On our Mortgage Freedom Series today, we're going to interview a couple that paid off their mortgage in less than 3 years and is now one step closer to financial independence because of it. Julien and Kiersten Saunders are my guests today and they are the creators of Rich and Regular, a hot new personal finance media brand that is growing in popularity because of its honest, informative and relevant approach to money.
Julien and Kiersten's story and advice have been featured in big publications like the New York Times, MarketWatch and Forbes. And when they're not talking about money, they're traveling the world and raising their son in Atlanta.
Andy Hill: When did you guys decide that you wanted to pay off your mortgage?
Julien Saunders: We heard about people doing this online and we were big followers of Dave Ramsey. I think the moment we really decided might have been shortly after we got engaged, and we were so excited about everything. We were in Peru at the time, and we were just head over heels and optimistic about life. As we were stitching things together there, we said, you know what? We should totally do it. We can do it. So I think we decided to do it actually shortly after we got engaged.
The honeymoon was a huge part of saving. And so now that the wedding was done, the honeymoon was done, the consumer debt was done, it was like, “Alright, well, the only thing left is the mortgage.”
What kind of consumer debt did you have?
Kiersten Saunders: Yeah, I had a bunch of true consumer debt, high credit card debt, a car note, all kinds of randomness. We started paying that off before we actually got engaged. Julien had some student loans, some tax debt, he had a car note and a couple of other things. By the time we were engaged and we were about to move in together and start to combine finances, we knew there was a lot of money here with no direction.
How much debt did you have combined?
Kiersten Saunders: I had about $30,000. Most of that was credit card debt and a lot was a car note that was a poor purchase when I was in my 20's, and then I think Julien had maybe closer to like $15,000 or $17,000.
Julien Saunders: I do remember in total between the mortgage, tax debt, credit card debt, student loans, two car notes, it was right around $200,000
What was the original mortgage principal?
Julien Saunders: That was around $90,000 – $96,000.
What conversations did you have when you decided to pay off the mortgage?
Julien Saunders: It wasn't easy. The reality was we were not on the same page at first. I was the one that got sucked into this debt freedom and financial independence lifestyle before she did. But when we met, I was so head over heels, I kind of put all that stuff aside and you know, we were just having a good time and we were just spending and traveling and having fun.
Then that kind of came to a screeching halt. I told myself I got to get back to what I was doing. I thought that I would introduce that to her, and she would say, “Oh, that's great.” It just did not work out that way at all.
After some rough patches and some arguing, we found each other again and then we got back on the same page.
What attracted you to financial freedom and financial independence?
Julien Saunders: There were a lot of things, but I think one of the big ones was I would always have this habit. I'm very driven. I'd have this habit of looking up and looking at my manager and my manager's manager, and I would say, “Do I really want to be that person?” More often than not I would say no.
What I really wanted was to have the options to be that person or to also be a beach bum or to also be an activist or a writer or anything else that I wanted to do. I still have hobbies that I've not gotten to explore fully yet because of this.
It's good to have some options. I was hearing of all of these people that were just doing some amazing things, and I said if they could do it, I really feel like I could do it too or at least I should give it a try. That was the initial thing that just got me hooked on this lifestyle.
Kiersten, when did you come on board with these plans?
Kiersten Saunders: I think it was the first month that I moved in with him and I didn't have a rent payment per se. I started to get a taste of what it's like to not have a giant bill when it comes to your paycheck. Then as we started paying down the mortgage, I started to realize this is what I needed to truly buy into the FIRE lifestyle because in my head I couldn't imagine how people were living on so few expenses every year.
Then when I realized, “Oh, it's because a lot of them don't have a mortgage or don't have an expensive mortgage!” That's how you can live off of $30,000 in the case of Mr. Money Mustache or some of the other popular FIRE bloggers. I just needed a small taste of what financial freedom felt like.
I used to have this big chunk of money going out. And it doesn't have anywhere to go anymore. So what are we going to do with this? We were thinking like “Is this what everybody goes through when they start living together? Does this mean they just go out to eat all the time?” We could do that. But we were like, “Wait a second, what else could we do that really sets us up for the future?” That was a really interesting moment.
Did you guys budget together or use any Fintech tools?
Kiersten: Yeah, so I'm a pen and paper girl. I would buy these 100-day countdown teardown sheets. You can even create them.
We would create like these 100-day sprints, and it would be like “A hundred days from now we'll only owe $76,000 instead of $82,000.” And so we'd celebrate. We'd find and create these milestones to actually have something to celebrate. Otherwise it felt like a really long journey that was never going to end.
We would kind of manifest by writing in advance, like, in 100 days we should be at this point. And if we're not, then we have to hold ourselves accountable. Every day I would tear down another day and say we're 76 days away from only owing $76,000.
How did having a child change the pay-down process?
Kiersten Saunders: It definitely slowed things down for a while because as Julien said, we were way off on our predictions. We started out super ambitious, like 18 months from now, we're going to be mortgage-free. Really it was more like 25 to 30 months later.
