I have been re-reading Possum Living by Dolly Freed. Her number one thrift tip is to have your house paid for. She says: "Have you read John Steinbeck's 'The Grapes of Wrath' When we read it, it completely amazed us. All that starvation, squalor and general misery the Okies were forced to endure stemmed from only two roots: (1) the fact that they didn't own their homes outright, and (2) their mule-headed determination to rely on the money economy.
Dolly might be a little rough, but basically she is right. She's talking about the Great Depression, of course, and some people feel we are headed into that again. So many of us are living from paycheck to paycheck, paying interest on everything we "buy" and buying stuff we don't need.
I also just read "Angela's Ashes" which is a painful and crude read, because I can see that they relied on the money economy instead of getting out and scrambling for food, fuel and the basic necessities of life. Only the author, Frank McCourt, showed much initiative, and he didn't have any guidance from a more experienced person. He survived, and that is the climax of the story. A paid-for house, at least in our current government, is pretty good insurance against starving. But don't make the mistake of using it for collateral on a loan, or you can still lose it. There have been so many newspaper articles in the past three months on people who were well off, at least on paper, who are now homeless.
Source: "Possum Living" by Dolly Freed, Universet Books, 1978.
By Coreen from Rupert, ID
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That is a very heart-felt article and I thank you for writing it. I always need to be reminded of either needing or just wanting something and these books are good examples of how extreme conditions can get.
Wow, I've never heard of Dolly Freed or her book, but it sounds intriguing. And your advice is great. Thanks for speaking truthfully about what we all should realize is the right, strongest way to live our lives. My parents got married during the Great Depression, and consequently, they were very frugal. Now, to me, it just seems the best and ultimately the happiest way to live. And being green? That's icing on the cake. We all need to realize that throwing things away, whether its hard-earnned money or resources, is just being a poor steward of what has been given to you.
Funny, I never thought of "Angela's Ashes" in that light before. I always thought the McCorts' problems had more to do with irresponsible financial stewardship in general.
Paying off our mortgage is still a distant dream for us; it's also a major bone of contention between hubby and me. He mortgaged the family home when he fell ill a few years ago - thinking more of immediate money than his heritage, I suppose.
Now with an auto loan and other credit to pay off, we've been in a pickle since I was seriously injured and left visually impaired by a drunk driver in February 2003.
Since I've gotten my head together at last, we're on the verge of paying off our highest-interest credit accounts in a couple of months and will fully own our van before Thanksgiving. Then, at last, we can start paying more toward the principal on our mortgage!
I am old now. But in 1972 we had 3 little ones. We didn't make a whole lot of money. We bought a house that was 1 year old. We made a house payment, + one more payment, which was like making 3 payments. The second payment was like paying 2 house payments with no interest, just principal. We got it paid for in 1/3 the time. We still live in the same home today.
One year my husband was laid off for 9 months. We lived on unemployment. Our entertainment was playing cards or other games. We didn't starve. When our friends was struggling, we always had money, cause we didn't have a house payment. We never bought a new car, until we had the money saved up to pay cash, cause we didn't want to pay the interest.
Neither of us smoked or drank, so that is like money in the bank also. We are retired now, and living well on our social security, not dipping into our savings. Just a little to think about.
My husband is retired, I'm disabled. We just moved from NY to TN and bought our house here. We moved here to save money. The cost of living in NY was so much more expensive than what it is here in TN. We can live quite well on my husband's military retirement here.
We took a large chunk of money and paid half down on our home here in TN and only took out a 10 year mortgage. Every other month, we pay an extra mortgage payment so that we can reduce the mortgage that much more. This way we can pay off our home sooner.
I think this is a good idea but I have also been told that if you have kids in college and you own your home outright your child may not be able to get grants and government help with college tuition.
This is a thoughtful point, but if you have already been slammed by the economy, how do you do it? I don't have the money, and neither do my parents, who are financially stable. I will say that it's a good plan, but not a very approachable one right now. I'm still trying to see if I am going to be able to be find a job in four quarters when I graduate, as another young person who is going to be permanently disabled. Right now, I can choose between medicine and bills that pile up, even with good insurance. And Kathy is right-if you have a lot free and clear, you will be punished by colleges. Financial aid is out of the question if you have two kids, a paid off house and you claim them on your taxes. Yes, it is thoughtful, but impossible for most average people.
Nice idea, but if you are already doing the things you mentioned and so much more and just to make the payments, it could be a pipedream. We are managing to make our payments rounding up to the nearest hundred, which is what I have recommended. Mind you, this is not many extra dollars, but at least we are doing what we can, and every dollar decreases our interest. Check with your lender first that extra money goes to the principal, or they can just take it for interest.
When my husband and I bought our house in 1991, the price was reasonable (for Long Island, NY) and so was the interest rate. Then in 1998 we refinanced to a lower rate but continued to add extra money toward the principal as we had been doing since we bought it. After he passed away in 1999, I continued payments, adding extra again each month, then refinanced again a couple of years later, this time it went down to 4.825 %. But the taxes in my area are high so I ended up taking part of the insurance money he had left and paid it off a few years ago, at that point it was about $59,850 left (on a $128,000 mtge). Now my situation is different than others, we had no children (my second marriage, his first), I had retired about six months before he died in 1999 (not knowing he was ill) and owed absolutely nothing (other than the usual monthly expenses). Also, when I prepaid more each month, I had the choice of whether I wanted it to go to principal or interest, naturally, I chose principal. And again, make sure there is no pre-payment penalty. Mine wasn't, so I was able to pay it off without losing any more money.
Everyone has a different situation. I was able to pay it off (and have not been back to work since I retired). But what worked for me may not work for someone else. And I am very good at budgeting and making the most of what I have.
