You’re young, in debt, not making as much money as you’d expected and the world keeps getting more expensive.
In many ways, our parents had it better: more jobs, cheap homes, less debt. Things that once seemed so basic, so average, so fundamentally middle class are becoming unobtainable.
Even if you’re making a bit more than the guy disappointed by $36,000 (which really isn’t bad), it’s a zero-sum game with those debt payments. Saving a critical mass of moolah is all but impossible in your twenties. Meanwhile, the big things in life require saving. Like a house and kids. And you need those things to be happy, right?
Wrong. To be clear, my goal isn’t to be political. If you want to resent the baby boomers for making all that money on real estate, if you want to march down the streets of Montreal, go right ahead.
What I want to argue is this: You’re wrong about what you think you want (and can’t afford). You don’t want to buy a house any time soon and you probably don’t want kids, ever. Here’s why:
Now is not the time to buy a home
Unless you have a lot of money saved up, it’s illogical to buy right now. But common sense, which suggests renting is wasteful and owning is not, is leading many first-time buyers astray.
While rental prices have risen pretty much in parallel with inflation, the real estate market has skyrocketed. Just look at this chart, which shows that in Vancouver—where the average price of a two-storey on the west side of town is $1.6 million—housing prices are 900 per cent of what they were in 1980. Toronto isn’t much better with a 600 per cent increase.
Meanwhile, rental prices in both cities are just over double what they were 30 years ago.
The standard criticism of renting is that you’re throwing money away, but that’s also true of owning. First, there’s property tax. As money manager Ming Lam told the Globe and Mail, a 0.8 per cent tax rate on an $800,000 home will cost you $533 a month—that ain’t peanuts.
And then there’s the interest you’ll be paying on your monster mortgage. In fact, for the first few years, interest is primarily what you’ll be paying. To make matters worse, you’ll be a first-time buyer, meaning your mortgage will be long and you won’t be able to put much down. To boot, Bank of Canada Governor Mark Carney has made it clear interest rates are going to rise, and soon.
There are also home repair costs, which are probably higher than you think—about 3 per cent of your house’s value per year, according to Lam. In addition, most of us move too often, losing tens of thousands to moving costs and commission. All of this is money you won’t get back.
With prices the way they are, the better alternative is to rent and save. You’ll be able to afford a much nicer place and you’ll have more left over. Use it to make smart investments—ownership isn’t the only way to build equity. Eventually, you might have enough saved up that buying will make sense. But there’s no rush, so relax.
Don’t have kids
You may think you want children, but you probably don’t. Or at least you shouldn’t have them if you’re expecting they’ll make you happier. Couples are least happy when children are in the house. Study after study has shown happiness declines after childbirth and doesn’t bounce back to its original level until the kids move out. You lose sleep. You lose free time. Your sex life drops off a cliff. You’re chained to the house. You sacrifice luxury and location for more space.
And how much will you shell out for these little bundles of misery? Just shy of $200,000 per kid.
Maybe you want kids more than anything in the world. Maybe you’re one of those types. Perhaps they will make you happier. But if you’re on the fence don’t bet on it. The odds are against you. I’m sure you’ll love those little buggers dearly, but the research is clear: you’ll be unhappier.
That doesn’t mean you shouldn’t marry, however. Studies also show married people are happiest. And with no kids in the house, both of you can work full-time and focus more on developing your careers. That means yearly, adult-oriented vacations. It means you can have nice, breakable things. It means you can save for your retirement instead of their college educations.
I didn’t write this to be antagonistic toward anyone who just bought a home or who desperately wants kids. I wrote it because when I realized this stuff—not long ago—I felt very relieved.
I realized I could afford the life I wanted.
Trevor Melanson is an online editor at Canadian Business magazine. Follow @trevormelanson.