Seven months ago we made our final payment to become mortgage free. After seven long years of paying down debt, we officially achieved complete debt freedom! I’m still not sure if this has completely sunken in yet.
It’s been a while since we’ve shared a more personal post about what our family has been up to since becoming mortgage free. We’ve been thinking a lot about our next goals, especially financial goals, now that we are mortgage free. This post covers what we’ve been doing the past seven months and where we’re going from here. Hopefully, it gives a bit of insight into what it’s like to live mortgage free.
First and foremost, we need to get our spending and saving back on track. We’ve splurged quite a bit since becoming mortgage free, primarily on travel and home improvements. While we still plan to do a decent amount of travel going forward, home improvements should be relatively minor.
Our Mortgage Free Family
Life for our family of four isn’t all that different since paying off the mortgage, to be honest. Adjusting to becoming a two child household a little over a year ago was a much bigger change!
Lately, I’ve been thinking a lot about the fact that my baby girl, who turned one last week, will grow up in a house that is completely free from debt. I know that may not always be the case because life happens and a job loss, medical expenses, or other significant life change could deter our progress.
Then again, if we remain on this path, I believe more and more that one of the greatest gifts we can give our children is a home that is free from debt and financial struggle. Financial issues are at the root of so many family problems and can lead to divorce, bankruptcy or other negative events. Eliminating debt certainly doesn’t guarantee success for our family, but it definitely improves the odds.
As I write this post, my one-year-old is sitting a few feet away. We are on a mini vacation down at a local lake since our four-year-old is on spring break. Sitting here typing this out with her crawling around, playing with her little toys and books, and overlooking a beautiful view has me feeling overcome with gratitude.
Bringing a child into a debt-free world is something I would have never imagined years ago. It will be years before her or her older brother have any sense of how different this is from others. I imagine my wife and I will get criticized as parents for being cheap and at some point they may even think we’re poor compared to their friends who live in much bigger homes and have nicer things.
We’ll try to do our best to find that balance of letting our kids enjoy the lifestyle we’ve built without spoiling them. I’m sure it will be a push and pull that every parent struggles to get right. Nobody wants their kids to grow up in financial chaos or lacking the basic necessities, but at the same time handing your kids everything in life isn’t the best approach either. I’m sure we’ll make mistakes along the way but we’ll do our best to find that balance.
How Has Our Life Changed After Becoming Mortgage Free?
As for our financial situation, we are making a significant pivot from paying off debt for years and saving in tax advantaged retirement accounts, to saving aggressively to purchase assets. Most all of our net worth is tied up in our home, retirement accounts, and pensions. As you’ll read below, we even recently burned through our emergency fund to remodel our kitchen. Our financial goals during the next several years will be centered around buying assets and building passive income streams. Below are a few ways that our life has changed and will potentially since becoming mortgage free.
We Became a Single Income Family
As mentioned above, our daughter turned one this past week. Instead of having to send her to an in-home daycare like we had to do with her brother, my wife has the opportunity to stay home with our baby. In an era where many families require two working parents to make ends meet, being mortgage free has provided us with the possibility of moving to a single income family.
Having my wife at home has allowed us to save an extra $600-$800 per month on daycare expenses. Additionally, we made our last preschool payment for our four-year-old in January by pre-paying for the rest of this school year. Since he’ll be going into kindergarten next year, that expense should be completely off the books. Additionally, my wife’s final paycheck came right at the time we paid the mortgage. Without a mortgage payment the impact of moving from two incomes to one has been minimal.
We Remodeled Our Kitchen
Right after paying off our mortgage we immediately moved to our next goal of remodeling our kitchen. When we decided to go all in to pay off our mortgage in 2016, we put all home renovations on hold until we became mortgage free. We’ve been in our home for 10 years and the kitchen was the last big project that needed to be completed.
In hindsight, we should have saved up more money before moving forward with the kitchen remodel. We ended up nearly doubling our original budget and as a result burned through the majority of our emergency fund. Using your emergency fund to pay for a new kitchen is obviously not recommended but it is what it is.
In the end, we are really happy with the way the kitchen remodel turned out. It also gives us a lot of pride that the kitchen was paid for with cash, even if we used emergency savings. You can visit this previous blog post for before and after photos of the remodel.
