For an audio version of this post, please click on the speaker icon (top left).
Welcome to this episode of The Doctor’s Bill (Can You Afford It?).
Wonder if you should buy that big ticket item or not?
Well here’s your chance to have a wealth management expert, Johanna Fox Turner, of Fox & Company Wealth Management analyze your overall finances and make a final verdict on whether or not you can indeed swing for the fences and splurge on yourself or whether you should just walk away.
[Johanna and I have no current financial relationship]
Disclaimer: This is not meant to be a substitute for paid professional advice but only meant to serve as a suggestion/guideline.
The following are the details from our submission form:
House addition to add in-law suite for aging parents.
What is the timeframe for this purchase?
Next 1-2 years.
How do you plan on paying for this item/experience?
Combination of cash downpayment and loans.
Probably 25-30% down and might borrow from family at a lower interest rate (but definitely 60% if not 75% loan to value).
On A Happiness Scale of 1-10 (10 Being Happiest), rate what this item/experience will do for you A) Short Term and B) Long Term:
Any Children (If so please provide ages)?
2 year old.
How Many Years Till Planned Retirement?
Aiming for FIRE: Ideal 12 years; Likely 15 years.
What is your total household income?
$650k (I am going to project 2 years at this income level. Then assume drop to $600k due to declining reimbursements).
State Income Tax (if Any)
What is your % Annual Savings Rate? (savings/gross income)
43% (approximately $260k/yr in taxable and pretax accounts).
Estimated Annual Living Expenses (Current):
Estimated/Desired Annual Living Expenses (In Retirement):
$120k if include mortgage (below).
Market Value of Primary Home [For Renter =$ 0]
Additional Real Estate Holdings Equity (Market Value-Debt):
Current Liquid Asset Value (Savings, Checking, Etc.):
Retirement Assets (401k/IRA/HSA):
Brokerage Account (Taxable):
Miscellaneous Asset Value (Please elaborate):
Student Loan Balance:
Unfunded Future College Costs & Years Left Till Needed:
16 years left to fund 4 year college fully at assumed $65k/yr in today’s dollars.
Saving $12k/yr for 529 (hoping for $200k in 529 at time of use) and cash flow the rest.
Other Unfunded Goals and Years Remaining (Today’s Dollars):
Any other pertinent information not addressed?
- Want to see if this addition will set us back significantly for FIRE.
- FI is our goal, not necessarily RE.
- Ideally for both spouses work would be optional with estimated income of $150k with part time and consulting work factored in during phase out to full retirement.
- Want to not be just be 100% dependent on W2 work (especially in medicine, where I foresee salaries going down).
- I am actively looking for Real Estate investments (hence cash).
- We just put $50k into a RE syndication and looking for rental property (around $250k range with 25% down payment ($60-70k).
- We have a looming decision to add another to our family.
- If we do have another child the expenses jump to $190k/year for the next few years due to the astronomical childcare costs in our area.
- As far as the in-law suite addition, the in-laws would likely pay for part of it (possibly 25%).
- We do not plan on supporting their living expenses.
- Childcare costs will not decrease when in-laws move in (goal is just to have them nearby/part of our lives only).
- Home value will likely go up to roughly $2.3M+ after addition.
So is this doctor building up the home only to tear down her financial safety nets?
After seeing these financials what would you suggest: Show the in-laws a new suite or would you show them the door instead?
Click on the Doctor’s Bill Image and find out the verdict:
After you see the verdict please come back to this page and comment whether you agree or not with the decision (and no cheating by looking at comments first!)
If you would like to submit your own Doctor’s Bill request please fill out the submission form.
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Good luck. This decision is tough. For me, I’d go with the in-law suite due to family duty.
Don’t forget to think about property tax. It could increase quite a bit depending on where you live.
Thanks Joe. I agree that some cultures (mine included) there is a huge obligation to take care of our parents. Good point on the property tax as well.