Today, I have the wonderful privilege to have Jerysey Mom write this guest post for me. I would say that most folks who think that having a mortgage is “good debt”. Well, this financial crisis has taught us that it is not always the case. The conventional wisdom is that you have to save up 20% for a house downpayment. Why 20%? Cos I guess you avoid PMI. But why not pay your house in cash? Impossible you say? Not really, and Jersey Mom is proof that you do not have to go into too deep of a mortgage just to your home. I would urge you to consider check out her blog and subscribe to her alerts (on her home page)
Hello Mr. Credit Card readers! This is Jersey Mom. Mr. Credit Card has generously invited me to write about how my husband and I were able to put $300k down payment on our $430k house and are nearly mortgage free.
To begin my story, we have to go back to my college years. While strolling through the bookstore one day, I came across a book titled â€œThe Millionaire Next Doorâ€ written by Thomas Stanley. It was a catchy title (who wouldnâ€™t want to be a millionaire?) so I bought it. To be honest, what I read in that book surprised me. I had no idea that most millionaires are so frugal that they used cars, wear $10 watches, and arenâ€™t into fashion.
When you think of millionaires, what do you think of? Most people think of Mercedes, BMW, Rolex, LV, Prada, million dollar homes, yachts, planes, etc. If your answers match what I wrote, youâ€™d be partly correct. In fact, I thought so as well because my parents happen to be multimillionaires and have BMWâ€™s, Rolexes, yachts, several houses, and housekeepers. The book Stanley wrote allowed me peer into behaviors of many other millionairesâ€™ lifestyles.
After college, upon realization that Iâ€™m not really cut out to be entrepreneurs like my parents, and not likely to make millions of dollars each year, I began following what I learned in Stanleyâ€™s book. I made a decent salary but I â€œdown gradedâ€ many things including: clothes (Banana Republic to Old Navy), skin care (Estee Lauder to Olay), and other every day items. Thus, began the learning process of leading a more frugal lifestyle and living below my means.
I learned that in order for me to become a millionaire one day, I needed to MAKE and STICK to a BUDGET. A budget is basically a financial plan. Most people what they need and want, then save the rest. I however, have the opposite system. In other words, instead of spend first, save later, I save first, then allocate the rest for specific expense categories.
Here is the general idea regarding how my husband and I allocate our household income (simple version):
Now that you know how weâ€™re able to put $300k down payment on a house, I want to share a few thoughts on ing a house. The house we live in is well maintained, one of the least expensive in town, and quite small by normal standards (1500 square feet). We didnâ€™t our house for other people. It is enough for a family of 4 + a cat + a dog. Donâ€™t a house to impress others or keep up with your friends. Buy a house (or townhouse or condo) you can easily afford else youâ€™d be stressed about paying the mortgage instead of enjoying life, being with your family, and saving for retirement.
Mr Credit Card’s Note: – Just as I was about to publish this post, Jersey Mom appears to have made her decision to pay off her mortgage.
One thing you will realize from reading her blog is that Jersey Mom lives life at her own terms. That is something we all can learn.