are not spending on housing you will invest in the market. We will assume the stock market grows at 12% per year (S&P has averaged 13.9% for the last 10 years) and that houses appreciate at 8% a year (which is reasonable for some regions of the country)

Scenario 1: You buy the house. After 5 years you should be able to sell the house for $514K and you won’t need to pay any taxes.

Now let’s see what you will be spending:

  • Taxes. Let’s assume $6K per year and suppose your house does not get reappraised. That is the tax rate in my neighborhood. $30K total
  • Maintenance: One is suppose to budget 1% of the value of the house but I think this is too high so let’s go with $2K per year for a total of $10K
  • Insurance: $700 per year for a total of $3.5K
  • Selling costs: The total here is usually 10% of the value of the house so $51K.

Total Cost: $100.5K. We need to make some assumptions here and to make the math easier we will assume you spend all of this money right after you sell the house.

Of course every month you will be investing the money you are not spending on rent into the market. We are assuming 5% annual rent increases. I needed excel for this but it turns out you will have $223K or about $216K after taxes.

In this scenario, at the end of 5 years, you will have $629K.

Scenario 2: Well, this is easier.

You don’t get to keep any of the rent money so let’s see how your investment does on the stock market. In 5 years, your $350K will be $617 K for a profit of $267K. You will have to pay about 15% in taxes but still:

In this case you will end up with $577K at the end of 5 years.

Well ladies and gentleman, the math has spoken. If you chose to rent, that will cost you $50K over 5 years. Not so bad really if you want to have the option of moving as often as you want.

Financial habits I am keeping (or adding) for 2021

2020 has been a crazy year, and the pandemic forced us to do many things differently. For some of those things, I can’t wait to get back to normal, but some of my new habits I hope to keep forever. Here are the keepers:

  1. Cooking at home. I never liked eating out. Not just because it is expensive, but I really don’t like people touching my food, eating meals that I don’t really know the ingredients of, and socializing with the servers. Meals out with people are sometimes part of my job, but I plan to continue to avoid them whenever they are avoidable.
  2. Bringing my lunches to work. I always planned to bring my lunches to work but rarely did. Most of the time, I bought burritos from Chipotle. For me, this doesn’t have most of the negatives of eating out – I know pretty much exactly what is in my burrito, and I can see the people cooking the food. Nonetheless, it is expensive. A $7 burrito each workday adds up to $140 a month or $1680 a year. And that doesn’t count the drink I often got to go with my burrito. I have gotten pretty good at preparing food over the weekend for the whole week, and when I return to the office, I will plan to have five lunches for my wife and me ready in the freezer each Sunday night.
  3. Only buying and eating whole foods. No Snacks September had quite an impact on my eating habits. We have continued to buy very little processed food, and it has been wonderful both for my physical and mental health. I am not sure there are direct savings, but this is definitely a habit I want to keep.
  4. Using grocery curb pick-up. I love Misfit Foods (Want to try it? 25% off code for your first box: COOKWME-IE2AJH). Fresh organic fruits and veggies arrive at my doorstep every week. I have compared with my local organic options, and the food is cheaper and much better at Misfit. I plan to keep those deliveries for the foreseeable future. There is also a lot to be said about grocery pick-up. My only complaint about curb pick-up is that I don’t always like the produce they select, but as most of my produce now comes from Misfit, that is much less of a problem. I believe I am saving a significant amount of money by not being tempted to throw random stuff in my cart, and I save at least an hour. Once it is safe, I would be happy to go grocery shopping once in a while, but I don’t think that will be the norm for my family.
  5. Not spending money on transportation. My office is 3.5 miles from my house, so driving is a minimal expense in terms of gas. Parking, however, is about $10 a day! Between that and my lunches, I was spending about $4000 a year to go to work. If it feels safe, there is a bus which is close to free. If that doesn’t feel safe, I have identified free parking 1.3 miles from my office. I think a 2.6-mile daily walk will do me good:0)
  6. Not spending money on gyms. I have had gym memberships off and on for years. I really don’t like gyms – I’d much rather be outside. I don’t plan to sign up for a gym even when that becomes safe.
  7. Not spending money on the weekend. Before the pandemic, we sometimes ended up at the mall on the weekend. Mostly, we hung out at the bookstore and didn’t buy much, but it still involved mall food and occasional purchases. After the pandemic, I would like to spend more time with friends doing non-mall things like hiking or exploring the surrounding towns

There are some things that I would be happy to start spending money on again. Dancing and 5Ks are very high on my list…..Actually, those might be the only things on my list:0)

What habits did you pick up during the pandemic that you want to keep?

