I like to think that I’m ‘immune’ to most luxuries in the world.
I don’t own a car, and I take either the bus or the subway practically everywhere I go. I use a 3-year-old Herschel backpack for almost all occasions. My iPhone 6 is 3 years old, and counting.
But the one thing that makes my heart flutter? Apartments.
Where I come from, land is scarce. Because of this scarcity, you pay through your nose for housing. A tiny studio apartment in the far-flung corners of the city would set you back $500K. “Tiny” meaning about 500 square feet, or 46.5 square metres. “Far-flung” meaning it’ll take you 2 hours to get to work by public transport. That means you’re looking at a 3-4 hour commute every single day.
A while ago, my girlfriend and I were eyeing an apartment. It was incredibly remote, and would take me at least an hour and a half to get to work. But it was one of the cheapest apartments we could find. It was a 2-bedroom, about 750 square feet, or 70 square metres.
The cost? About $800K. And that’s considered to be cheap.
The first issue was the downpayment. Our downpayment of 20% amounted to $160K. No small sum of money, but we knew we could do it.
At the time, we already had savings of around $60K or so. Which meant that we had only $100K to save. My girlfriend’s 5 years older than I am, so the plan was for her to save $60K, and for me to save $40K. Manageable.
We knew that we could afford the entire downpayment within a couple of years. Or maybe even less.
The Monthly Repayments
We needed a bank loan of $640K ($800K – $160K). The interest rate was 1.8% per annum at the time. A 25-year mortgage meant that our monthly repayment would be $2,651 a month.
‘That’s not bad!’, we told ourselves. The interest rate was at an all-time low, and the apartment was the cheapest 2-bedroom we could find. ‘What a steal!’
I was earning $2,800 a month. My girlfriend was earning $3,700 a month. Our combined monthly income was $6,500.
We did the math, and here’s what we would spend every month.
Maybe you’re thinking “hey, savings of $1,700 a month? That’s okay!”
But that’s for two people. Which means that we’re saving only $850 a month, per person. Far from ideal.
And what I listed above includes only monthly expenses.
What about property tax? Property insurance? Income tax? Travel expenses?
Essentially, we would have close to zero savings. All our net worth will be tied up in the apartment.
Sure, our paychecks were stable. But so were our expenses. Whatever money comes in, would flow right out.
But we were bright-eyed, and unrealistically optimistic. And we wanted that damn apartment.
So, the plan was to live paycheck to paycheck, at least for a while.
We told ourselves that things would get better as we slowly rose through the ranks, earning bonuses and increments.
We worked our butts off to save up as much as we could. Full-time job. Multiple side hustles. Living a simple lifestyle. And we made steady progress. Everything was going smoothly.
Until I Started Hating My Job.
I was never a big fan of my job, right from the very beginning. But I somehow convinced myself that I could do this for the next couple of decades, at least. I mean, it was an easy life. Work 9 hours a day, relax upon getting home. After a 5-day work week, you get to take the weekends off.
But as time went by, the resentment grew. Maybe it was the meaninglessness of the work. Maybe it was the complete inflexibility of the 9-to-5 routine. Maybe it was the time-consuming commutes. Maybe it was the endless bitching. Maybe it was the fact that you’re not allowed to disagree with your boss, even if you’re the one making more logical sense.
Maybe it was the belief that I was destined for greater things than to just sit at a desk.
I think it was everything put together. It takes a while for the small things to get to you. To wear you down. A few months in, and I was all worn out.
Not a day went by, that I didn’t think about quitting.
And it was excruciating, thinking about how I had to endure 25 more years just to service my entire mortgage.
I was incredibly stressed, wondering how I would be able to service my mortgage if I got fired. Or if I just quit. Money issues overwhelmed me, day after day, and turned my dreams into nightmares.
I eventually got to wondering – was this apartment even worth it? I was always stressed about money. The constant dread of picking up my feet and going to work wasn’t doing much to help my situation either.
Could I live this way, for the next 25 years?
Was this apartment worth the best years of my life?
Would I even be alive at the end of the 25 years to enjoy my freedom?
No, no, and I doubt that I would.
It took a couple of months for me to accept that my dream apartment was going to slip through my fingers. That I wouldn’t have a place to own and to call home. But I knew that it was better for my sanity this way.
Eventually, I let it go. I gave up my dream apartment.
And you know what? I never regretted it.
In fact, I’m so thankful that we didn’t have enough for the downpayment. That we needed some time to save up for it. That we hadn’t gone in and dumped a huge wad of $160K on the real estate agent’s desk. It was the fact we didn’t have enough money yet, which allowed us to escape the shackles of having an expensive mortgage to service for 25 years.
I’m grateful for that.
