My husband and I have officially paid off our mortgage on our 3 bedroom house and 20 acres of land in Victoria, Australia and we did it in just over year, including most of the time I was on unpaid maternity leave with my son!
Firstly to dispel a few assumptions you may immediately be having. Our property isn’t a dump and it isn’t in an undesirable location. It is 1hr to Melbourne CBD the 2nd largest city in Australia we are also nearby another regional centre and has great schools, shops and a train line. Our place would be worth much more than a similar property in the US, the Australian market is just like that. Also we did actually take out a mortgage. Yes we had a big deposit but our mortgage was still 200K. Also my husband did have a good job but he wasn’t a CEO or anything like that. This wasn’t handed to us and we did do this through our hard work and the choices we made. And yes we still had a social life.
Ok so now how we did this.
Saving our Deposit
Well firstly we did pay off our mortgage in about 13 months but that doesn’t really count the time we spent saving for our deposit although that was still fairly short. Our deposit was just over half the value of our house. It is hard to exactly pin point how long this deposit took us to save as really these savings happened before my husband and I had even met – especially on my behalf. I had around 80K saved when I met my husband through living a semi nomadic life doing specialist consulting work for about a 2 year period and not paying a lot of rent due to always being away on fieldwork. I’m very glad i saved this money at the time (even though i didn’t really know specifically what it was going to be for) as it really evened out the playing field when I settled into a not so high paying public service job while my husband made about 3 x as much in the mining industry. He didn’t have nearly as much savings when we met but certainly made up for it.
After we got married we really defined our savings goals. We were quite influenced by Dave Ramsey at the time and my husband was starting to be interested in investing and got a little bit into shares. We also individually opened up Australian First Home Savers Accounts which are savings accounts with tax concessions (unfortunately they no longer exist) but require you to only spend the money on a house otherwise it gets put into Superannuation (the Australian compulsory retirement savings system). The result of these accounts made us a few extra thousand in interest taxed at a lower rate but they do have a maximum amount that can be deposited each year which varied between $5-7K for the few years we had them.
Also we started saving hard and spending less. We put our savings in high interest online savings account which made reasonable interest, and occasionally took out small term deposits. These would have made a few extra thousand interest.
We had originally planned on buying a house with cash. It seemed like such a big bold dream and we didn’t know anyone who had done this for their first house. So many nay-sayers too out there about doing this. People, especially people of our parent’s generation say that the price of property will go up faster than we could possibly save and thus a mortgage is necessary. Well we definitely could have proved them wrong and bought our house with cash, but circumstances with the First Home Savers accounts changed and we saw a property we liked and knew we could pay off a mortgage quickly as we’d be saving so quickly up our deposit before so took that option rather than just hold out to prove a couple of people we probably wouldn’t even ever see again wrong. 🙂
What changed with the Home Savers Accounts was the government abolished them. Before to access the money we would have been required to live in our home within a year of buying it and using the money from our accounts. We didn’t know if we would have been able to do that as we were buying interstate from where we were working so had to hold off until either we knew we were moving or what happened was they took off this restriction and we could access this money with no rules or regulations.
How we saved $240K so fast and Paid off a $200K Mortgage even Faster
Ok so now to our lifestyle and how the actual money saving occurred.
There are a few things that contributed to this achievement. Firstly we were lucky enough to make the most of a very particular time in the Australian economy: the mining boom. Yes we were among the so called ‘cashed up mining bogans’. I’d like to think we weren’t bogan however. Both myself in the beginning and my husband for the entirety of this had well paid jobs for a mining company. On top of decent pay we also got subsidized housing which significantly reduced our rent. That being said it wasn’t a handout. We both worked quite long hours in these jobs, much more than our friends who worked in cities. We also had to live in an extremely remote location 6hrs from the nearest city and 3hrs to the nearest decent sized town and in the desert. Visiting family was a very expensive exercise, in fact going anywhere was an extremely expensive exercise as was the air-conditioning costs of living in such a hot environment and food which had to be trucked in such a long way to the single non-competitive supermarket. So we do feel like we earned it.
