Without a doubt, the most difficult part of the move process has been the finances.  What sounds like a simple question: “How much will it cost to live in Lewes, DE?” – is actually more complicated when you start working with real numbers.  Adding even more uncertainty to the equation is a vastly different job market, raising the question “Can we even do this?” come up more than any other.

A method that I learned about first in the Four Hour Work Week is what I’ve come to describe as a “reverse budget.”  (Also covered at the Five Cent Nickel.)  Normally, budgeting begins by identifying a pool of funds (income or revenue,) then determining what can be acquired with that pool and at what priority.  If you don’t have enough money to buy that Maserati, you’re not getting it.  However, if you do have enough, it’s not happening until there are groceries and a roof over your head.

DISCLAIMER: I’m not an accountant of any kind!  The idea is for you to get some ideas on how you might be able to apply this to your own lifestyle design projects, but everything in the blog is a part of our own experiment.  You should know that blindly doing whatever the Internet tells you is probably a bad idea.

So, what’s this “reverse budget?”  In all deference to Tim Ferriss, the main idea is to start by writing down the things you need – and want – to buy/pay for/spend on.  In our case, we took a full and complete categorization of all expenses we’ve got in DC, then determined which we would want or need to keep in Lewes.  After this part, we came up with a list something like:

• Groceries
• Mortgage (P&I and Escrow for Insurance and taxes)
• HOA fees
• Roth and/or Traditional IRA contributions for both Marie and I
• Childcare for each of the kids
• Dining Out
• Utilities (Gas/Water/Electric, Cable TV, Internet, Mobile Phones)
• Fuel for cars

There were a few other small categories, but the idea is that we were as complete as we could be – covering all known theoretical expenses.  We used actual DC costs for anything we could easily identify: groceries, utilities, etc.  Then we used best-guesses or external data sources for things like property taxes and childcare.  Finally, we ran a few mortgage estimations for the rough ballpark for the types of homes that we had been considering.  That total value went into the spreadsheet as well.

Finally, we calculated tax breaks such as mortgage interest (since the Lewes house will be our primary residence), childcare (since both of us will be working), medical insurance, and IRA contributions.  After taking the total estimated taxable income, we calculated the tax bracket, and added the estimated taxes that you’ll pay (Federal, Social Security, Medicare, State, possibly more.)  With that addition, we arrived at a magic figure of our “required gross income.”  We did the calculations on a per-month basis, then bumped it to an annual salary requirement.  This big picture gave us the flexibility to quickly adapt to unexpected costs without really blinking an eye: as long as we stay within the costs we established, we can still make things work out financially.

This was all done inside a Google Spreadsheet, so it was easy to collaborate on the document, and change figures to either increase accuracy, or to play “what-if” with the model.  If you’re interested in seeing the calculation, let me know in the comments and I’ll try to redact our actuals to something suitable for public consumption.

Taking this approach lets you calculate the impact of a new wanted/needed expense on your overall financial picture.  As a real-world example from our home builder, we were given the chance to install a geothermal of HVAC system that costs a lot to install but virtually eliminates the recurring (and wildly varying) cost of heating fuel and electricity for air conditioning.  Of course it’s not “free,” but the system would drop utility costs by around $200/mo, while increasing the mortgage by just $150/mo.  The traditional mode of thinking would be to consider whether the $30,000+ increase in the home cost “broke the budget,”, but the reverse-budget model quickly proved it would actually save money – the first month we’re there!!

This might sound like common sense, but when you know your bottom line cost boundaries, it’s kind of fun to move costs between budget items, and see what combination saves you the most while still getting what you really want.  This process results in dropping your required income/revenue, which is the ultimate end goal of a reverse budget.  The more you drop your costs, the less income you need to cover, freeing any extra funds for emergency savings or other goals.

It’s a pretty simple process, once you get the hang of it.  As with any simple tools, it all makes much more sense when you give it a try a few times – go ahead and let us know your thoughts or questions in the comment section!