My motto is to get the most I can for the least amount of money and I do very well. It takes a bit of thought, but definitely worth it.
Absolutely the best financial advice. Additional thought: How much house do you need? Do you have too much? I have siblings who have deliberately downsized their homes as their financial situations changed (and not as empty-nesters), taking the initiative to rid themselves of large home debt payments and moving to homes that better suited their finances. I'm very proud of them both for those decisions.
The average American home has gotten bigger and bigger. We need to look at whether we really want to keep paying for our McMansions, or are they standing in the way of our peace of mind.
It's hard to move when you love your home, but it has paid off well in increased financial security in both situations. Based on their examples, if faced with the same decision myself, I know I would be ok with the choice of a smaller home. As one friend says, "You can be happy anywhere."
And by the way, our own home is paid for and we are both retired, which amazes most of our friends because of our ages. We were able to do this by refinancing from a 30 to a 15 year loan when my mother died and her house was sold. It wasn't a huge inheritance, we could have bought a new car and maybe taken a cruise, but instead we paid down our principal so we could keep the new payments in the same range as the old payments. This single decision has made all the difference in our subsequent life choices.
This is timely! We just got our mortgage last Sept. and it is about $620 a month on a $119,000 mortgage at 4.75% we put an extra $200 a month down and over the course of our mortgage, we will save $46,233.06 in interest! We will have it paid off in 18 years, rather than 30.
I need to correct something. First, "The Grapes of Wrath" is a book of fiction. It is not factual enough for you or Dolly to use this as a sample or reason for paying off a mortgage. Many people from the Dust Bowl left there for better living. Some even owned their own homes and just left while some did as the character family did an left with what they had or could carry. This has happened through out history and still happens.
That said, many people who stayed did not own their own homes and still survived. My parents and grandparents did this. The one thing many people who survive any form of disaster is that a house is still just a house. One set of my grandparents raised 10 children during the depression. Neither set of parents owned their homes during this time, but they reared their families nevertheless. One grandfather built houses in Oklahoma while the other one raised cattle, hogs and produce to sell, barter etc. yes I'm a Okie so I have some facts which speak differently than what Steinbeck's book was about. Still I did like the book too.
I have not read Dolly's book, I can't speak from where she comes in her assumptions other than, like she bases them on her own experiences and her father's. I have read some of her blog though.
As many posters have said, paying off works for some and certainly is something to be celebrated. That said, as one poster has said, depending on many circumstances, paying off your mortgage may or may not be to a family's advantage. The real key is getting out of credit debt first. This starts by removing the higher interest rates so you can breathe easier when it comes to keeping your home. When you pay off your highest interest debt, go to the next highest, pay it off and so on and so on.
By the time you get to the lower/lowest interest rates, the amount of money used to pay those off will pay off the rest of your debts. Use your credit sparingly. Be realistic about your wants and needs; then teach your children the same. Even as adult children you can help them to learn this.
You said, "Grow your own food and reduce the grocery bill. Wear your clothes until they are truly worn out if necessary. Stop going out and don't drive unless you have several errands to do. Barter.
Help your neighbors." I couldn't agree more. I know many who have become wealthy even though they were house poor. Wealth isn't always measured terms of owning your own home. For many that's not even close to reality especially in this time of change. I help people with their finances from time to time; my key to how we move ahead in their finances is not the home but what can they do to clear their debt which means putting away the credit cards for emergencies and only have 2 card, cut up and cancel the rest.
Pay yourself as you do tithing, then look to your expenses to see where you can cut the fat. It's that fat you cut which will be your treasure to help you get out of debt. Then look to whether paying off your mortgage will help or hurt you financially. See in my case, it was in not paying off my mortgage first which helped us to become debt free. The house came last and whoa what a celebration it was.
Things are changing so fast, keep your head about you and don't allow your emotions to override your plan. By all means, don't just listen to me or Coreen, listen to financial experts and do what's needed for your family and situation.
Though we disagree a little, I'm so glad you posted this, we need reminders of what others are doing and how they are doing it.
Thanks for that article, I almost lost my home last year, and I was checking around for apartment, it was a lot cheaper to stay in my home, Thanks to my co-workers, me and my children still have a roof over our heads.
You can learn a lesson form almost any book you read either facts or fiction. I came into a lump sum of money. I had a choice to pay my house off 8 years ago, but I did not. I brought a brand new car, and I brought my 16 year daughter a used car. The reason I did not pay my house off I read it was more feasible for tax purpose not to.
I am "inbetween" some others who posted feedback. I lost my husband in January, after 2 years fighting cancer.
I too, am disabled. So, now I have a large mortgage, and there is no wage earner.
I don't have family. and honestly do not feel I could trust someone to move in and pay room and board. I am considering walking away. My husband from overseas, held dual citizenship. His SSD was less than mine. and now, my health insurance COBRA has skyrocketed. It was high, when he had to leave his work. Now it is almost equal to the mortgaqe. Any advice?
PS - to my post which follows: my husband and I have no consumer debt. just a mortgage that we took three years ago.
I so agree! Thank you so much for sharing. I am currently living in an apartment as I am saving to pay cash for a very small house.
I forgot to add. I am debt free at the present time.
Very good stuff. I am having a garage sale now because I have accumulated way too much stuff. I am adding more shelves and storage space to my closets and pantry so I will have things more organized and stored properly. A tidy home means you lack nothing, a messy one means you have too much stuff.
I would add that if possible buy second hand for many reasons two being it is cheaper and the second being it will keep American money in American hands. It may be longer to wait to get something, or you may never get it but it is well worth it when you realize you've paid a fraction of the store price for your item. Clothes, furniture, electronics etc. are all made sturdier when they are older. Cheap plastic spin offs are easy to come by now days. Good advice Coreen from Ruppert!
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