Many other people thought that were living in our town and earning similar pay packets were spending up big on fancy cars, overseas holidays and alcohol. There was definitely a culture of that and that was something we had to resist with our eyes on the bigger prize.When I say we still had a social life though we definitely did. To this day we still have some wonderful close friends that we met in this town and there as many a house party or dinner party to be had while we were there. While i was on maternity leave I also spent a lot of time hanging out with the other mums and babies.
Living remotely did however have some benefits for helping us to save money. For one thing there were virtually no shops to tempt us to buy new things. There was internet shopping though of course and we did find that when we did go to a city we were more likely to buy more things but we eventually got that under control. The other benefit was living in a town like that is a lot more casual – fashion doesn’t matter so much because most people aren’t all that exposed to what is or isn’t in fashion. This was really noticeable when I did visit a city and i’d feel quite self-conscious at times about the way I was dressed.
Some of the things we really cut back on to save money:
- The most important thing i think we did was track our spending in a computer program. We used one called Moneydance but there are lots that would work and some online. Every month we put in our bank statements and categorised them and looked over and discussed. We did not have a budget except a goal for our groceries as we believe budgets are in many ways a licence to spend more money (more on that). It was very motivating and exciting to see our net worth rise on a graph on that page and to track expenses versus savings.
- We had an automatic deposit into our savings account/mortgage from my husband’s bank account where he got his pay. We set this as the maximum amount we thought we could do and get by with. This took a bit of trial and error until we found what worked with that. Ontop of this we decided how much was a reasonable amount of money to keep in our bank account on a monthly basis. It was around about the $1000 mark as we also had credit cards (that we paid off every single month) so realised we didn’t need too much cash on hand. At the end of the month anything above that amount we transferred into our house saving account (or mortgage once we got one). This included any extra money we came buy. There were a number of times we did get extra money either in the form of bonuses from my husband’s work, from selling our excess household items during our minimalist purge, when i did some occasional one-off consultancy work, tax refunds etc. Now if we had had a budget we would have thought that it was ok to spend anything left over after we got our essentials in that category. That is why we do not have a budget. Every purchase we think about and get what we really need or know would add value to our life and discuss amongst ourselves all big and even medium sized purchases.
- I started with a 6 month challenge where i only bought clothing 2nd hand (except shoes and underwear). I enjoyed this so much and it changed my perspective on the cost of clothing that I now continue this for around 80% of my wardrobe. I hate buying new now. I have gradually convinced my husband to do the same – he still buys his work clothes new but hasn’t bought any new casual clothes in years now.
- We eat out less. There wasn’t much we could buy out that tasted good living in the desert so this was easy for us. I also enjoy cooking. This is harder when we travel especially as we used to feel so deprived of certain foods like good sushi living in the desert. Now we are living closer to cities this is more of a challenge.
- We travelled less. This was a hard one, there is a real culture of leaving town and visiting family and friends or even just going somewhere else when we were in the desert but we worked out this was our largest expense even though we thought we didn’t do it all that often – even bigger than our yearly groceries (yes leaving town from a remote place was that expensive!). So we had to get better at entertaining ourselves on weekends at home doing things like gardening, post-graduate study, this blog, craft etc and dinner parties and BBQs for a social fix. Travelling less meant we did have to make some sacrifices missing some friends weddings and things like that but we did always go to the important things. It really helped knowing from our money tracking exactly how much a trip would cost so we would discuss each time when contemplating going somewhere if something was worth that amount of money.
- We took on a minimalist lifestyle. I’ve talked about this before but i had previously, unknowingly been living this lifestyle before i met my husband and ‘settled down’. Living in a more fixed location we’d started accumulating things and my husband had owned a lot before i met him. I found this very stressful so purging what was unnecessary and not bringing new things into our lives felt very freeing to me. As an added bonus we saved money and made a fairly significant sum on money selling our unwanted items.
