Here here at Mutilate The Mortgage we often talk about how to pay off your mortgage as fast as possible. However one of the best ways to make sure you do this is to ensure that it doesn’t actually get any bigger. There are many ways that this can happen, but the most common one is by purchasing a new house.
For most people the reason they upgrade to a new house is because they either want it to be bigger, better or both. Whatever the case is, this ends up with their mortgage being bigger and by the time this event rears its ugly head, the ability to prevent it is usually long gone.
Too. Much. Crap.
One of the most common reasons that people feel like they need a bigger house is because their current house is packed to the gills with random crap. Depending on how old you are accumulating stuff can be easy or ridiculously easy. If you have a reasonable amount of disposable income it’s very common for people to succumb to the pressures of buying more and more gadgets, toys or other paraphernalia.
From endless tech gadgets (guilty!) to jet skis to clothes to multiple cars and every kitchen appliance under the Sun, you can very easily and very quickly fill your house with all sorts of stuff. The end result is every room, nook and cranny as well as your entire double garage being completely full of boxes and boxes of crap.
Even if you don’t have wads of cash on hand just the pure passage of time can mean gifts from others build up or buying little bits and pieces one by one over time slowly fills every area.
After this happens and your house is completely full, you then start to feel the pressure of never having any space or feeling like you’re stepping over things every five seconds. It’s also much harder to keep your house clean and eventually people break and arrive at the decision that you know what? They need a bigger house!
As this process happens slowly over the course of many years, the feeling that you need to move to a bigger house slowly creeps up on you. Therefore you tend to not question whether or not it’s the right course of action because it’s just always been there in the back of your mind.
Think Of The Children!
Another common reason for requiring a bigger house is because you might be wanting to start a family. This obviously is a lot more justifiable and logical in its reasoning but none the less can still be used inappropriately sometimes. For example, if you live in a three-bedroom house and are wanting to have only one child, a bigger house might not be needed.
When I grew up my brother and I shared a single small room for most of our childhood and although it wasn’t exactly super fun, it’s not like I died a horrible death or turned into a psychopath as a result. Now I can’t say definitively whether or not a three-bedroom house is big enough for just one or even two children as we’ve never had children.
However at the very least I think we would try and make it work for a few years first. Rather than instantly deciding that we must have a much bigger house, we’d first see if we could cope with our current setup and then consider purchasing a bigger house if it honestly wasn’t working after a year or two.
This is how we operate with most decisions and it seems to work quite well. Occasionally we’ll try and get by with what we have and see if it works or not. If it clearly just doesn’t work in after a good period of honestly trying then we have legitimate proof that the money we’re about to spend is actually needed and not just a nebulous “want” as those can get out of hand very quickly!
When it comes to children and spending vast sums of money on upgrading your house size, I think it’s also important to consider where else that extra money you’ll be spending could deployed. For some people the choice might come down to having a slightly bigger house with an extra bedroom… or sending their children to private school.
It could mean having a room for each of your children or being able to pay for a private tutor every week for all your children while they go through high school. Do you use that money to help pay for their college or university fees or instead upgrade all so they can play in a second rumpus room downstairs?
While I’m not saying that everyone should be cramming six children into a two bedroom unit instead of buying a bigger house, it’s certainly a major decision that everyone should give considerable thought to. See if you can make do with what you’ve got to begin with. If that proves to not be actually working then really calculate how much extra money and extra interest you’ll be paying and have a think about if you can deploy that capital somewhere else with better results.
I’ve covered lifestyle inflation a number of other times on this website. If you’ve been following along, you should in fact be practising Awesomeness Inflation. This practice ensures that rather than trying to keep up with the Jones’s by buying more and more expensive stuff, you instead actively work at becoming better and more resilient with the things you currently have.
For those that don’t practice it however lifestyle inflation often becomes a big reason for wanting a bigger or better house. As you grow up, you tend to get higher salaries and want better things. You’ve worked hard so far and are doing really well, you deserve that nice shiny car or better house!
But I would argue that if you haven’t actually paid off your original house yet… you should really focus on that first rather than going into even more debt. Similarly if you’ve got a huge mortgage over your head you shouldn’t be buying jet skis, boats, fancy cars or other expensive items.
Not only do these things cost you money to purchase, but they also usually cost a great deal to maintain and operate further taking money away from your mortgage repayments.
An excellent solution to this problem that I’ve found is to buy or upgrade something small, while committing the majority of your gains to the mortgage. For example if you get a $10,000 raise after switching jobs, you could go out for a nice dinner and then recalculate your mortgage repayments so that the full raise all regularly goes towards your mortgage.
This way your brain gets a small reward or upgrade making you feel satisfied, but in reality 95% to 100% of your gains are being dumped straight into your most important goal long-term.
Focus On The Problem, Not Making It Bigger
There’s even more reasons out there that might make you upgrade or want a bigger house but my point is the same. Always try and stay focused on the problem at hand rather than making it worse.
Over the years it’s very easy to get bored or demotivated when it comes to paying down debt. This is why one of the core pillars of our strategy has always been “motivation”. Having all the money in the world is irrelevant if you have no motivation to pay off your mortgage anymore.
So anytime you see or feel yourself wanting to upgrade or move into a bigger house really stop and throw up a red flag. Rather than diving into what pretty new houses you could buy ask yourself if it’s required at all in the first place. Ask yourself are you making your debt problem bigger?
If you are the next course of action is clear: double down and re-focus on absolutely obliterating that mortgage once and for all. Only once it’s destroyed are you good to move onto bigger and better things.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).