Thursday, January 31, 2019

How to Become 22% Financially Free

Most of my girlfriends think that
living with my parents is
a horrific idea :)
Over the Christmas break, my family made a very big decision. We all finally agreed that it's time to eliminate one of our biggest liabilities - our home! 

We decided to join efforts cross generations and consolidate two residences: my family moved in with my parents.

This is not only because we love each other to pieces, but also because we saw a great opportunity to optimize our spending. This is a step towards our financial freedom goal and a part of the following chain reaction:

  • Spending goes hand in hand with saving.
  • Saving goes hand in hand with investing. 
  • Investing goes hand in hand with multiple streams of income.
  • Multiple streams of income go hand in hand with financial freedom.

I understand if you think it's a crazy move. Even my nine-year-old jokes:

My son: Mom, how do you feel about living with your Mom when you are almost 40?
Leaving 16 years of memories behind
Me: I like it
My son: Why? [Pauses] Free food?!?
Then, he bursts into laughing loudly at his own black humour.

All joking aside, this is a big change for our family. Kids had to change schools, karate dojo, pack
and move all of their stuff, and try to make new friends. My husband and I packed 16 years of life into boxes and garbage bags and piled it in my parents' basement. My parents now have to observe our semi-chaotic living in their previously idyllically quiet home.

Why? Because this change takes us closer to achieving our financial freedom goal. Now, our upcoming year-long Sailing Trip in a couple of years is more real than we've ever imagined.

Myth: Home is an Asset

Most people consider the home that they live in to be an asset.

There is a lot of evidence all around us in favour of this myth. For example, real estate agents will tell us that home is the most expensive asset we will purchase in our lifetime.

A creditor will ask us to put the market value of our principal residence at the top of the Assets column on their credit application.

Our personal financial advisor will ask about the value of our home and enter it on the first line of the assets section of our Personal Financial Information form.

Let's be pragmatic about facts:

A real estate agent will get paid a commission based on the purchase price you pay for your home. 

A creditor will collect thousands of dollars of interest payments when you borrow from them and secure a loan against your home.

A financial planner will help you in many ways:
a mortgage, insurance, a secured loan, an investment portfolio, and a repeating annual financial plan update, all of which is based on the market value of your home; all of which comes with a price tag.

Please keep in mind that I am a grateful customer to a few amazing real estate brokers, mortgage brokers, and financial planners. Knowledgeable advisors help me tremendously on my way to financial freedom! The value of the products and services they provide to me greatly outweigh the associated costs and propel me forward. In fact, I wouldn't be able to achieve what I've done so far without their help. If you are reading this - Thank you!

The trick to appreciating the value of these services is to know exactly what you are after.

The advisors, especially great ones, will give you the advice that you'd like to hear. This is because a huge part of their job is to help you achieve your dreams. They will cater services to your tastes and help you make the decisions to achieve your desires.

Therefore, if you go with conventional definitions and believe your home to be an asset, you will inevitably purchase an expensive home and spend a lot of money on it! Your advisors will help you do it to the maximum.

Your Decisions are Yours to Sponsor

Since my goal is financial freedom, I make it my highest priority to fully understand the costs of each of my liabilities, including my home.

I am fully and solely responsible for all the associated home expenses such as:
Mortgage Interest and principal 
Mortgage insurance 
Life and disability insurance premiums 
Property taxes 
Property insurance 
Maintenance and repair costs 
Snow and grass care costs 
Phone line 
Security alarm system 
Furnace lease 
Water tank lease 
Interest on the furniture bought on credit card 
Interest on the car as fancy as my neighbour's
Amazon Prime 
Cleaning lady (I notice that the trend is more bathrooms than people in a house!)
A second car if the house is far from work 

Given my personal goal, I choose to disagree with the conventional definitions and concur with Robert Kiyosaki, who insists that we put our home on the liabilities side of the equation.

In order for me to balance my personal budget, I have to face the harsh reality and be ready to pay the bills that I signed up for. There's definitely a lot of bills to pay when it comes to home ownership!

Consequently, my advisors strive to help me find the best bang for the buck, save every penny possible, and use my personal home to the fullest.

Abundant Opportunities

Homeownership combined with the home being classified as a liability (as opposed to being an asset) gives you tremendous opportunities.

First and foremost, I bet you can save two to three hundred dollars a month, if you carefully revisit all of your regular expenses, decide which of them you no longer need, and stop paying for them.

Keep in mind that small savings add up.

For example, over the past couple of months I shaved off the following on little things:

- Replaced mortgage and loan protector insurance with whole life and disability insurance +$100
- Stopped paying for a home thermostat rental +$15
- Cancelled Netflix +$12

Sub-Total: $127 per month = $1,524 per year = $1,836 before tax.

After moving to my parents, I've also added the following savings:
- Cancelled internet +$65
- Cancelled home insurance +$40
- Cut utilities and property taxes in half +$500

Sub-Total: $605 per month = $7,260 per year = $8,746 before tax.

Adding $656 monthly saving I shared last month, grand total becomes:

$127 + $605 + 656 = $1,388 per month = $16,656 per year.

At 17% tax rate, that is $20,067 of pre-tax salary.

An average family with 73.7K annual household income has to work for over eleven weeks to earn enough money to cover these expenses.

Given the recurring nature of these expenses, it's not just a one-time eleven-week long work project. You'd have to work for eleven weeks every year to pay for all these obligations.

For me personally, getting rid of these liabilities means that my husband can be on vacation for 11 weeks out of 52 every year. 

This alone makes us 


Sailing Trip Awaits!
Not bad, eh?

PS Saving and being frugal around your home-related expenses is just one side of the coin. Being a homeowner can open many investment opportunities and become the basis of your future wealth and financial freedom. Email me at if you'd like to learn more

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