Over half of Americans claim they're nowhere near achieving their definition of financial freedom, with 36% saying they have less than $1,000 in their savings accounts.
Personally, to be “financially free” I would need enough investment income to cover all my expenses without making any sales/withdraws. Ideally this would include owning my home outright. So probably in the neighborhood of one million. I doubt I will ever get there.
Yeah, owning your home free and clear can really lower the bar needed to hit that financial freedom level. I did the math before for myself and it would be about $2m, but I don’t think I’d feel comfortable actually quitting my job at that level, so would likely say $5m to be safe. Everyone will be different of course, depending on the lifestyle they’re looking to live.
Unless you pay cash upfront for a house, it serves no benefit to pay it off early due to inflation. As inflation goes up your debt says flat but your home value increases as well as equity. With a interest rate lower than the inflation rate your making money on the loan, not losing it. A mortgage is an investment, let it roll for as long as you can. Also it’s convenient that taxes are collected within the mortgage rate, once that is gone it becomes a pain.
Yes a mortgage is an investment (which can make a profit or loss just like other investments) but it is also an obligation. With a mortgage losing your job could potentially leave you homeless. That is not what I consider “financially free”. If you have a lot of cash up front you could potentially put it into higher yielding investments and make a profit on the difference between yield and mortgage rate at the end of 30 years but that takes some amount of luck and skill with investing. Especially now that mortgage rate are 7%. If you don’t have all the cash up front then taking out a 30yr 7% loan for 300k will mean you’re paying over 700k for the house with interest included.
Saving up an emergency fund to pay the mortgage if you become jobless should be a top priority for any homeowner. Priority meaning you cut back everywhere you can to generate those savings, until you have enough saved to be comfortable. Once I saved up a 6-mo emergency fund I felt much closer to financial freedom. I can have 6+ months to look for a new job if I lose mine.
A mortgage is an investment, let it roll for as long as you can.
The fact that you’re not wrong about this is part of the reason housing keeps getting more expensive. So many individuals have their nest eggs tied up in their houses that building more would hurt a lot of ordinary folks.
I certainly don’t live debt free, though the debt I have has a ROI that makes it worth having.
What amount would be enough to consider yourself financially free? $30K in savings? $100K, $500K, $1 Million?
Personally, to be “financially free” I would need enough investment income to cover all my expenses without making any sales/withdraws. Ideally this would include owning my home outright. So probably in the neighborhood of one million. I doubt I will ever get there.
Yeah, owning your home free and clear can really lower the bar needed to hit that financial freedom level. I did the math before for myself and it would be about $2m, but I don’t think I’d feel comfortable actually quitting my job at that level, so would likely say $5m to be safe. Everyone will be different of course, depending on the lifestyle they’re looking to live.
Unless you pay cash upfront for a house, it serves no benefit to pay it off early due to inflation. As inflation goes up your debt says flat but your home value increases as well as equity. With a interest rate lower than the inflation rate your making money on the loan, not losing it. A mortgage is an investment, let it roll for as long as you can. Also it’s convenient that taxes are collected within the mortgage rate, once that is gone it becomes a pain.
Yes a mortgage is an investment (which can make a profit or loss just like other investments) but it is also an obligation. With a mortgage losing your job could potentially leave you homeless. That is not what I consider “financially free”. If you have a lot of cash up front you could potentially put it into higher yielding investments and make a profit on the difference between yield and mortgage rate at the end of 30 years but that takes some amount of luck and skill with investing. Especially now that mortgage rate are 7%. If you don’t have all the cash up front then taking out a 30yr 7% loan for 300k will mean you’re paying over 700k for the house with interest included.
Saving up an emergency fund to pay the mortgage if you become jobless should be a top priority for any homeowner. Priority meaning you cut back everywhere you can to generate those savings, until you have enough saved to be comfortable. Once I saved up a 6-mo emergency fund I felt much closer to financial freedom. I can have 6+ months to look for a new job if I lose mine.
The fact that you’re not wrong about this is part of the reason housing keeps getting more expensive. So many individuals have their nest eggs tied up in their houses that building more would hurt a lot of ordinary folks.