- We stopped buying junk. For us a big expense before we started saving and paying off our house was DVDs, particularly TV box sets. We stopped this and sold the ones we had as we got Netflix instead. Recently we even got rid of Netflix as we realised we preferred the on demand tv shows we could get for free and youtube videos. Another expense was technology like smart phones. When mine died I bought a new one that wasn’t an Apple and that wasn’t the latest model. This saved several hundred dollars. Previously i would have got the latest iphone. We tried this with a laptop getting a Dell and severely regretted it though so we won’t be doing this with computers in the future – but at least i know Macs for me are worth it.
- We rained in our grocery spending. After travel, money spent at the grocery store was our biggest expense. This was the one thing that we did have a budget for and we had a separate bank account for so it was really easy to know if we were going over budget. Periodically to save money on groceries we’d buy nothing but milk and bread and just eat what was in our pantry and freezer, or we’d do beans and grains weeks although to be honest this is mostly how we eat anyway.I’m vegetarian which saves us money and my husband eats what i make him which is 90% vegetarian. Most weeks we didn’t buy meat at all. While we were in the desert we only had access to one overpriced supermarket. Fresh produce was quite expensive so we cut down on that and ate more frozen veggies as well as what i grew in our little garden. Now we have moved to a town nearby multiple groceries stores we are experimenting with other options. We are big fans of Aldi and it has enabled us to cut our grocery spending almost in half. We also have joined a local food coop and go to farmers markets to reduce the amount of food waste so don’t have to eat frozen so much now. We have also explored Costco but not having one all that nearby it won’t be a regular thing for us. Eventually we’ll be growing most of our own food anyway as we now have the land and will then just use the food coop for flour, rice etc.Another trick we’ve developed for cutting grocery shopping is to only do it fortnightly. It is more difficult to overspend that way as we still tend to fill our grocery basket. Then we know what we have left over for the fortnight which we’ll spend by topping up fruit and veg or milk mainly in the 2nd week at a more local smaller store or at the farmers markets.
Other Things that Helped Us
Finally the number 1 thing that allowed us to save for a deposit in a couple of years and then pay off the mortgage in just over a year was that we were content to buy a house that was just right for our needs but nothing more. We have a lot of land (20 acres) but house wise it is just 3 bedrooms. Having more bedrooms would have bumped up the price a lot. It is also an oldish house (20 years or so) and not super large (smaller than the 3 bedroom company housing we’d been in before). Many people of our generation buy the maximum amount they can possibly loan from the bank. They also aim for something like their parents had which might not have even been their parent first home or an extended version of it. We know we will be content with or home long term, we have no intentions of moving or extending and that is possible due to living a more minimalist lifestyle. So that’s my last bit of advice – be content with what is just enough and find satisfaction in other things in life. Having the freedom of being mortgage free is worth that for us over having a more ‘flashy’ home. We are not about status symbols anyway and have always and will only ever have 2nd hand cars (which we always bought in cash) as an another example of this.
How being Home Owners and Mortgage Free at only 30 years old has Affected our Lives for the Better
While this new state of being is still very fresh for us and i’m sure will have many positive effects to come it has already given us a lot of freedom and allowed us to pursue our dreams. Primarily paying off our house enabled us to take a big leap in leaving the desert and our jobs to move into our house to start our dream of living a more simple self sufficient lifestyle practicing permaculture. At the end of our time in the mining industry there were many job cuts and i know many people got caught out in sad ways for their family. We always new that kind of income and lifestyle had an end, we wanted it to end and were lucky enough to be able to leave on our own terms with a redundancy around a similar time we would have been wanting to leave anyway and could take the risk of moving to our farm before lining up new jobs. A tiny part of the redundancy package put us only 1 month ahead of schedule paying off the house so it wasn’t this good fortune that got us there. But it was a lovely bonus and since my husband got a new job within 2 weeks nearby our farm we feel extremely fortunate to not only now have a paid off house but now some instant savings to put towards retirement which is the next thing to save up for.