One of life's biggest expenses is dwelling space. I've been thinking for a while about how to handle (and eventually eliminate) this expense. Owning your own home outright seems to be the most significant step in achieving financial independence.
If you want to buy your own house, I see at least two options:
1. Get a mortgage, say, a 15-year mortgage on a $100,000 house
2. Take, say, $10,000 and buy the cheapest house (or trailer or cabin) possible
The obvious downsides to option 1 are that we'd be stuck with a mortgage payment for the next 15 years and that we'd end up paying a pretty penny in interest. The upside is that we could probably live in a pretty nice house.
The downside to option 2 is that our living space would probably be pretty crappy. The upsides are that we'd immediately own our property outright and it would take a pretty serious financial disaster to put us out of our home. Losing a job would be no big deal at all. If we had no mortgage, no car payments and no credit card payments, we would barely have any living expenses at all. If we were to choose a rural area (which I think we would) we could even grow our own food, reducing our living expenses even further.
Has anyone else here taken this approach to financial independence? If so, what has been your experience with it?
Also, can anyone poke holes in this idea? Are there pros/cons I'm missing here? I'm biased, of course, so I'd like to make sure I'm not being irrational.
I'll try to poke some holes...
First off, I'd say that option 2 could be entirely possible if you choose the right place I personally know a few people that live almost free but they do it in Hawaii where the climate is conducive to both living without utilities and to growing food year round.
Second, I think you need to balance quality of life issues. I realize that it is possible to be completely happy living in a cheap trailer. But will you still feel that way in 10 years when/if you have a family and things get crowded. Will you still feel that way when you are making enough money to easily afford something nicer?
Third, trailers are not very energy efficient compared to houses. There is a good chance you will be spending considerably more in utilities than you would in a house. You also must pay fees for a place to put your trailer or, if you buy the land, you have that expense.
Remember too that if you borrow that $100,000 to buy a house you get a tax deduction on the interest. If you buy land then put a trailer on it, no deduction. That means you pay more in interest.
I have no doubt that it is possible to live as you said, very frugally, and be very happy. If you make that choice though it is important not to burn your bridges. If you really think that is a good choice for you, rent a trailer for a few years and see if you still feel that way.