Additional notes:

• It should go without saying, but estimate all expenses HIGH, and all income LOW.  This is the only safe/sane way to keep yourself out of unintended debt.  When you learn actual future costs – childcare, for example – plug those in.  Until then, though, it will pay to stay on the safe side.
• We also created expense lines for “slushes,” or deliberate set-asides for future expenses that tend to be unplanned.  Kind of like self-managed insurance.  In our case, we have two – one for auto repairs and one for pet medical care.  For these, we will create new savings accounts and automatically move funds there for future use.  If the car needs a new air conditioner, we can pull from the appropriate slush account.  These slushes are above and beyond the “rainy day” savings account with 3-6 months of living expenses.

©2009, EscapingDC.com

Well, maybe we are and maybe we’re not alone in the galactic sense… But in terms of leaving a large city for a smaller town, there are definitely others thinking along the same lines as us.

The awesome mint.com blog created an interactive infographic that compares the cost of living between America’s Most Expensive Cities (per Forbes.com) and America’s Best Small Towns (per Money Magazine).  An embedded map is below, and you can also use the full-sized version.

Budgeting – Mint.com

©2009, EscapingDC.com

“Prior planning prevents poor performance” is a common saying in the military and in project management circles.  However, adequate planning also gives one the benefit of having already considered the next three (or thirty) steps of a project when unexpected events are thrown in the way.  In our situation, we had always been tracking toward a March 2010 move to Sussex County, DE.  My plans were to keep the current job until that point, and then move and find new employment.  On the home front, we’d already taken the financial aspect of that plan into account.  On the work front, I’d been working with some key staff members to establish transition plans for the workload, which would minimize the impact on the daily operations of the team.

Then it got interesting.  Last week, I was notified that I’d be terminated from employment for “cost control” reasons.  Joy…  We had just received a good offer on the VA home a few days earlier, so the good news was certainly subdued by the job loss situation.  That said, after a few minutes of bewilderment, we took a critical look at the situation.  The quick realization was that it didn’t change our plans, just their timing.  The transition arrangements graciously provided by the company decreased our risk, and there was now plenty of time to focus on the next steps of our move: putting all of our stuff into storage, get the cats to my parents’ place, move into a temporary home, and make more concrete plans for moving.  Not to mention this is all going to happen over the holidays, with lots of travel and other events.  [We were also able to affect a solid transition of the job's workload, but this blog is focusing on the home front.  Suffice to say, this same planning mentality served the work transition as well.]

I strongly feel that every five minutes of planning for chaotic events during non-chaotic times is worth at least an hour during the chaotic event itself.  If you can realistically ask yourself “what is the absolute worst that could possibly happen?” and plan to those ends, you’ll be fully prepared to handle the bumps in the road as you hit them.  Even the major hurdles will seem small.

That’s not to say it’s time for fearmongering or considering end-of-days plans.  Although I worked very closely with a military-run Y2K program back in the day, I assure you we don’t have a bomb shelter with 20 years of canned food in the backyard.  However, take an honest look at what might happen in your future and then spend an hour or so planning what you’d do if they were to occur.  Would you sell your home?  Could you transition into a new job quickly?  Do you have three or more months’ worth of savings to cover costs while you transition?  If not, how soon can you get there?  Write down your answers and keep them somewhere accessible.  When you think of new ideas or questions, add them to the list – this will become your living “disaster plan.”  I assure you that being able to refer to such a plan – one that was made with a cool, logical head – will be incredibly comforting when you’re hit with an unexpected roadblock on your ideal path of life.

©2009, EscapingDC.com

Tim Ferriss, author of “The Four Hour Work Week,” just announced that an updated and revised version will ship on 15Dec2009.  Of specific interest for us is the addition of more than 50 tips and case studies, some specifically addressing families working through their lifestyle design.  The book is available for pre-order at 30% off from Amazon.com.