We are Rebuilding Our Emergency Fund and Saving for Rental Property
Our primary financial goal in 2019 is to rebuild our emergency fund and begin saving for a rental property. Right now our family of four is living on a little more than $3,000 per month. Our plan is to have six months of emergency savings, and therefore an emergency fund of $20,000. We should have our emergency fund built up again by the end of April.
In reality, if we really needed to, we could live on about $2,000 a month somewhat comfortably since we have no debt. We don’t strive to live overly frugal and could cut some of the fat if needed. Examples include going out to eat, paying for cable (Sling), weekend road trips, and minor home improvements. We try to balance spending money intentionally on things where we get enjoyment while still maintaining a high savings rate.
Speaking of savings rates, our next big goal now that we’re mortgage free is to eventually purchase a rental property. The big debate is if we should save up enough to purchase a property with cash or only save up 20 percent for the purchase. The long-term goal is to own 5 to 10 rental properties mortgage free but I’m not opposed to taking out loans to get started. More to come on this internal debate in a future blog post.
We are Maxing Retirement Accounts and Giving 10 Percent
Something we take a lot of pride in is giving away 10 percent of our take home pay. We are so grateful to be in our financial situation and the least we can do is give back even if that slows our path to financial independence. Our goal of giving away 10 percent was achieved for the first time in 2018.
We gradually worked our way up to giving away 10 percent. Three or four years ago we were only giving one or two percent. Two years ago we increased giving to five percent, and last year all the way up to 10 percent. I feel passionately that everyone should give in some way, whether that is money, time, or other means. The amount you give is a personal decision and everyone will have a different goal.
We are also on schedule to fully max out my 401(k) for the first time by contributing $19,000. We also plan to open at least one IRA, adding an additional $6,000 into tax advantaged accounts. I’ve been on the fence about opening an IRA for years because I don’t like the idea of locking up more money until retirement age. However, the tax benefits are too significant to ignore. I also need to learn more about options to get money out of retirement accounts early if needed.
We are Focusing More on Travel
Our family loves to travel. This is more difficult with young children so weekend road trips have become more of the norm. Sometimes my wife and I travel alone and other times we bring the kids. Since becoming mortgage free we have taken trips to Orlando, Fort Lauderdale, Branson, Dallas, and several trips to the Lake of the Ozarks. We are going to Los Angeles in May as a family, and are planning an adults only trip to Mexico later in the year.
We try to be as smart as we can with the money we spend on travel. For example, our flight to Los Angeles for our family (3 tickets) was almost completely paid for with Southwest Airlines points. We often look for deals on lodging and entertainment as well to minimize the cost of travel. When the kids get older we plan to explore more elaborate travel opportunities out of the country.
We are Less Stressed and Have More Options
Since becoming mortgage free it really does feel like a weight has been lifted off our shoulders. My day job can be stressful at times. Knowing that no matter what happens we probably won’t lose our house. We have the financial runway for one of us to find another job if something goes wrong, which takes the edge off of a stressful situation. I can’t imagine going back to a time where job loss would mean potential financial ruin. Overall, I like my job and love my organization. I’ve been there for 12 years and would like to work there for another 12 years. However, I also know that staying employed there isn’t completely up to me to decide. Layoffs, bad managers, forced job changes, and other things outside of my control could happen. Becoming debt free is much less about what makes the most sense on paper and more about the impact that it has on our lives.
There are a few other quick things I want to share with you all.
- I’m really excited to have been selected to be on the panel for the Plutus awards. The Plutus awards celebrate excellence in financial media. It’s basically the Oscars of blogging and podcasting. The annual awards show commences during FinCon and will take place in early September. The underlying foundation for the Plutus Awards, the Plutus Foundation, provides grant money and resources to provide financial media to create, develop, and administer community-based programs that enhance financial literacy, education, and empowerment. It’s a great cause and I’m thrilled to be a small part of it.
- My wife and I signed up to participate in a Tough Mudder in April. Tough Mudder is a mud run that includes many obstacles along the way. This will push both of us way out of our comfort zone as neither of us has done a formal race more than a 5k. Wish us luck. 🙂
- A couple weeks ago, my story was featured on Vital Dollar. I had the opportunity to share my side-hustle as a freelance recruiter a few years ago. Check out the post to learn more about my experience recruiting for extra money!
As always, thank you for reading. I really appreciate anyone who takes time to read through this blog in my own little corner of the internet. I always enjoy getting comments from readers and would love to hear how you’re doing on your financial goals. Also, if you want to talk us out of financing a rental property, now’s the time!