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Oct 2, 2017

Why I Burned My Mortgage And Achieved Financial Freedom And How You Can, Too

by Sean Cooper

Sean CooperYou may have heard of my story. I’m the guy who paid off his mortgage by age 30. CBC News filmed my mortgage-burning party and it went viral. While a lot of people know I’m mortgage-free, I wanted to share my story of how I got there and why I decided to do it, and give you a sneak peek of my new book, Burn Your Mortgage.

 

In August 2012, I purchase my first home – a three-bedroom bungalow in suburban Toronto. I was proud to call myself a homeowner. It took me two long years of searching to find a home in Toronto, one of North America’s most expensive housing markets. I bought my house for $425,000 with a hefty down payment of $170,000, leaving me with a mortgage of $255,000.

On September 22, 2015, just three years later, I paid off my mortgage. Not only did I pay off my mortgage on my own (I didn’t receive any money from my family), I did it by 30. Paying off my mortgage early wasn’t easy – it required a lot of sacrifices, but it’s been well worth it. Here’s how I did it along with some tips to pay down your mortgage sooner.

Why Did I Want To Pay Off My Mortgage by Age 30?

Financial bloggers have set financial goals from paying down student debt to going on a shopping ban, but few set the goal of paying off their mortgage quickly. A lot of millennials feel like housing is out of reach, so I wanted to prove it isn’t. If a single, 20-something-year-old can pay off his mortgage in three years, in Canada’s second most expensive housing market, what’s stopping other people from setting stretch goals for themselves?

I was inspired by my mother to pay down my house quickly. When she was downsized during the dot-com bubble, as a single mother she struggled to pay the mortgage and raise two children on her own. I didn’t want to find myself in the same situation, so I vowed to pay down my mortgage as soon as possible.

What It Took To Get There

Reaching mortgage freedom wasn’t easy. It took many sacrifices. One of those sacrifices was my social life. While my friends were out having a good time on Saturday nights, I was inside working on the computer. I was fortunate to have loyal friends who stood by me during this busy time. I also wasn’t able to travel as much as I’d hoped. My most exciting trip was a 24-hour bus ride to Wisconsin.

I lived very frugally during this time. I did what it took to save money. I packed my own lunch, cooked meals at home instead of dining out, and biked to work. Kraft Dinner was probably my best friend (and no, I didn’t eat it at every meal, just a couple times a week).

I’ve been told I have a strong work ethic. While I was paying down my mortgage, I typically worked 70 to 80 hours a week (sometimes as much as 100 hours a week). To quote Jimmy Carter, former president of the U.S., “I have one life and one chance to make it count for something.” I set myself goals each day in terms of work. I set the goal of earning at least $50 a day extra in hustle income on top of my full-time job. It’s this goal that kept me working, even when I’d rather be watching the basketball game or enjoying a night out with friends.

How Being Mortgage-Free Has Changed My Life

Paying off my mortgage feels like the weight of the world has been lifted from my shoulders. It feels like winning the lottery. I work not because I have to, but because I want to. It has given me the opportunities to pursue things I’ve always wanted to, including volunteering and traveling (no more bus rides to Wisconsin for me!). Now that I have more free time, I’d like to put it to good use. I recently volunteered for the United Way campaign at my work. I also helped organize a Syrian refugee clothing drive with my sister. It’s easy to take what we have in Canada for granted. It’s important to realize how lucky we are to live in a great nation like Canada or the United States, where we have the freedom to pursue our dreams and passions.

My Investing, Savings And Lifestyle Plans Going Forward

A paid-off house is only the first step in achieving financial success. The biggest mistake you can make when you pay off your mortgage is to put the money you used make mortgage payments with towards lifestyle inflation.

Lifestyle inflation is a term that describes how our spending goes up during our career. As you move up the corporate ladder at work, your spending typically goes up. This often happens because of the people that surround us. We feel pressured to keep up with our family, friends, coworkers and neighbours. While there’s nothing wrong with enjoying the fruits of your labour, it’s also important to put some of that money towards savings. Next time you get a raise at work, increase your savings rate as well or better yet, put that money towards your mortgage.

With my mortgage paid off, I’m investing the difference in low-cost index mutual funds. My next goal is to achieve a net worth of $1 million by age 35. Even when your mortgage is paid off, it’s important to have your next goal. Whether it’s saving towards retirement, buying an investment property or starting a business, have goals and an action plans to achieve them.

My Top Three Tips For Reaching Mortgage Freedom

Tip 1: Live Within (Below) Your Means

If you want to be mortgage-free sooner, it’s going to require sacrifices. While you don’t have to go to financial extremes like me, it does require living within (below) your means. To keep your spending accountable, have a budget. Your budget isn’t written in stone. Review your budget once at least every six months and look for ways to cut back. Any money you save can be put straight towards paying off your mortgage sooner.

Tip 2: Make Hustle Money

If you have free time, why not put it to good use? Instead of binge-watching episodes of Game of Thrones on Netflix, look for ways to earn extra money. Get a part-time job, work overtime or freelance. The extra money you make can go directly towards paying down your mortgage.

Tip 3: Rent Out Your Home

Whether you have roommates or tenants, rental income is a great way to pay down your mortgage sooner. Roommates and tenants help you pay down your rent. However, being a landlord isn’t without its headaches. Take your time to choose the right tenants and price your rental property properly. The last thing you want is a nightmare tenant to deal with who pays their rent late and damages your property.

Sean Cooper is a speaker, money coach and personal finance journalist. He is also the author of Burn Your Mortgage.

http://www.seancooperwriter.com.