We’ve already placed our order, which is even more significant since we’ve got some seriously sweet developments moving on our story.  Trust me, the lack of updates here has not resulted in much free time on either home front! Thanks for your patience, and please stay tuned…

Four Hour Work Week

©2009, EscapingDC.com

After a LOT of prep work, cleaning, decluttering, more cleaning, some long-ago-started projected being completed, and then more cleaning, we finally listed the NoVA home for sale!

It’s definitely a mixed feeling, since we really do love this home, and can only hope that the next owners will enjoy and appreciate it as much as we have.  That said, checking off “Sell House” on the to-do list will also be a very welcome closure, meaning that we can truly free our minds for the other thousand or so steps that still have to be completed.

Probably the biggest downer of the preparation process was deleting all of the Home Improvement tasks from the list we’ve built over the past few years.  There were some really cool projects that would have been a blast to plan, work on, and enjoy.  I guess that’s the way things go, though – you’ve got to make plans, but be ready to adapt when reality intervenes.  As is often said, “Life is what happens when you’re busy making other plans” (–John Lennon)

We’ve made so much progress on this adventure in just a few short months, but there is a lot to be done between now and move-in.  I’ve had quite a few posts on our progress, which wasn’t intended when we decided to blog the project.  The original intent was to provide more insight into the tips, tools, and other things we’ve learned/created that helped us make the move to the beach a possibility.  There are a number of posts queued up, and I promise that will more more of the focus from here on out.

©2009, EscapingDC.com

If you were to ask a hundred people this same question, you’d almost certainly get a hundred and five answers.  To each person there is a different answer, and that’s a part of what makes us humans an interesting lot.

Personally, I’d find more work.  Not the same 8-to-6 grind, of course, but something.  I don’t golf.  I enjoy travel, but I never tire of the feeling of relief  I get entering my own home.  I lack the dexterity to build model ships in bottles.  Even if I could do any of these things well, I’d find a way to make a business out of it: GPS-enabled golf-game tracking service, paid travelblogging, or starting an international ship-in-bottle sales web site.

The bottom line is that finding a business model in everyday activities is the challenge that I most enjoy.  For that reason alone, I’ve resigned to the fact that I’ll never have a traditional retirement.  It simply doesn’t appeal to me – I’d go stir-crazy within a month.  That doesn’t mean that there’s no place for relaxation or enjoyment of some of the nicer things in life.  We love spending time at the beach, as is obvious with this blog, we enjoy spending time with the kids on adventures: either in the backyard or far away from home.  I would love to take a long tour of the best craft beer breweries in America.  The truth is that all of that should be do-able NOW, not “someday.”  In the most perverse of punishments, we simply cannot wait until retirement to spend time with our kids as they grow up.

About a year ago, I read Four Hour Work Week, mostly as a lark.  ”Come on, how could I cut my work time by a factor of 10-15x?!”  Still for $10 or $15, the book was a good beach read, and brought to light some real possibilities.  The book is more about shaping your work to be insanely effective efficient, which can then decrease the number of hours spent to attain specific financial and lifestyle goals.  Even in government contracting, for whom the concept of “one hour” is sacred, there are many ways to optimize time spent such that efficiency is maximized.

Don’t misread my source list, though.  There are a multitude of data sources that I’ve referenced in reaching the escape decision.  Sites lifehacker.com, tech industry news from GigaOm, Engadget, and others have been invaluable.  Even community chatter from sites like digg.com and its ilk have been useful.  (The latter family of sites, however, has a much lower signal-to-noise ratio.)  4HWW was at times just a framework for ideas, at others a substantive resource.  I’ll refer to it often by name, but that’s more because Tim’s ideas were of a different category than the “work your ass off until you are 65, then retire by sitting on a porch somewhere complaining about weather and kids on your lawn” variety.

The idea is to identify what you want to do with your life NOW, then determine how to meet the financial and schedule requirements.  If you approach this in reverse, better known as “traditionally,” then you’ll be committing one of two cardinal sins: Either you’re artificially limiting the scope of what you can do with your life based on your income, or you’ll be constantly striving to make more money to do the things you want.  That last bit just puts salt in the wounds – if you spend more time to get ahead to make more money, you’ll have much less time to do what you want.

