Live On Less Than You Make- The Strategy That Helped Me Pay Off My House… Again!


Paid house for useIt is nearing the end of October and traditionally this has been a higher sales month for me.  This year seems to be flip-flopped from years past.  October has been one of the worst months in a while… but we’ll get to this in my next income report- so why am I mentioning it?  I created a post some time ago and I’ve been sitting on it for a couple of months- not sure whether or not I should publish it.  In talking to several of you, it seems like it will be beneficial.  Now seems like the perfect time to talk about budgets, particularly because October is not going quite as well as I had personally hoped (though it’s still going great!)  In addition to this, the holidays are coming up and I realize that budgets can struggle for those who celebrate the traditions that are involved.  The information contained in this post explains how I budget and why I don’t freak out during lower sales months (but I used to!)  I hope you gain something from it to implement in your own business and personal finances!  Note, I edited the post slightly to keep it current, but essentially, this was the original content.  Enjoy!

A few months ago, I paid off my house… again!  If you’ve been following,  you know that  starting this online business enabled me to pay off my first house!  Some time later, we bought a second house (and finally sold our first house!) The second house was more than double the price of the first! I had mixed feelings about taking out a mortgage after paying one off.  My original desire was to find a house I could pay cash for (including the money we would get from the house we were selling) but for a variety of reasons (location being a big one), we ended up buying a more expensive house.  I discussed this extensively with my wife and we decided to do this with one condition: we committed to be aggressive about putting money aside to get the new house paid off as soon as possible (I really hate debt).  I talk a lot about selling online and business finances, but today I want to share a bit of the personal side- the strategy my wife and I used to pay off the house along with what factors went into the decisions we made.


This specific strategy won’t work for everyone because it’s highly dependent on several factors including your current income level, where you live, the cost of your house, other living expenses among other things.  The principles in this post, however, can apply to anyone.  The point is to live on less than you make.  For the majority of people reading, this is possible (whether you think it is or not.  For most people, it will involve adjustments and sacrifices… keep reading)!


Let me be honest…when I share anything about my income, it feels awkward.  It’s like I’m exposing a secret.  Perhaps it was the way I was raised.  Nobody talked about what they made when I was growing up.  I still don’t know what anyone in my family of origin or extended family makes.  Sharing this information was deemed “improper” when I was growing up (as an unspoken, but very real “rule”).  As I mentioned early on in my blog, I thought long and hard before sharing income reports and when I did for the first time… it felt… wrong.  Perhaps these are just issues I need to deal with (anyone know a good therapist?)  The truth is, I’ve never been accused of bragging and my income reports seem to be among my most popular posts.  Several people have written me personally telling me that it inspires them and has given them the motivation they need to start their own business.  This is beyond exciting for me… so I’ve continued to post what has long been considered “private information.”  I’ve chosen to get over my awkward and uncomfortable feelings for the benefit of my readers.  Today I’m taking this to the next level.  Business finances are one thing, but personal finances… well… now I’m subjecting myself to possible scrutiny.  The fact is, I have nothing to hide, BUT I still obsess and stress about the potential effects of putting this out there.  Not only this, but as I mentioned in my previous post, organization is a huge struggle for me, so here is my disclaimer: the information I’ll share in this post is accurate to the best of my knowledge.  If I become aware of a figure that is not 100% correct, I’ll edit this post to reflect that.  My hope and my intention is always to help wherever I can.  I’m not perfect and I’m always learning, but there are some things that have worked for me.  With that long and probably unnecessary disclaimer, let’s get into it!


If you’ve read my income reports and my ebook, you know that my business seems to be averaging about $200,000 a year in profit.  So… how does this work for family finances?  Well… it’s a bit complicated.  Before the explosion of my business, my wife and I had already learned to live on next to nothing (by American standards).  We had learned because we had to!  We really had no extra money to work with and we had to be creative with what we had just to survive.  We learned by necessity where to find the cheapest food, how to conserve energy, how to find cheap clothes (amazing thrift stores where we used to live- though it can be difficult to find pants for a 6’6″ man!)  where to find free stuff (our living room couch came from a dumpster for instance… yes seriously- you’d never know it though.  It was in nice shape). We never had any surplus to create “extra budget categories.”  When the business took off, we continued to live this way for a while.  When we realized I had made over $100,000 in my first year of full time business, we created an LLC and started “paying ourselves” a check and had to decide on our “wages.”  At the time, the average American household income was a little over $40,000, so $40,000 was what we chose.  For us, it was actually much more than we were used to living on (though these days, our kids and other factors have easily filled the budget!… I’ll get to that soon.)  Our total budget actually ended up being a bit higher than this.  This is where it gets complicated.  I will explain more on this below.


The fact that my actual profit is so much larger than what we’re living on allowed us to simply set aside $40,000 at the end of the year and live on it for the next year.  When we started doing this, it helped me tremendously!  I did not need to worry about the numbers each and every month because the money for the next month was already in the bank!  This means if the business takes a massive dive or fails, I have some time to figure out what to do so my family’s financial situation will not immediately be in shambles.  This strategy has been invaluable and has greatly decreased the anxiety associated with running a single business that is responsible for providing for a family of four.  We “write ourselves a check” once a year.


