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December 2021
I serve many clients who live in the San Francisco Bay Area, which is a beautiful but expensive place to live. I’m regularly having conversations with them about moving to other parts of California, upgrading existing residences, or moving out of California entirely. The risk here is having the money tail wag the dog. The way to lower that risk is education and fact-gathering. Whether you’re wanting to move on, move up or move out, do your homework. The answers are not always as obvious as you think.

First, get clear about what you’re trying to achieve.  Even if “live less expensively” is number one on your list, what’s a close second? Typically I hear things like: be closer to family, live in a one-story structure, have more outdoor space, have a bigger kitchen, be closer to the ski slopes (oh, right, that’s me), etc. If you don’t put some focus on where you want your life to look like, you might end up unhappy in your new location.

Second, gather data and run your numbers. . This is definitely one of those places where you want to measure twice and cut once. I regularly see clients who are remodeling forget to add in the rental expenses on an apartment while their home is gutted and they eat out more often. I see clients who are selling and buying something new fail to calculate their capital gains tax liability, thinking if they sell a primary residence and buy another, there’s no tax due. That hasn’t been law for a very long time. If you move within California, it’s also worth familiarizing yourself with Prop 19 and the tax ramifications of that. I also see clients moving out-of-state think that utilities or auto fuel will be cheaper elsewhere but fail to remember that they’ll have air conditioning running all summer and they’ll be in their cars far more than they are now.

Third, go visit.  If you’re going to remodel, do your best to visit other homes like yours who have done similar renovations. Magazine pictures of rural home kitchens are unlikely to work in the city. What you need is neighborly advice about what it’s like to renovate a home like yours. If you’re going to leave a place where you have lived for a long time, you need to see what it would look like to live elsewhere and not while on vacation, when everything is fun and great. AirBNB and VRBO are great ways to visit and explore new-to-you neighborhoods.

Fourth, run your numbers in the context of your financial plan. Spending money now reduces what is available to grow over time. Take money from a sale and getting it invested can increase what is available over time, which often helps reduce long-term care expense worries. Spending money on an upgrade does not always mean that you’ll reap more money when you sell. Playing with various assumptions on investment growth rates, inflation, expenses, etc. is eye-opening and helps you get clear on what it is you really want.

If you need assistance with the analysis on whether to move on, move up or move out, please reach out.


Lanning Financial Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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