Is paying off your mortgage and living mortgage free really like having financial freedom?
When you have a mortgage, it may seem like it would be.
When you finally pay off your mortgage, you realize it’s not yet financial freedom. But, you’re getting there!
Related: How to Pay Off Your Mortgage Faster
I’m mortgage free, but, I still have about $400 / month in property taxes and $775 / month in maintenance fees. So, even though I own my house, I still need to make sure I earn at least $1175 / month to keep it.
And that’s just a minimum. You also need a few hundred a month for utilities such as water, heat, and electricity. And finally food. Those are the most basic necessities.
For me, internet is almost a necessity as electricity. So, you can add that and other services such as a phone to your expenses.
The key is to create an expense breakdown to see how much income you need to cover all the expenses over and above having a roof over your head.
An expense breakdown is your first step to living within your means. When you live within your means, you will be able to save and create wealth.
Below is a breakdown I created for my family, which includes my wife and daughter, for mostly “essential” expenses:
| Expense | Amount (per month) |
| Condo fees | $850 |
| Groceries (includes toiletries and vitamins & herbs) | $600 |
| Property taxes | $375 |
| Health insurance | $350 |
| Car loan* | $300 |
| Car maintenance | $200 |
| Car insurance | $225 |
| Restaurants and Take-out | $200 |
| Enbridge | $160 |
| Internet | $60 |
| Hydro | $65 |
| 2 cell phones | $100 |
| Home insurance | $50 |
| Streaming shows | $25 |
| Clothing | $80** |
| Entertainment Passes*** | $80 |
| Grand Total | $3720 |
I’ve recently updated this for April 2022.
*Car loan – I don’t have a car loan, but, it’s my placeholder amount for having (buying) a car. As you can see, having a car is a big waste of money. After your mortgage, it’s about tied with condo fees for the next biggest expense when you include the related expenses of maintenance and insurance.
** Clothing – I have never kept track how much I spend on clothing because I buy it so infrequently. It’s very sporadic. Recently, for example, I decided to throw out a ton of very old socks after trying wool socks for the first time in my life. I’ve done the same with my old shirts. I might decide to clear out old clothing and then I replace them. So, my clothing spending is very sporadic.
*** Entertainment passes are for my daughter and include membership to Canada’s Wonderland and other places. I’m including it as “essential” because my wife and I will go crazy if we didn’t have these memberships 🙂
You can also see that to have your basic expenses covered, you need to earn almost $3,720 per month for a family of 3. This doesn’t include vacations, daycare (which is about $1500 / month) if you have young kids, and other stuff.
So, living mortgage free isn’t financial freedom. Not by a long shot.
You still need to earn more than $44.5k a year even if you paid off your mortgage. And that’s just your basic expenses. That comes out to about a $35 / hour job, when taking taxes into account because expenses use up your income after you’ve paid your taxes.
So, living mortgage free isn’t close to financial freedom, but, what it does is increase your job opportunities because you can take a wider range of jobs and still survive.
When you finally cover all your basic expenses, what it does is lift a huge weight off of you mentally.
Think about it, when your basic expenses are covered, you don’t need to worry about pleasing your boss and keeping your job. If you hate your boss or job, you can leave.
You can really take whatever job you like. Because whatever you make, it’s your disposable income for the “fun” expenses like vacations, basketball game, concert, or whatever.
I can tell you it’s exhilarating 🙂
Now, those of you who know me, know that I don’t slack off. I always work hard at whatever I do.
But, if I were to take a job and I got some crazy boss that breathes down my throat and barks and yells, or you know, they’re just a plain asshole (and there are many of them and co-workers out there), I can just say, see you later, hasta la vista, sayonara, adios, whatever you want!
And that in itself is an aspect of freedom that is just plain sweet!
Inspiring Video for Saving
You may have noticed that my above budget is based on no mortgage. And that’s because of the focus of this article, to show you that it isn’t financial freedom even without a mortgage.
So, you may be thinking, this budget vastly underestimates your expenses. Which is does if you have a mortgage. So, you definitely need to add that in, particularly since it’s usually your biggest expense.
Despite that, I want to show you one video showing a 23 year old living in Brooklyn, NY on $50k a year!
Again she’s vastly different from my profile with a wife and child. But, her video still gives ideas for saving and living within your means.
Below is another video from Kevin O’Leary talking about debt and saving. Kevin suggests being out of debt by about 42 years old. Because by that time, you’re about half way through your life!
It’s not the nicest way to look at things, but, I have to agree. At some point, you want to be free of the debt burden. You have to set goals and targets just like companies do if you want to achieve certain accomplishments in life.
When you think about it, all companies have a mission or goal in mind. They don’t just create a company and hope for the best. There is a purpose with a defined goal.
I think if you want to become “successful” with paying off your mortgage or having a certain amount of wealth by a certain age, you need to calculate it and plan how to get there.
Leave a Reply