“Vancouver is a lonely place for financially responsible people.”

“There are some of us who still view life realistically but Vancouver is a lonely place for financially responsible people.

My partner and I are alike when it comes to finances. Our friends have been buying houses, condos, cars, boats, and all the toys in the world on incomes we know are similar or smaller than ours. Often we get lessons on how easy it is, “just put $10000 down and you’ll have $700 payments, its so cheap these days.” That would be a fine statement if we were talking about housing, unfortunately many of our peers talk in such a way of car payments. I get nightmares imagining what it must feel like to spend $1000 +gas on a car with my income. Dreadful thought, but I know first hand of people who do this without a second thought.

With housing its no different. We purchased a condo in 09, at a small monthly discount to renting. Our mortgage is just barely 2 times our annual income. We feel the need to get rid of this debt as soon as possible. Yet, we have friends who have bought both houses and condos in the past year valued 4 times that of our condo! These people earn the same money!

I would venture to say people are so conditioned to debt these days, they feel naked not having obscene monthly payments. When a car if finally close to paid off, they trade in for the newest model with biggest possible payment, or newest cruiser, or newest Bowrider.

The irony of it all? It makes us feel poor! We look at our friends, over extended, loaded on debt, enjoying all the spoils of life. The appearance of the wealthy elite.

Us? No consumer debt, used cars, and a big savings accounts, even bigger investment accounts.

This is partly why Vancouver is such a hard place to live, if not for us both being grounded and reminding ourselves that by 40 we will have enough cash-flow to retire or work part time, we would likely go insane and cave to the temptations. Its hard not to feel vindictive, and wish financial reckoning upon the indebted masses who get to enjoy the spoils without the work.”

– Burt at VREAA 25 Oct 2012 8:39 am

Burt has our sympathy; it isn’t easy running against one’s herd, or even just sitting out while the herd is running.
The one note of surprise in the post regards Burt’s early retirement. It would be interesting to see his retire-at-40 math, given current interest rates and investment environment.
– vreaa

59 responses to ““Vancouver is a lonely place for financially responsible people.”

  1. I don’t think this is unique to Vancouver.

    I must be in a bubble: most of my friends/colleagues/family are not taking on huge debts near the high end of allowable DSRs.

  2. Thai-born Chinese Canuck

    I am quite sure bankers and credit card issuers are not pleased with Burt’s self-sufficiency mentality. Burt will emerge a winner when reckless spenders go bust en masse.

  3. Real Estate Tsunami

    There are many “house rich/cash poor” people out there.
    Renting is the name of the game now. Enjoy the freedom, and let the homeowners worry where the money for the leaky roof will come from.

  4. Why would anyone want to retire at 40? Serious question.

    • To do more of what they want to do and less of what they don’t want to do.

      • And what if you actually enjoy your work?

        Cyril, I agree. Retiring at 40 would be cool for about two weeks. After that would come the realization that you have another 40 years ahead of you. What are you going to do with the rest of your time? Yoga and basket weaving? Humans didn’t evolve to be “happy”, we evolved to be productive. That is where we get meaning in our lives. It doesn’t matter if you’re a volunteer and don’t earn a cent, as long as you’re contributing something. But if you’re 40 and not doing anything of value, you’re wasting you life and I have no time for you.

    • Why not if you can afford to do so? Do you want to work for money or have money work for you while you enjoy what you do?

    • “The object of living is work, experience, and happiness. There is joy in work. All that money can do is buy us someone else’s work in exchange for our own. There is no happiness except in the realization that we have accomplished something.”
      Henry Ford

      • Ya work-life balance is for traitors and pinkos.

      • “I adopted the theory of Reincarnation when I was twenty six. Religion offered nothing to the point. Even work could not give me complete satisfaction.” – Henry Ford [San Francisco Examiner – 26 August 1928]

        Unlike Henry… Harry had a slightly different theory of work’s ultimate purpose…

        [NoteToEd: That actually really really was inspired by… TradesPeople at AssortedBuildingSites, TheCity, circa ’88…]

      • Cranston Snord

        “Ya work-life balance is for traitors and pinkos”

        For some people work is a job that they use to earn money with so that they can feed, clothe, and house themselves while doing something else in their free time. For others, especially the creative class, it’s a passion and a profession.