Becoming financially independent is easier than you may think

Financial independence, from a mathematical point of view, is pretty straightforward. You need an investment portfolio 25 times your annual expenses. With some basic assumptions, confirmed by historical market performance, if you withdraw no more than 4% of this portfolio each year, it will last indefinitely.

Financial independence is not absolute; it depends on how much money you need to cover your annual expenses. If you can live on $40,000 a year, you need a million dollars in your investment portfolio. If you spend $100,000 a year, you will need $2.5 million. That is a lot of money but actually getting to financial independence is easier than it might seem because you don’t have to save all of that money on your own. Once you start investing, the market helps you along.

Suppose you save and invest $20K per year. It may seem that it would take you 50 years to get to 1 million dollars. But if we assume that your investment grows at 11% annually (a reasonable assumption based on historical averages), it will take you only 17 years. In other words, you will only have to actually save $340,000, and the rest of the money will come from the growth of your stocks. In the table below, notice that after year 7, the market is actually contributing more towards your portfolio growth than you are. The rich get richer!

Surprisingly, how long it takes you to reach financial independence does not depend on how much you make but only on what percent of your income you save. If you make $200,000 and you save 50% of your income (therefore, you can live on $100,000 per year), it will take you exactly as long to accumulate the $2.5 million you need as someone who earns $80,000 and can save $40,000 of their income to reach their financial independence number of one million dollars. Of course, making more money helps – it is much easier to figure out how to live on 50% of a $200,000 income than to figure out how to live on 50% of a $20,000 income. Nevertheless, the table below will tell you how long it will take you to reach financial independence assuming today you have no assets and no debt based on various level of saving. You can get information based on your specific situation with this straightforward calculator.

Do you feel inspired? What percent of your income are you willing to save? The average US household saves about 7% of their income which translates to 58.8 years until financial independence. Can you do better?

November Spending

As we expected, November was a big spending month. December is turning out very similar, so be prepared!

Food has again climbed over $1000 for the month. In this case, this is actually OK. With Covid spiking again, I decided it is time to restock the pantry and we are back up to more than a month of food stored. It is not the kind of food I actually want to eat for a month, but it is definitely survivable. We also splurged for Thanksgiving food. It is amazing how fast expensive food adds up! We have a nice stockpile of nuts left waiting for Christmas.

The next largest expense we had were pets. In addition to the usual food and meds, we had two vet appointments. One of them was a major work-up on our Beagle’s heart to make sure it is safe to put her under anesthesia and clean her teeth. The results were good and she got her dental on December 1. This means that in the next budget report you will see another big vet bill. Her dental was several years overdue because of concerns about her heart. It took 3 hours, she lost 9 teeth, and they cut out some weird growths on her gums (hopefully these will check out OK). She recovered from all of that within a day and is doing very well.

Next on the list are donations. I won’t say much about these to protect the innocent.

Child expenses are up too. Christmas. Do I need to say more?

The battery on one of our cars stopped working. A new battery, oil, and several other small things added up to almost $300. And we need another $700 of maintenance (the car just passed 100K miles) when we get around to it. As we are not driving much at the moment, I am in no rush.

Our phone bill is big because it is for two months. I am not very good at paying on time. However, we are going to try prepaid phones. More info on that next month if it works out.

As you see, I also got a nice blender/food processor. I am very, very happy with it. So far, I have made delicious banana ice cream, smoothies, and some great burgers. I got a Ninja. I can’t imagine Vitamix is four times better (and it is four times more expensive).

Next month, watch for our December spending and our end of the year summary. My goal was to stay under $60K. Did we make it?

Life without Netflix and our December Challenge

No Netflix November: November’s challenge was to survive without Netflix. As challenges tend to be, this was eye-opening. My screen time didn’t decrease, but I largely switched to Youtube, and that was great! It turns out I like to learn new recipes, and we had all kinds of delicious food, including stuffed “goose,” which I made completely from scratch for Thanksgiving. All the geese in the neighborhood (we live by a lake) heard about my amazing hunting ability and now fly away every time they see me (This is a joke. The “goose” was fake. We are still mostly vegan and definitely vegetarian.) I declared No Netflix November a success and canceled our subscription. We still have access to movies on Amazon Prime and through the library.

Modified SNAP December: For December, I decided to try something hard. I started by thinking of doing the SNAP challenge – living on $4 per person per day for food in December. This is $360 for the month for our family of 3. I tried to do the math, and it was impossible to continue eating organic, eat lots of fruit and vegetables, and still get a reasonable number of calories for $360. Either the organic food or the vegetables would have to go, and for an entire month, I am not willing to compromise on either. So we have decided on an easier challenge – $240 for the month, but most vegetables don’t count! We will still count vegetables that provide a significant number of calories, such as potatoes, corn, and avocados (I am drawing the line at 50 calories per 100 grams). Vegetables that don’t count will also not count if they are frozen or canned, but processed foods (such as pasta sauce) will still count even if they are made mostly out of “free” vegetables.

