Most people envision retirement as kicking their feet back on a beach somewhere surrounded by loved ones.
Of course, that is the goal for many people. And most people work the majority of their adult life with the thought of achieving that goal in mind.
Sadly, that goal is not achieved by all who strive for it. There are of course many reasons it may not happen for someone. This post will focus on one – homeownership gone wrong.
Owning a home can be a great thing. However, if done incorrectly a home can end up owning you.
Young, eager home buyers have a funny way of overlooking the expenses that come with homeownership. It is common for people to save up just enough money to afford the minimal downpayment needed to get into a home. Then budget just enough monthly to pay the mortgage payment with minimal room for any other savings to take place.
This approach to buying a home has a direct effect on one’s retirement. The ‘life on the beach with loved ones’ retirement is not possible for these people.
The reason being… they don’t have enough money for it! The reason they don’t have enough money is that the home they are working so hard to keep up payments with is taking all their income!
The window of opportunity for a comfortable retirement gets smaller and smaller every year one remains in this situation.
People in this situation start to tell themselves that they will sell their home when they retire, and their home itself becomes their entire retirement plan.
The problem with that is if mortgage payments are barely being paid every month… Where is the money for the updates and repairs needed to get the most value from the sale of the home when they do sell? Is that home slowly decaying and in fact losing value in the marketplace?
The answer may very well be yes. And this creates a situation that puts this type of homeowner in big trouble.
They spent all these years working to pay back the bank their principal & interest for an item that is now in poor condition. Now they have to sell it in order to retire for minimal gain.
Once it’s sold where will they live? Anywhere they choose will require new payments. Depending on how much is gained from the sale, retirement may be nowhere in sight.
If you find yourself in a situation where the mortgage is taking all your income every month, and there is no money left for retirement savings or maintenance. Don’t worry, you still have time to make your retirement dreams come true!
The absolute first thing to do is sell your home. There is no use in paying the bank any more interest on a home that is not appreciating in value.
Then, you will need to find a cheaper place to live with fewer maintenance costs. This could be renting a place with a lesser monthly payment. Or use the profits from the sale to buy a condo that does not require the same level of capital expenses a single-family residence does.
The lower monthly living expense now allows room to save for retirement! You can put that money you would have put toward the mortgage payment into a retirement account so you have a separate retirement fund working for you. And enough money left over to live a comfortable day-to-day life. All while avoiding the daunting fear of paying the mortgage every month or the cost of something breaking.
If you do this… it is a certainty you will be able to kick your feet up on the beach every day of the week once you retire.