I still think about quitting my job, every single day. The only difference between now and back then, is that I only have a few more years on my timeline. I know I’ll be staying in my job till end-March 2019, at least. Because that’s when my company gives out bonuses. That’s only 7 months from now. After which, I could extend my stay to 1 more year. Or even 2-3 more years.
A lot more bearable than an excruciating 25-year wait.
Hell, I could even quit at the end of this year, which is what, 4 months away? By then, I’d have a six-figure nest egg to tide me over for years.
It’s truly liberating, this freedom.
And I know that this freedom is only afforded to me because I don’t have an expensive mortgage to service. Or any other extravagant responsibilities to tie me down, for that matter.
Would I want a fancy-ass apartment that requires me to stick it out at a job that I dislike for 25 years? Or would I rather have the freedom to quit and chase my dreams? Chase the passions that truly matter to me?
I think my answer is clear.
Freedom trumps everything else.
I don’t know yet when I’d quit. But one thing’s for sure – a few more years (at most) and I’ll hand in my resignation letter to chase my dreams all over the world.
FREEDOM trumps everything. Love it! It took me a long time to figure this out. The stuff that you own (big or small) can eventually end up owning you. So we have to be careful with every single purchase, even the ones disguised as ‘investments’. Cheers!
Thank you, Joel! I love how you term this as “investments” in disguise. Very clever! Definitely something to mull over.
Awesome post! It’s great to hear other perspectives on this. My fear of chains/monetary commitment have kept me from large purchases like an apartment/house. For those reasons I’ve never even wanted one and am always looking to understand why someone would (hard to get into someone else’s shoes 🙂 ). I try to image the sense of ownership homeowners tell me about, but instead I’m just remember those same people (for example) having to scrape together $3,000 when that’s almost everything they make in a month (after tax) to pay for a broken HVAC system in the middle of a humid summer.
It’s awesome you two came to this revelation by yourselves and that you had the time to think. A lot of people that I know rushed into these purchases and find themselves in a less than ideal situation when the dust clears. Thank you for sharing!
Thank you APL! I can’t quite explain why I love apartments either, but let me try. Since I was young, I’ve always admired modern interior design. Something about it made my insides feel all warm and fuzzy. (I hope I don’t sound like a lunatic). I could spend hours and hours staring at the interior design and architecture of apartments. I guess when I got older, my love never died.
Another reason is because of the falling out I had with my parents. Whenever they were mad at me, they’d tell me to move out or leave their house. In a way, it felt like I was walking on eggshells. If I did something wrong, something against their wishes, I would get thrown out. So, I wanted a place of my own where nothing like this would happen. Where I would have the liberty to do whatever I want.
It’s good that you can foresee all the negative things that could happen! That way, you’d never wind up with an expensive ass mortgage that you have to spend the next 25 years servicing. I wish I could have seen things your way sooner, it would have saved me many months of stress and heartache! But hey, at least now I know. 🙂
By the way, I’m starting to see all the merits in your no-responsibilities-no-obligations mantra. It’s liberating.
Lol – you don’t sound like a lunatic. I think I get that feeling – I do watch HGTV! Architecture really is beautiful. And I can totally see how living in that kind of environment with your parents would make you want something that was yours, that they couldn’t throw you out of.
Haha – there’s my pessimism again! Always thinking about what could go wrong lol. I thought about it more and another reason I’m averse to buying a property myself is because of all I’ve read and experienced with hedonic adaptation. Even the most gorgeous places on the planet become normal for me (and according to psych studies most others). Change is the spice of my life so being able to rent/AirBnb/VRBO a chalet in the Swiss Alps and then a beach bungalow in Thailand is more likely to increase my happiness since just having one or the other would decrease in wonder quickly. Or maybe that’s just what I tell myself since I don’t like committing a majority of my assets to one item. Who knows! But for now I am loving the no-responsibilities lifestyle and I’m happy to hear you’re starting to see its merits. It does feel a lot like freedom for me.
Thank you for the insight, APL! It really gave me something to think about. I understand the concept behind hedonic adaptation, but I think the difficult thing for me to wrap my head around, is this – if I’ve never owned an apartment before, how do I know for sure that it won’t make me happier? Something I’m currently struggling with and I hope to come across some answers soon. Although I must say that I love the “chalet in the Swiss Alps and beach bungalow in Thailand” example. It really makes you see the merits in having a life of freedom, not tied down to any huge-ass mortgage. You get to see all parts of the world, maintaining your happiness because there’s always so much change happening. It’s awesome!