This challenge will involve some tracking. Foods we buy will get counted when they come into the house if we expect them to be eaten during the month. However, if I am using bulk foods that will last more than a month or are foods we already have, I will do my best to estimate the amount we eat and the cost. So “shopping” the pantry is allowed as long as we track the cost. Buying bulk will help with keeping the cost down. For complete record, I will also keep track of the cost of veggies we eat and report it at the end of the month.

Black Friday and Cyber Monday Shopping: Youtube influenced me exactly like it influences the average consumer — I decided I must have some of the toys people on Youtube were showing. That, combined with Black Friday/Cyber Monday, led to the purchasing of two kitchen toys – an Airfryer (on sale to $59 from $119) and a blender/food processor (on sale for $96 from $150). We have had them for just a couple of days, but the Airfryer makes the most amazing fries, and the blender makes the most amazing banana icecream, so I am quite happy with both. This weekend’s project is to figure out where to store them:0(

What would you be doing if you weren’t working

Most of us have been socialized to let others decide what we do with our days. We start in kindergarten (or even earlier). They tell us when to have meals, when to listen to a story, and when to take a nap. As we grow up, the limits on our time are even stricter. There is the hour to do math, the hour to write an English paper, the hour to do art. If you go to College, you get a bit of a break. Most students take about 15 credits, which means they are in scheduled classes roughly 15 hours per week. They have some flexibility with the rest of their time, but there is homework to do and books to read. Even social events that College kids feel like they must attend to have a real College experience take away from their ability to make their own choices about their time.

Most people’s jobs have a pretty strict schedule. Even if the job is interesting, it is pretty regimented. I am in meetings an average of about 6 hours a day. Answering email takes probably another three hours. I like my job, but it does dictate how I spend most of my waking hours. Self-employed people often have less of an external schedule imposed on them but for most people, being self-employed still involves working hard every day to make and keep their business successful.

Most people don’t experience the opportunity to truly decide what to do with their time until they retire. It is tough to learn how to make decisions about your time at 65 when the last time you got to make that decision was when you were 5!

I have no desire to retire, but it seems like a good thought experiment to think of what I would do if I did. For me, the most important components of a fulfilling life are having a circle of friends, having challenges, and doing something impactful. I would like to become good at some physical skill. I like ballroom dancing, and I can probably be good at it if I put in the time. It is also a great way to make friends. I would also get a small camper and travel with my lovely wife, child, and all the animals. Traveling and biking around the country would be really fun.

For a challenge, I would start a business based on teaching all kinds of kids useful math skills. I hate how math is taught in US schools. On average, I can do about 80% of my kid’s math HW correctly on the first try (she is now in 6th grade, and my percentage has actually been improving), and I have a Ph.D. in math. If I have to think hard about a problem, my 6th graders shouldn’t be expected to know how to do it. At the same time, many of her classmates still don’t know the multiplication table. There is a lot of help available to kids. For example, Sylvan has a pretty good program, but it is $50 per hour in my area (and I live in a low-cost area). That is not something most families can afford. I want to contribute towards giving all kids the same opportunities for a good education.

It would be kind of terrifying to wake up and not to have the schedule my employer has predetermined for me. And it is kind of sad that I don’t have the skills to do my own thing. I’d like to think I would figure out how to live my life without being told which meeting to go to next, and I won’t spend my days eating potato chips in front of the TV, but it would be a challenge.
What would you do if your schedule wasn’t determined by your employer or by the need to make money? Are you looking forward to such a time?

Homemade “Meat”, “Cheese”, and Bread and how much do they cost

Artwork by The Child

I just finished eating a delicious “meat” and “cheese” sandwich on homemade bread and I thought I should share some amazingly easy recipes together with a comparison of the cost to make them at home verses buying equivalent products. Although the savings are significant, I mostly cook because I enjoy the magic of creating food (who knew you can make “meat” in your kitchen with just a few minutes of labor), and I like having control over the ingredients I use. Buying in bulk and cooking from scratch also reduces waste from packaging.

We are mostly vegan, hence the quotes above, but I am still pretty traditional and like a good “meat” and “cheese” sandwich once in a while. Bread is one of the easiest things to make and it is well worth making it at home to avoid all the preservatives added to store-bought breads. Plus it makes your house smell great.

