Practical Steps Towards Financial Freedom
I know it's been a long time since I've actually posted anything, but in part it's because I've been so busy preparing for and ultimately buying my first house! Now that I'm done with that, I'll try to get back to posting more frequently! I write a lot about how someone can "theoretically" make strong financial choices and retire young, but I figured that since I've actually just made a big financial move, I could talk a bit about why and how I did it!
Happiness is Key
Before I start talking about the financial benefits of my new home, I want to point out that I absolutely love it! It's a small condo near downtown Worcester in a great location with lots of charm. The last time I moved, I did it because I needed to and not because I wanted to. I can't stress enough how much different it is this time! I've been saving up for months and when this place came on the market I could absolutely see myself living here. It's just as important to make decisions that will make you feel happier with your life as it is to make decisions that will build wealth.
Believe it or not, this is in many cases still a great time to buy a house. In Worcester, prices still haven't recovered much from the Recession and interest rates are ridiculously low, as in, lower than almost any time in history. When you put these factors against a backdrop of beautiful historic homes, the conditions line up perfectly for someone like me! I was able to purchase what is essentially my dream home for $90,000 with a loan with a 4% interest rate. For anyone who is familiar with the way that the Massachusetts or most other real estate markets typically operate, this seems almost unbelievable. On top of all of this, I participated in the Buy Worcester Now program, which offered me an additional $5,000 to help with closing costs! Thanks Worcester!
In many ways, this actually is almost unreal. My total payment each month for this place that I absolutely adore, including principal, interest, condo fees, property taxes and heat comes to $800 per month. That's $400 less than I pay in rent and just about the best deal that I could possibly think of!
This is where things get really fun! My crazy freedom of having such a low housing cost is going to help me achieve financial freedom very quickly! Before I made this purchase, I was paying just over $1,200 in rent and saving $400 per month towards a downpayment. Now that I've purchased the house, I'm going to continue to spend $1,200 on housing and the $400 will shift to an investment portfolio rather than saving for a house. Either way, I'll still be allocating $1,600 a month, just to different spots than before.
Assuming that I make no changes to this plan and never increase the amount of my contributions, I will have my mortgage fully paid off by 2027. That's 12 years from now, but my goal is to be a bit more aggressive and actually do it in 7! Now that $400 per month that I'm going to be investing is likely to turn into about $83,000 in 10 years under "normal" market conditions.
All of this means that assuming that my income never increases and that I never become any more disciplined, this one shift from renting to buying will allow me to accrue about $200,000 in home equity and investments over 10 years. I have other sources of investment income as well, but still this is nothing to scoff at!
This is Worth It!
I know that I talk a lot about this, but now that I'm actually here and I've actually completed one of my major goals, I have to say that it's so worth it! And while I'm certainly proud of myself for getting this far, I believe that anyone can do this! If you would like to follow this same path of building wealth through homeownership, don't forget to contact me at Z.Dombroski@gmail.com and I'll be happy to help!