I’m 300% completely against committing all of my assets to one “investment” as well. While getting my own apartment in the future is still on the cards for me, I’ll make sure it’s affordable! This $800K apartment was just too insane. Thanks so much for all your insights and stories, it makes me happy to know that I dodged a huge-ass bullet. 🙂
RE: “How do you know what would make you happy if you haven’t tried it” – You don’t 🙂 . Learning most of what makes me happy was through trial and error. The rest from thought experiments and seeing how other people feel while doing something, such as owning a home. From observation and questioning I’ve done no one has been happier – they’re usually more stressed out. I am looking at sample groups across the world from you though 😉 . It could very well make you happy – I have no idea! Keep us posted with what happens after you buy an apartment. I’m super curious.
RE: “No one has been happier – they’re usually more stressed out.” – Oh wow, that’s an incredible nugget of information. It kinda blows my mind. I guess I have been so hung up on having my own place for so long, that I’ve practically convinced myself that it would make me happier! I probably need to spend more time re-thinking my choices in life and also re-evaluating my finances every year or something! I would most certainly keep you posted should I buy an apartment 🙂 Although it won’t be any time soon, you probably have a 5-year wait, at the very least. :X
I’m also on the fence about this… all the HGTV makes me want to have a nice place… I don’t have strong feelings about owning one way or the other… I know I would not enjoy home maintenance but I do have visions of having get togethers and cooking with friends in a nice kitchen and just admiring having a sleek modern place of my own. I think if I had unlimited resources and a clear life timeline… home ownership would be a bigger priority. I think it’s nice when people know for sure this is something they want rather than vacillating…well that’s my opinion on anything not just home ownership. What are your money goals anyway?
I completely understand what you mean! I have similar visions to yours. It seems lovely, right? And I totally agree with you on this – “If I had unlimited resources and a clear life timeline… home ownership would be a bigger priority.” Unfortunately I don’t think my health is in the best shape either, and I can’t afford to keep working a corporate job just to service my mortgage.
Hmm, as for my money goals, my main priority is to be free of my corporate job. It’s not the worst job in the world, but I can feel myself getting more miserable as time passes. I want to fulfill my dreams, not sit at a desk all day. So I need to save up enough to quit my job and start pursuing my dreams. I’m aiming to keep saving as much as possible, and quit perhaps 2 years from now. After, if I can monetise my dreams, I would love to get a cosy, reasonably-priced apartment. 🙂 What about your money goals? I would love to hear about them!
Mine are similar to yours. I’ve just recently put blinders on and trying to raise enough money to take some time off work. As you said, my job is not the worse. I don’t even hate it. I just don’t like working. Over the last three years, I have tried applying for different jobs or different kinds of service programs – either I don’t get an interview, or for the two that did offer me an interview, I ended up declining. One was because of the decline of a family member’s health; another was because of salary. What are your dreams? That is what I haven’t pin-pointed for myself.
I totally feel you – I don’t quite like working either. I’m sorry to hear about your difficulty with finding different jobs. I guess sometimes the job market really isn’t on our side. Hopefully you’ll find a job soon that you like better! Or at least, save up enough to look forward to your sabbatical 2 years from now 🙂 It’s great that you’ve put your blinders on! I’m trying really hard to do that on my end too.
As for my dreams, one of them is to one day become an author. Another is to become a musician. Unfortunately, most of my dreams have very unstable income streams. Which is why I’m working hard to save up now, so my nest egg will tide me through these tougher times. What about your dreams? Perhaps think back to when you were younger, what were your dreams then? 🙂
I’m in Australia and I’ve been a home owner for 20 years and wouldn’t have it any other way. To me rent is dead money if you like routine and coming home to same , your own place which I do. I’m not a extrovert or spontaneous person that likes change. I’ve had a few homes over the years and 4 years ago downsized my home but on bigger land size , I went from the busy suburbs to semi rural place 30 minutes away which I wanted to do move there for years . Our mortgage is small ish. Rent in Australia , particularly Melbourne & Sydney is ridiculously expensive. We have a beautiful 4 bedroom home and beautiful outdoors spaces and our mortgage is cheaper than renting most small rundown 2-3 bedroom homes.
I’ve always thought of rent as dead money as well. At least, that’s what my parents taught me. So I kinda grew up with the mindset that I had to buy my own place. Unfortunately, my city is terribly expensive. You can’t afford a place unless you’re willing to be burdened by a corporate job for the next 25 years or so.
Like you, I do enjoy routine as well. I like coming home, you know? So buying a place I believe would be good for me and my partner. Just that we need to figure out the financial aspects first. This is a really good insight. There’s a lot of debate about renting versus buying, and I think you made a really good point here! 🙂
I think it’s a good move to downsize as well. Less financial burden = more freedom. Way to go, taking advantage of geographical arbitrage (if this can be considered that)!