There are a number of tools that can be used to accomplish this in a sane fashion.  The next post will look at the keystone of such an effort – the Reverse Budget.

©2009, EscapingDC.com

Sorry for the delay in posting recently – there has been a crazy flurry of activity, and writing here doesn’t trump getting stuff done in the real world.  Anyway, we’ve been keeping notes on our process and will have a bit more of a chance to get into things.  Most updates are posted directly to the corresponding Twitter page, which is also republished in the sidebar to the right of this blog.

The two major bits of news are that we’ve signed for a home to be built!  The place is an extraordinary home to be built by the Schell Brothers company, and we’re incredibly excited to see it get underway soon.  We’re still working out timing, but that should all be nailed down very soon.  As you can imagine, any project like this has a thousand moving parts, and keeping them spinning in harmony can be a scheduling nightmare – especially when so many are well out of our control (housing markets, etc).

The supporting bit of news is that my wife Marie was unbelievably fortunate to find a remote work opportunity that will meet our reverse-budget requirements, making the move possible.  (See the next post for details on what a reverse budget is – I’ll add a link here and remove this note when that post is final.)  There are simply no words to say how lucky an opportunity this was, and we are tremendously grateful that the stars happened to align.

Anyway, things are happening, even if not updated here as much as I’d like them to be.  Follow us on Twitter to get the latest and greatest, but we’ll be catching up here as we are able.  There were a TON of great tips and tricks that we either found or devised, and the original idea of this project still stands: track the process of drastically changing our living situation through a formalized process of lifestyle design.

There are a lot of fun things coming soon, and I can’t wait to write about them.

©2009, EscapingDC.com

As with any major life decision, it’s easy to find reasons NOT to change anything at all.  The familiarity of our surroundings – no matter how frustrating they are – can provide a level of comfort.  Whether you want to call it “lifestyle inertia,” say that “the devil you know is better than the one you don’t,” or use some other cultural cliché, the bottom line is that if change is tough, a lifestyle overhaul can be a tremendously difficult journey.  However, without taking a serious look at both sides of the “move/don’t move” equation, we wouldn’t be making a wholly informed decision.

Said differently: Be as familiar with well-supported arguments against your preferred viewpoint as those that support it.  In fact, in the case of a decision that has a heavy emotional angle, it’s probably more important to objectively study the opposing viewpoint.  So, for the sake of discussion, let’s take a look at a few of the  solid, well-thought-out reasons that we should just stay put?

Jobs

The DC job market is probably the biggest reason we shouldn’t leave.  Let’s face it – regardless of what administration is in town, the government is always hiring.  If you’re fortunate enough to have a security clearance, it’s a safe bet that you can stay employed, even if your skills and abilities are toward the baseline.  Of course, you might need to downgrade your expectations and glamour factor a bit, but you’ll have food on the table and a roof over your head.  Usually, it’ll even be nice food and a nice roof.

I’ve noticed that in both contractor and governmental circles, the security clearance tends to be a very convenient safety net.  When someone here changes jobs, I’ve noticed that they seldom even consider going to a job that doesn’t also require a similar clearance to the one they already hold.  The real irony is that as long as you know what it takes to get and maintain a clearance, getting one back is not (usually) too difficult a prospect.  Don’t start using or dealing meth.  Don’t do things that could put you in jail.  Keep notes when you travel overseas on dates and locations you travel.  There are, of course, more factors to consider, but you get the idea.

Even when looking at the job opportunities within the DC area that don’t require a clearance, there are always going to be government employees that need goods and services.  The fairly constant and predictable flow of customers provides a healthy job market.  Especially given the recent economic turmoil, that’s a tough thing to walk away from.

