1. Burn that outdated list of “Status Quos”
This sickening list has wormed itself insidiously into cultures everywhere on earth. It sounds like a badly broken record, and the lines may not appear in any specific order. Amazingly though, people play it all the time.
- Study yourself into a psychotic mess, so, you can compete with everyone else in the world.
- Complete university to secure a degree, and put yourself on a level playing field for jobs with the other 99.99% of the population.
- Hunt down a job that pays you well
- Buy a house with a mortgage
- Have a kid or two
- Move on, manipulate and stab some people to get an even better paying job
- Get a new envy-worthy nice car that makes your peers green in the face
- Upgrade to a more desirable house with a possibly bigger mortgage, to feed your own vanity
- Send kids to college/university, preferably private/overseas, all in the name of peer envy
- Get another/any status quo item to ruffle envious feathers, and for the hell of increasing your debt level. Maybe have two maids, or a minibus-sized MPV outfitted with the latest media gadgets?
Does it ever end? Are you even aware of the destructive cycle of debt, piled upon debt, all through the years? Do you also know that you probably have to keep working until you’re almost at the end of life itself?
2. Get rid of your mortgage.
Buying a house eats up disposable cash. Think about it, very hard. Squash those noisy, popular opinions aside. In the end, a house is merely a shelter. You don’t need to get sentimental and too attached with the idea. You don’t need to lock up all your hard-earned cash into that deposit. You also don’t need to keep stuffing your hard-earned cash to feed your mortgage every month. It’s so obvious but so easily overlooked. This one important detail. A mortgage is a debt. The bank owns your mortgage. This really means that you do not own your house yet. Sorry, but it belongs to the bank, not you. Granted, there may be the privileged few who can purchase a property outright with their savings. However, a mortgage is the most popular way to buy a home. It may be the only way for most, as people rarely have bags of money lying around.
So, the trap is laid. Realistically, the properties far, far exceeds savings in the bank. But still, people think that spreading a huge cost over a period of 30 years, makes a mortgage, a safe option. Really? Plonk down a chunk of blood money for the deposit, pay the bank a service fee and then you can sweat the instalments?
Did you bother to work out the extra percentage interest you have to fork out every month? And, have you added it all up over the lifetime of borrowing you requested? Even after factoring in interest deductions and breaks, the sum total is easily twice or triple the amount of the original purchase after 30 years. Worst of all, what if you lost your job or get laid off?
And that makes it OK? Does it make sense to you?
So you’re thinking your monthly payments would be lower than your monthly rental arrears. But, rent is an expense and not a debt. There’s your difference. When you buy a house against a mortgage, you increase your debt-to-income ratio. The consequence is deadly. You’re locked in for the lifespan of your mortgage. Lifespan. It means you don’t get to retire. You have to keep on working into the distant horizon. You won’t be able to save much. It will be that much harder to grow your nest egg at all.
It means that ALL the money you’ve been throwing into your home is just floating in the ether and costing you more money. There’s nothing you can do with that money you’ve already thrown away into a mortgage. It’s gone. Your property is not an asset if you can’t use it to produce an income.
3. Don’t borrow more than what you can afford.
So you’re thinking your mortgage sets you back by $400 a week but your take home is $800 weekly. It is just half your salary right? And for that price tag, you get to live in a beautiful, location perfect place. Wrong. To play it safe, your mortgage should not be more than 30% of your salary.
You’re in lalaland. Once you have a home, the bills pour in. There’s the home insurance, council levies, utilities etc. If it’s an apartment, there’s more. There would be additional costs, like parking fees, building maintenance fees, grounds upkeep and the like. Worse of all, you won’t even own the land your building sits on. What you own is a numbered spot in the building.
Don’t get carried away by your emotions. Many will try to sway and influence you. Parents, good friends who think they know better. They’ll say that everybody needs a place to call their own, a place where you can sink your roots. But you can make a home anywhere and set root there if you please. The word, “home” is a principle you can apply anywhere on earth. It is doesn’t have to be confined to just one brick and mortar location.
4. Uproot yourself, so you don’t get stuck in that ONE property FOREVER.
With technology, the world has become so much more connected. There’s a lot more to learn outside of your “home” country. Some of us relocate overseas with our jobs. There’s a lot of work mobility. With relocation, you grow new eyes and there will be lots of self-growth as you learn a new culture, a new way of living, you discard old habits, you discover new hobbies, new friends. There are many other countries, many other opportunities to create your own life options. There are so many advantages to becoming a global citizen. You don’t have to stay anchored down in one country, one single location.
If you are happy where you are, and you are not looking for freedom, financially and otherwise, then perhaps you should continue living in your own capsule. The world at large may prove too lively and shake up your sheltered frame.
5. Feed and care for yourself instead.
Stop feeding and caring for your house, or your car, or your maid.
While you are speculating that the value of your house may increase over time, the value of the material and equipment in your is on a depreciation schedule. To keep your house in good repair, you will be pouring in money for repairs, modifications, and such in order to maintain property value. Over the years, the costs will surely add up.
Notwithstanding the good sense in all this, people do tend to turn a deaf ear and cling to old traditions. Here’s a good way of looking at it. If you’re planning to stay where you are right now and if you’re not looking for financial growth and more freedom, then buying a house might be for you. Everyone else should really reconsider — because owning a home might be costing you way more than your monthly mortgage payment.[/one_half_last]
Do you agree?
Engelo Rumora’s article at engelorumora.com