As I mentioned above, our actual “budget” got a little complicated with this new “once a year” payment model.  The actual outgoing funds far exceeded $40,000 this last year mainly because our goal was to pay off the house!  Our mortgage was around $700 per month plus property taxes and insurance which brought it to a total of $1002 a month.  Note that we did not include this in our regular budget ($40,000).  The reason was that we were setting aside a separate fund each month to pay off the mortgage.  Once the mortgage was paid for, it would no longer be included in the monthly budget moving forward.  We decided to set aside an additional $5000 each month (whenever we could) to work toward paying off the mortgage.  This allowed us to pay off this house in less than 1 year of living here (between the $5000 per month and the lump sum we received from the old house).  In case you’re wondering, we bought the current house for $132,000 (the old house was purchased for $59,000.)  The house we live in is exactly what we wanted and  more, but it is by no means extravagant by average American standards (but by average “world standards”, it’s a mansion!)  It is a ranch-style house built in the 70s.  Houses down the road go for between $300,000 and $500,000, while houses on the other side of town (where we used to live) go for between $20,000 and $80,000.  I’d say we’re fairly average for our area.   Adding $5,000 to the budget each month essentially adds $60,000 to an annual budget!  In our case, it was less since we stopped this fund when the house was paid off (less than a year- we paid it off in May this last year).  Are you following so far?  Ok, good… let’s keep going.


As I mentioned, the mortgage was added in addition to the regular budget as were the taxes and insurance.  Since we’ll still be paying the taxes and insurance, these will be added to our regular budget next year (about $300 a month).  Now, if we were like a typical American family, we would be paying all of this (the mortgage, taxes and insurance) for 15 -30 years (we had a 15 year mortgage.  The monthly cost would have been less on a 30 year of course.)  This (15 year mortgage monthly payment) would have brought our annual budget up by $1002 a month- approximately $12,000 a year.  This would have put us at $52,000 which is a bit higher than the national average, though it seems to depend on which source you look at (this source claims the average “family income” is closer to $62,000).  Ultimately, it doesn’t matter.  Who wants to be “average” after all? (that was a joke- for those who didn’t get it).  In all seriousness though, my goal is actually to set a budget that is reasonable- not so high that I lose all sense of discipline (and forget how to say “no” once in a while), but not so low that it feels like we’re “struggling” (feeling like we need to say “no” all the time)

In addition to the budget and the “pay off the house” fund, there are a few other areas that were not in the regular budget.  The plan next year is to look over everything we paid out and budget accordingly the following year.  Moving into a new house added a lot of variables.  Not only were we trying to pay the house off as quickly as possible, we also had no idea what kind of bills we would incur (gas, electric, water etc).  In addition to this, we could not plan well for maintenance, repairs and other miscellaneous costs.  We purchased a home warranty ($500) and paid $75 every time we needed a repair.  This served us well as the first year brought with it many surprises!  We paid over $1000 (between the initial $500 and $75 per visit) but we would have paid several thousand had we not purchased the warranty!  Additional unforeseen expenses added several thousand dollars that we did not have budgeted.  On top of this, we have a medical fund (not currently in the budget) in addition to our insurance plan (currently IN the budget) due to some health issues that my wife has.  In 2012, we were able to set aside $10,000 and we’ve been drawing from that for the last 2 years as our “med fund” but it is almost depleted, so we will need to work this into the budget for 2015 as well (we had no insurance part of that time.) As I said, this last year was a bit odd for the budget due to all of the changes and our insane drive to pay off the house quickly.  My guess is that our 2015 budget will be between $43,000 and $50,000.


As I mentioned, sharing all of this feels awkward and uncomfortable.  I predict the response will vary depending on who you are, what your income is and what standard of living you’re used to.  Let me be honest: if I read this blog 6 to 7 years ago, this budget would have seemed a bit extravagant.  At the time, I was living on far FAR less.  On the other hand, things have changed tremendously since then- not only in terms of income, but in terms of financial needs (the addition of a second child, increasing expenses for the first child as she continues to grow up, moving into a new house, changing over to a much healthier (and expensive!) diet, family health concerns as well as several other factors).  Our family is living on a little less than 1/4 of the business profits (not including the house payoff and other non-budget expenses listed above).  When the business took off and hit $100,000, I was extremely cautious of raising the budget at all (and didn’t for a while).  My plan was to stay in our “cheap” house and keep expenses down.  I currently live in a country where there are countless people that “act rich” (even when they are not) but my philosophy is, I’d rather be rich and live like I’m poor, than act rich and be deep in debt (which is the true situation of the many of those who act rich in my city and surrounding towns).  Note: In case you’re not aware of it, if you’re living in a western society and make anywhere close to the average income in your country, you are doing well.  This is how I define “rich.”  In fact, at least 80% of people on earth live on less than $10.00 a day and over 3 billion people (almost half the world’s population) live on less than $2.50 a day.  This means even if you are making more than $10.00 a day, you’re in the top 20% of the world’s wealth…  crazy huh?  I don’t point any of this out to lay some weird guilt on anyone, but rather to inspire gratitude.  I am continually thankful for what I have and what this business has been able to produce!    This causes me to be very cautious about taking it for granted.  Eventually, my family moved to a new house and added to our expenses, but we never took a step like this without stretching our lower-income lifestyle out as long and far as possible- living with less even when we had more.  This was the “secret” to paying off our first house, and to buying our second house- our lender was shocked that we were going for such a “cheap house” when we could “so easily afford” a far more expensive house! This “secret” also helped us pay off the second house!  We keep a written budget so we know where every dollar goes.  The “secret” is to simply budget less we make!  In most cases, you can do this also even if it means cutting expenses.  The only two ways I know of to meet a financial goal like paying off a house is increasing your income or live on less than your current income.  I spend a great deal talking about the former.  I hope you found it helpful to hear me talk personally about the latter!