I don’t remember where I got my bread recipe so I can’t give proper credit, sorry.


(This recipe is very forgiving. Even though I give exact measurements, I only measure the flour and the water and I am not very careful with those.)

Dry Ingredients
4 cups white flour
(can replace 1 cup with whole
2.5 teaspoons yeast
1.5 teaspoons salt
Wet Ingredients
2 Tablespoons oil
1 3/4 cup warm water

In a big bowl mix together the dry ingredients. Then add the wet ingredients. Mix and knead for a couple of minutes. Add more flour if needed. Let the dough sit in the bowl covered with a damp towel for about 2 hours. It will double in size. I make two loaves out of it. After forming the loaves, give them another hour to raise and bake at 350 F until golden brown. Let cool before cutting.

Cost for two loaves using mostly organic ingredients with links to Amazon:

4 cups organic white flour = 18 oz =$1.62
2.5 teaspoons yeast = 0.25 oz = $0.20
2 Tablespoons oil = 1 fl oz = $0.05
Salt, water, and electricity for baking = a few cents
TOTAL: Less than $1.00 per loaf

Comparable bread at the store is about $3.00-$4.00 per loaf. You can have added fun by putting rosemary, oregano, or suflower seeds in the dough. Unfortunately the child does not like anything added to her bread so we make it plain.


This recipe is a mild modification of Lessarella cheez by GoDairyFree. The original recipe is probably better but it requires lemons and I often don’t have those around. Prices quoted for mostly organic ingredients with links to Amazon.

2 cups water (free)
2 Tablespoons apple cider vinegar (1 fl oz, $0.18)
1/2 cup nutritional yeast (8 Tbsp or $1.50)
1/3 cup quick oats ground to a powder ($0.20)
1/4 cup cornstarch (optional, makes cheese extra solid) ($0.35)
1 Tbsp onion powder ($0.25)
1/4 cup tahini ($0.86)
1 1/2 teaspoon salt

TOTAL cost: $3.34

Put all ingredients in a food processor (or use a submersible blender), blend until smooth (less than a minute) and then cook until thick (about 10 min). While cooking you really must stir THE WHOLE TIME. Freezes well. Great on sandwiches, pizza, quesadillas, and as dipping sauce for vegetables.

This “cheese” doesn’t really have a store bought equivalent but it fulfills all of our family’s cheese-needs for the week which used to take 3-4 packages of Dayia at $4.50 a bag and it is much less processed.


I don’t know why but it took me years to discover how easy it is to make seitan at home. This recipe is a modification of Seitan with Chickpea Flour from One Green Planet. Again, the original recipe is probably better but this has fewer ingredients so it is faster and cheaper.

Dry Ingredients
2 cups vital wheat gluten
1/2 cup chickpea flour
1/2 cup nutritional yeast
1 tablespoon dried basil
1 teaspoon cumin
1 tablespoon onion powder
Wet Ingredients
1 tablespoon ketchup
1/3 cup soy sauce
1 1/2 cups hot water

Mix all dry ingredients in a bowl. Separately, mix all the wet ingredients. Add the wet to the dry, mix, and kneed for 3-4 min. Add extra wheat gluten if needed. Let rest for 15 min covered with a towel. I usually form two “loaves” and I like to make them kind of long and thin (helps with cutting later). Put in a pot mostly covered with water with some soy sauce and boil for 1.5 hours. They will at least double in size so make sure they have enough space to do that. You may have to top off the water occasionally and you might want to flip the loaves half way through but they will be fine if you forget. You can also boil them in vegetable broth but I never do.

Cost for two loaves of seitan using mostly organic ingredients with links to Amazon:

2 cups vital wheat gluten ($1.95)
1/2 cup chickpea flour ($0.72)
1/2 cup nutritional yeast ($1.50)
1 Tbsp dried basil ($0.25)
1 teaspoon cumin ($0.25)
1 Tbsp onion powder ($0.25)
1 Tbsp ketchup ($0.25)
1/3 cup soy sauce ($0.60)

TOTAL: $5.77

You can add seitan slices to any meal or salad. We also eat it just as a snack thinly sliced. Store-bought seitan in about $4.00 for an 8 oz package in my area. I don’t have a scale but I think the recipe above makes at least 2 lb so that is about $16 if you bought it pre-made. Plus, it is really fun to make!

October Spending

It is the middle of November, and I am just now posting our October spending. The election occupied all my discretionary time-to-think, and I just didn’t have the bandwidth to compute our numbers for October. But I am quite happy with the final results, and now I can get back to managing the household budget:0)

October was another month with pretty low spending – $2327. Interesting fact: this corresponds to about $28,000 per year. As we don’t include our property taxes in the monthly summary, adding them back in gives us $34,000 per year, which is really low -156% of the federal poverty line.