Housing

Selling at or near the bottom of the bell curve sucks.  Buying there is ideal.  Moving generally means doing both simultaneously.  In our case, we’ve got one leg in each of two vastly different housing markets.  We’ve had to keep eyes squarely on the equity in current home and how that translates into buying power in another market.  We’ve had to remain disciplined enough to focus on the fact that we’ll be lucky to get what we paid 5 years ago for the current house, despite putting a lot of time, money, and effort into some extensive improvements.  That’s a tough pill to swallow, but the real key metric is equity and the percentage of down payment it equates to on a new – and far less expensive – home in a new location.

Uncertainty

The question “What is the worst thing that could possibly happen?” has become something of a mantra for us.  The fear of the unknown is powerful, and has certainly held back countless potential great things from happening throughout history.  In our case, of course, we’re “just moving,” and our little experiment won’t hold up as one of the riskiest gambles ever undertaken.  However, for our family, it’s likely to be one of the more significant life changes we’ll make aside from retirement.  Things could go horribly awry – we may not find jobs, maybe we won’t be able to afford the new mortgage, and/or our current house might not sell for what we need or at all…  However, by methodically calculating the risk we’re taking on, we can determine how much of a financial buffer we need to have before taking the leap.  The unknown shouldn’t be a reason to stop planning, but a staunch motivator behind our planning more completely for possible failures along the journey.

DO IT

All in all, these are some really good reasons for us to stay put and figure out a way to mitigate the frustrating aspects of living in the DC Metro area.  We’ve considered these and a lot more – very heavily.  However, even after all of the deliberation, consideration, and re-consideration, the course of action was clear: it’s time to head to the beach.

In our case, we’ve now personally committed to moving to the Delaware beaches within a year.  This is where things start to get interesting.

©2009, EscapingDC.com

An obvious and completely understandable question is “why leave?”  To put all facts on the table, both my wife and I have well-paying jobs, ostensibly helping to accomplish meaningful things in the greater DC work-o-sphere.  The house is fairly new and we both love it.  The kids are in a good school system.  All in all, we’ve got a pretty good thing going, and are infinitely thankful for that.  So again, “why leave?”

One answer is boredom.  As Tim Ferriss postulates in Four Hour Work Week, the opposite of happiness is not sadness but boredom.  My job has become an administrative exercise in perpetuating the status quo while linearly scaling to a larger bases of customers, revenue, and (somewhat) profit.  There is little challenge in this.  ”Keep doing what you’re doing, just do more of it” is not something that will make me happy for the next 10 years.

Another is that DC is not a location that caters to families as well as others.  The work here generally demands most of your waking hours to remain competitive with the person in the next cube.  The commutes are insidious – an hour each way for 15-30 miles is like taking an unpaid part-time gig just to be my own driver.  While working from home is somewhat of an option, it is justifiably trumped by security requirements that necessitate countless hours in small windowless rooms, all but cut off from the outside world.

Personally, I could easily deal with one or the other of these two factors.  A relatively unchallenging job is no sweat if you’ve got the time to spend with family and do more of whatever it is you want to do.  On the other side of the equation, the rewards of a highly challenging job – while it will never make up for personal time – can somewhat offset the increased amount of time it demands.

Without either of these “pegging the fun meter,” there’s little uncertainty left in the decision – it’s certainly time to consider other options.

When considering where to move, we had to really take a step back and see what drives us. A recent lifehacker.com article led us to the familyhack.com site, where Michael Davis recently implored readers to “Find the Environment Where You Thrive.”  A timely and interesting take that really amounts to “common sense” – find what kind of place makes you feel best and live there.  Wow – simple and to the point, isn’t it.  DC was a great place to be before kids, and for some folks can be great after.  For us, though, the equation is just not balancing.  Obviously, we’ve got an idea of the kind of location we will go – the beach – but  the only things left to decide are: exactly what beach/coastal area, what to do for a living, when do we do it, and how can we make it work?  Piece of cake… Right?

©2009, EscapingDC.com

It’s time.  What’s been plain and obvious for a number of months has finally been verbalized: It’s time for my family and I to leave the Metro DC area for something – somewhere – else.

©2009, EscapingDC.com