I’ve been spending a bit too much time on Pinterest lately, and today I made the mistake of typing the word “budgeting” into the search bar. As you know, I’m a big fan of sensible and sustainable budgeting. I’m all for managing money wisely, and making the most of what you’ve got. I am very much for strategies that help people get out of debt and sav, BUT I like to be practical and real. I like information that helps people to achieve their goals in a realistic and sustainable way. So, when at least a third of my Pinterest feed for “budgeting tips” was filled with “How I paid off my mortgage in 2/3/5 years” I started to feel a little uneasy.
Firstly, these articles are all almost exclusively American, which does possibly explain some of the content. In Australia, the average mortgage is just under $400,000 (if you are in a capital city, that average jumps to more like $600,000). The median income is just under $60,000, meaning a person takes home around $49,000 after taxes.
So, let’s assume they use every cent that comes through the door… (obviously totally unrealistic), even then they would need nearly 9 years to pay off the debt. Even with TWO full incomes and ZERO other expenses (umm… yeah), they’d still need more than 4 years.
Let’s say they live frugally, on one persons income and use the other totally for debt reduction. You are still looking at close to 10 years for a couple, both working full-time, to pay off the average mortgage on the average income. That’s assuming no kids and a pretty tight budget. To pay it off in 2/3/5 years you’d need either WAY above average paying jobs or a significantly below average mortgage. Ironically, most high paying jobs are in capital cities where, you guessed it, mortgages tend to be much higher than the average.
The reason I object to articles like these is that for most, they are unrealistic. Often, they are also quite misleading as income generated from “non work” sources, or free accommodation/services or products they receive isn’t disclosed. Many people read these and become discouraged, they know they will never achieve it so they give up, thinking what’s the point.
Don’t give up. Good budgeting, sensible saving and ambitious debt reduction is NOT about overnight success or owning your home by Christmas.
I won’t pay off my mortgage in five years (I live in Sydney, so it’s likely to still be hanging around in 15). And do you know what, that’s OK!
We live quite simply in terms of income and expenses. I am very careful with money and we manage to budget and achieve things on a comparatively small income (and a rather high mortgage) that many struggle to on a higher income.
Over the next few weeks I have a series of posts on budgeting, money and saving that I hope you will find useful in establishing a realistic budget, setting up some savings goals and working towards them in a sustainable way. I’ve also got a Budgeting Bootcamp course planned which I am busily working away on. It’s designed to be an alternative to the personal budget review that I do with individuals and will help you get your finances under control for good.
If you’d like to be kept up to date when the course opens for enrolments you can leave your email below and I’ll be in touch 🙂