Personal Finance

My net worth is over $7 million but do I need another 5 years of work to pay off my mortgage?

Rich Duprey

Published: November 18, 2024 9:28 am

Some people don’t believe they are wealthy enough to quit working. Even though they are millionaires several times over, they feel they need to keep up the daily grind.

From the outside, such folk can seem foolish. You have more money than many people will be able to earn in several lifetimes, so quit working and enjoy what you have achieved.

Yet it’s not always so simple. With more money comes more expenses. Millionaires become accustomed to a certain lifestyle and it is not so much a desire to keep accumulating more wealth, but to be able to pay for the kind of living they enjoy. Plus there are bills that still need to be paid that can’t be met if they quit working. It is tempting to step back from the rat race, but not practical if you haven’t achieved your goals.

24/7 Wall St. Insights:

• Having a goal and sticking to it is an essential component of becoming financially independent.
• Yet if you are unhappy with your situation even though you’ve achieved more than most people will ever accomplish, then making trade-offs may be the best option.
• You can still live the life you want though it may require downsizing a bit, changing your surroundings, and putting your money into better investments to earn greater returns.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

This becomes clear from a Redditor’s post on r/ChubbyFIRE, a group dedicated to early retirement with an upper middle class lifestyle. The individual has achieved significant wealth with a net worth over $7 million. Yet despite feeling burnt out by his job, he doesn’t believe he can quit working for at least five more years, but more likely another 10 years.

On the surface it seems the Redditor is just trying to gild the lily. But despite his fabulous wealth, he also has enormous expenses and it is not quite so easy to just say “live below your means.” He still has goals left that have not been fulfilled and finishing the task is important.

For example, he is still $250,000 short of funding his children’s education, likely at an Ivy League school as he has over $3 million saved, but wants a total of $4.35 million. While he has $1.6 million in equity built up in his home, he still has $1.2 million left outstanding on his mortgage. 

Evaluating what’s most important

As mentioned, after a certain level, it is not so simple a solution. For most people, choosing a community college instead of Yale or Stanford is a no brainer. Not necessarily so for high-powered individuals looking for their kids to make the connections needed to continue to operate within certain circles.

Yet he does have options. While I’m not a financial advisor, so these are just my opinions, the Redditor has choices he can make that still meet his needs. 

First, selling his rental real estate can offer him better returns. He owns $2.2 million in rental properties with no mortgages, but he only receives about $70,000 a year in income from them. This income-to-invested capital ratio is extremely meager. The proceeds from the sale could pay off his mortgage, or he could invest it in an index fund and earn better returns.

While the rentals give the Redditor asset diversification and he has benefited from their appreciation in value, it must be weighed against the freedom from work he is giving up compared to attaining some of his goals.

Similarly, the Redditor lives in a very high cost of living area. He could sell the house, move to a lower cost area, and downside to a smaller home. While he wants to stay near family and friends, he could still move outside the region while remaining within driving distance.

His annual spending is about $240,000 a year, apart from his mortgage. While some of that includes childcare, home maintenance, and other essentials, he and his family also take several international vacations each year. But for the Redditor, that is non-negotiable because it includes visiting relatives overseas. 

Key takeaways

Ultimately it comes down to making trade-offs. Despite the Redditor’s burnout and disappointment over how much longer he feels he needs to work, he’s reluctant to change little about his lifestyle.

Again, it comes down to a choice between grinding it out for another decade and being disheartened by the situation or making relatively small chances that don’t really impact your overall lifestyle and feeling emotionally better.