What do you think?  Was this helpful to you?  Would it be helpful to write about the budget again in 2015 when it is “set in stone?”  Do you have any questions?  Comment below!

If you’d like more information, please subscribe below.  In doing so, you’ll get my free ebook that lays out an overview of my 6 step business strategy and provides some tips to make some money immediately!  Thanks for reading!

10 thoughts on “Live On Less Than You Make- The Strategy That Helped Me Pay Off My House… Again!

  1. Daniel,
    I don’t even know where to start. It’s like every post you make connects to me at every stage of my business. I remember in one of your posts you were asked how many items you have listed on Amazon and at the time you had about 916 items or there abouts. I so connect with your posts. Please don’t stop. You inspire the best out of me. Keep up the good work.

    1. Thanks so much for the kind words! I’m glad this stuff is helpful. I’m planning to keep going and hopefully share some more great content!

  2. Hey Daniel,

    Great share, First congratulations on paying off your mortgage on both houses!. It is great to hear how people do achieve doing this rather than hearing “hey I just paid off my mortgage”.

    I must admit it takes hard work and effort to be consistent, and be smart when budgeting. Its easy to blow money when you do have a bit of success come your way! -I know I have done that! This article will help me so many thanks

    Can I ask for you personally was that a big motivator in your success to set a clear goal like paying off your mortgage! The key lesson I feel here is to set a clear goal what ever does it for you personally and focus on that and success will follow

    All the best


    1. Hi Neal,
      I’m glad to hear this was helpful! To be honest with you, paying off the house (the first time) was very much an afterthought. I believe I mentioned in a different post, but I had no money when “I purchased” my first house. I had every intention of taking 30 long years to pay it off and to send loads of interest to the bank in the meantime! It wasn’t until my business took off that I realized “hey… I may not HAVE to be in debt!”

      Personally, I’ve found it more helpful (for the second mortgage payoff) to say “I’m going to do everything I can to make this work- stick to the budget, say no to a lot of stuff and don’t overspend, but if I’m not comfortable putting and extra $5000 in the bank on any given month, it’s ok.” This allowed me to not be too hard on myself when I didn’t reach the goal. There were a couple of times when I would only move $2000 or $3000 due to other expenses or emergencies coming up that I couldn’t plan for. I should note also that I moved all of the money into a bank account, but kept it available. In other words, I didn’t actually put any of it toward the mortgage until “pay off day.” This was a personal preference to allow me to have that money available had I needed it for some emergency. The flip side of this is, when I finally drained that account to pay off the mortgage, it felt pretty scary… but now I’m debt free and have more in savings. This method won’t work for everyone, but it worked for me! Always great to hear from you!

  3. Hi Daniel,
    Great post. I admire someone who tells the truth even if it isn’t popular. Your way of doing things may not be popular, (most people want others to think they have more than they do), but it is the way we all should live.
    So what if there is a little step back. I’ve never known of a stock to only go up without falling back a little at times. You’re still a blue chip stock in my book.
    Keep up the great blog and great business
    Robin D

  4. Congrats on paying of the house (houses) and living on a budget! My wife and I also sit down EVERY month and do a WRITTEN budget.

    This simple and effective tactic for personal finance is really the most powerful thing you can do with your money, regardless of how much or how little money you make. Take control of your money, or your money will control you.

    You shouldn’t regret posting this information, as it definitely does relate to running your own business, and is probably some of the most valuable information you’ve ever posted in this blog.

    In my opinion, if a person doesn’t have their personal finances in order, it is very unlikely that they will see any real success in their business ventures. It’s like trying to drive a motorcycle, without first learning to ride a bike.

    In reality, everyone is already running their own business whether they know it or not, and it is called “Me Inc.”.

    1. Hi Saph,
      Thanks for the kind words. I remember when my wife and I started sitting down to look at our budget. It was pretty eye opening (“we spend WHAT on THAT?!”) Ha ha… It’s nice to know where the money goes :)

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