There is nothing particularly interesting in our October spending. It turns out that when nothing special comes up during the month, we can pretty easily keep our spending at about that level. However, November and December will be expensive months. We have several things coming up, including some large pet expenses, some fairly large car expenses, and some large donations.
Our food expenses have settled to between $700 and $800 a month for the last few months and, given that almost everything we eat is organic, I think this is pretty good. We are continuing not to buy processed food, so I am doing quite a lot of cooking.

A popular “rule” for proper budgeting is the 50/30/20 rule. According to this rule, you should spend 50% of your income on essential like rent and food, 30% on discretionary spending, and 20% should go to savings. We don’t follow this rule, and I don’t like it. Let’s start with essentials – by the definition of “essential,” there actually shouldn’t be much flexibility here. You need a place to live, but if you choose for your family of three to live in a five bedroom house (we do this, it is just how it worked out, it is not smart), some of that expense is discretionary. You also need food, but if you choose to pay for all organic, that is also discretionary. Thinking of your rent and food expenses as essential prevents you from seeing your actual choices.

Once you figure out your actual “essential” expenses, the rest of your money is all discretionary. You have two choices for the money. You can spend it on stuff, or you can save it and essentially buy time. If you save about 65% of your take-home pay, you can retire in about 10 years starting from zero. So once the essentials are covered, you get to decide how you want to prioritize spending vs. savings to optimize your happiness. I think if we moved to a smaller house, stopped buying organic, went to one car, and didn’t spend money on child activities, we can probably get to under $2000 a month. But that would be a lot of work and a lot of sacrifice. I think we have our discretionary spending vs. savings optimized to just about the right level at the moment, although moving to a smaller house is still on my to-do list for sometime after the pandemic.

No Netflix November

No Snacks September was a fun challenge which led our family to adopt new eating habits. I thought November offered an interesting opportunity to explore life without Netflix. Maybe this will be another change we will decide to permanently embrace…

Netlfix for me is a lot like junk food. I spend a lot of time on Netflix to relax – it is essentially junk screen time. Given that my job requires me to be on the screen for probably 10 hours per day, I really don’t need any additional screen time. There are also many other screen activities that are more productive and more fun like writing this blog.

The average Netflix subscriber spends 1hr and 11 min per day on Netflix but only 35 min bonding with their family. I am afraid my stats are even worse than the average. Maybe No Netflix November will help me be a better wife and mother…

The Child does not approve of No Netflix November. For this reason, she has declined my invitation to provide art for this post. I am glad she has clear opinions and refuses to participate in activities that go against her believes:0)

A new gadget in the funky kitchen that is totally worth it

Artwork by The Child

I like my kitchen pretty empty. A few years ago, we donated most of our kitchen appliances and any extra pots and pans. We haven’t owned a mixer, a blender, or a food processor in awhile. These things occupied too much storage space, and they were too hard to clean, so we didn’t use them much. We also never got an instapot or an air fryer. We have a pot, several pans, a rice maker (when it breaks, I probably won’t replace it), and a toaster oven, and that seems to be all I need to make food. The toaster oven was a gift from my in-laws and is possibly the most used appliance in the house. I do most of my baking in it, and there are sweet potatoes roasting in it as I type. If you don’t have one of those, you probably need it!

The other appliance that I use a lot is a submersible blender. This was also a gift from my in-laws. It does most things a blender can do, but it is much smaller and doesn’t need counter space. I use it to cream soups, make vegan cheese, and even to make pancakes. About 6 months ago, it broke, and for a few months, I refused to replace it. I stopped making some things that required it, and I made my pancakes by hand (a little lumpy, but after baking, they tasted just fine). Finally, last month I decided that it is time to replace it and I found this wonderful gadget to replace it with

KOIOS 800W 4-in-1 Multifunctional Hand Immersion Blender

It turns out this is my dream gadget. The immersion blender works great. You can also use the motor to power a very basic food processor—just one blade, super easy to clean and store. I already made hummus and a salad dressing with it, and I love it. I am not so sure about the egg beater. I probably don’t really need that, but it might work as a mixer in a pinch.

If you already have a high-quality bender and a multifunctional food processor that shreds and grates and has a gazillion attachments, and you already have a mixer, then this gadget will be an inferior duplicate of what you already have. But if you don’t like cluttering your kitchen and you want one thing that will do most of the things you need relatively well, this is a gadget for you! $39.99 and no counter space needed.