I had Beau in April of 2017. Obviously, I went on maternity leave, and my company doesn't offer a full 12 paid weeks of maternity. My 12 weeks was kind of stitched together of like a vacation. 60% pay here, 40% pay here and then a couple of weeks of absolutely no pay whatsoever. That slowed us down a bit.
Then when I went back to work, we tweaked some things, and then we had all of the new expenses that come with going back to work and having to pay for childcare. As your baby grows, they start to eat more, and there are just all sorts of other new costs. At the end of the day, it didn't really derail anything. It just slowed us down, and we ended up paying it off five months later after he was born.
Related Interview: What Financial Independence Means for a Young Father – with Jim White
Why did you decide to pay off your mortgage instead of investing your money?
Kiersten Saunders: I think our reason was more emotional than mathematical. That's something that we talk about on the blog as well, that everything is not just number crunching when it comes to money. Some things have to feel aligned to the goals that you have for your life.
When we think about our family situation, we write about this on our blog all the time, we have financially insecure family members. The idea of always having a home that we owned, always being able to put a roof over somebody's head is something that there's no stock market return that can give me.
I think it's a personal choice. I mean, that's the beauty of personal finances is that everybody can pick the path that's best for them. One of the other interesting things that we've been involved in is just questioning the 4% rule. While we use it as a framework, we're not relying on it. We're not building our entire FI strategy around this golden rule. It's just one of those things that for us when we reach financial independence, obviously there will be math involved, but it's going to be more of a feeling.
Julien Saunders: I was going to say also one of the other criticisms about the movement is it doesn't account for all of these things. There are a lot of things that could happen, right? I mean, something tragic could happen 5 minutes from now.
For us, it was a matter of insulating ourselves from some of these issues and saying no matter what, we do know that we own that place and we've lived in that place and we're comfortable there. If everything just kind of went to crap, we'd be able to go somewhere and have a roof over our heads that we could live in and that our son could live in, and everything would be fine.
Right now, we actually use that property as a rental property for us. We earn income from that home and it's been occupied since we've left it. We don't regret that decision one bit, but to Kiersten's point, that's a personal decision based on our beliefs and our values.
Related Article: 14 Pros and Cons of Real Estate Investing
Where are you living now?
We moved into a home about 7 miles away from our old one. This still has a mortgage on it, so we're not completely mortgage-free, but the income from our rental properties offsets the majority of this mortgage. And so what we pay on the note is minor.
What are your financial independence plans?
Julien Sauders: We're very happy that we've essentially saved for our retirement. Our goal is to just make sure that we don't have to touch that money, so it is growing in the background.
Our goal right now is to basically build a pad, and that's the money that we know that we can live on between now and when we can withdraw funds from those traditional retirement accounts without penalty. If all goes well, we won't have to worry about that either. Our goal is to continue for as long as we have the energy, and just keep on finding ways to earn income at what we consider a fair exchange of time and to be able to have options.
We've got an online business, maybe we have a franchise or two, we have rental properties. We've got a number of different things going on at any given point in time that earn income for us, as well as taxable accounts that we could draw down from.
It's not to disregard, let's say, the traditional path, which is to save and invest as much as you can and just keep it simple. We do respect the fact that people do like to work and we like to work too, but we do like to have options. For us, it's a matter of saying: “Can we build enough businesses or micro enterprises that give us the flexibility to offset some taxes and also to earn some income without having to dabble into any of our tax deferred accounts?”
Related Post: $400,000 Home Paid Off in Less Than 4 Years
What income streams are building your bridge fund?
Julien Saunders: There's going to be a checking account, a savings account, but mostly a separate brokerage fund.
The way we think about it is we want more people to fall out of love with the idea of a six figure job and to fall more in love with creating ten $10,000 micro-enterprises, right?
You don't have to be the best at any of these things, but if it earns $10,000 at what you consider to be a fair exchange of time, that to me is way better than the stress, the inconvenience, and the constraints that oftentimes come with that big, big job.
And it's also a lot easier for you to grow that $10,000 business to a $20,000 business than it is for you to get a $10,000 or $20,000 raise at a job because those roles aren't even available. If you do get it, that comes with a boatload of more stress and inconveniences.
For some people, there is a dream job, but I do think that they oftentimes they also have an expiration date on it, so we recognize that. We've seen that. We've heard those stories. We're simply building a plan that protects us and allows us to tap into our skills so that we can live the life that we want to live.
Kiersten Saunders: I think we also want to just evolve the language and the meaning of retirement. I think there's this idea that if you're retired, that means you can no longer earn any money. And that's just not true.
Julien's dad is 83. He has not worked in 20 years, but he does taxes every year, and he brings income from that and that doesn't make him any less retired than the other 83-year-old guy that lives across the street. Just the idea that the language hasn't kept up with this new economy and the way that people are making ends meet or reclaiming their time is sad.
We just want to be an example for that and sort of challenge people to say retirement doesn't mean that you can't still earn money.