        A 9-5 soul sucking job isn’t a life. Earning a living doing something you love, are passionate about and want to do a good job at is a life… while always remembering that it’s your family and friends who will be there for you when things go to shit, not your job or profession or whatever you want to call it.

  5. pricedoutfornow

    My significant other often asks why so many coworkers have such expensive cars. I say it’s all home equity lines of credit and other consumer debt! I’m not believed, but where else would all this “wealth” come from? We live modestly, rent, drive secondhand cars, meanwhile the coworkers who earn the same salaries drive really expensive cars, live in houses that cost $1.2 million and take extravagant vacations every year. It can’t ALL be family money. I maintain: it’s debt. I guess we will see in the next 5 years who’s right.

  6. My wife and I were talking about this exact subject yesterday. She is a medical professional that works for the public health service here in Alberta. Several of her colleagues at work have mortgages bordering on the $2,500 – $3,500 a month range, new car payments, lots of personal “bling” and they make less than she does. Of course, I also earn a nice income as do some of her friends husbands I imagine, but still, we have to budget carefully each and every month even thought we have no mortgage or unsecured debt, just to be able to live, pay our bills, STAY OUT OF DEBT AND SVAE MONEY (capitalized for emphasis). My wife and one of her very close friends at work who also thinks like us, figures that they must all be living off lines of credit and credit cards………..because with our income ($160K combined in our case) we could not comfortably carry the debt load that they are appearing to do.

    • Oh thank god.
      Really its just the last of the last getting in before Nov 1st.

    • All of the recent capital flight out of China has to go somewhere especially now that HK has also implemented foreign ownership restrictions of their RE market. Also, it’s probably pretty obvious to the Chinese that it’s much eaiser to buy Vancouver RE than Canadian natural resource companies as a means of getting money out of China.

      • Much easier having an offshore bank account. RE is an annoyance because of the substantial overhead.

      • Opening an offshore account is not easier. If you are Canadian, try opening an account in Canada and depositing a very large sum of money. Then go buy (with cash) a half million dollar plus house that is substantially mortgaged an you’ll understand which is easier to do. It’s always easier to give banks back their money then give them new money. This is one of the reasons why RE transactions are such an effective way to wash dirty money – the previous mortgagee is the cleaning intermediary.

      • ummmm ok. Guess they pay for property with suitcases full of cash. Literally.

      • “The winners—Kamran Hakim, a New York-based landlord, and Santa Monica, Calif., real-estate attorney Farhad Eshaghpour—edged out other suitors by offering the sellers $29.5 million in cash, including a guaranteed $4 million even if the deal fell through and a 10-day close with no contingencies.”

        [WSJ] – A Hollywood Icon’s Turning Point: The El Royale, a longtime movie-star haunt, changes owners. Aiming to keep the stars—and fix the elevator.

        http://tinyurl.com/cnw8art

        [NoteToEd: Alternate ‘Slanguage/Varietyese’ Leader: “BoffoCommish! PersianPaYola Swoops On GreatSatan’s RetroRoyale!”

    • Real Estate Tsunami

      You either are a realtor or you trust the fabricated numbers that the Real Estate Board publishes.

      • Terminalcitygirl

        Neither. The post was tongue-in-cheek. Most folks around here a long while know me well enough that I didn’t think I needed to make that obvious…

      • Rusty's Revenge

        it’s ok, i still have to make it obvious some times

        PINKO COMMIES ARE TRYING TO COLONIZE THIS BERG

  7. Like VREAA pointed out, I’m pretty sure his math is wrong if he plans on retiring at 40 unless he has at least 3 or 4 million stashed away somewhere

  8. I’m a doctor, make a nice income, and have one luxury car between me and my wife. Combined, we make 500K a year, give or take. Thing is, my 70K luxury car was bought with cash. I see people making way less than us who drive even nicer cars than us. Of course, we also have a mortgage (about 775K left officially; but we have money tied up in other investments), but again we see people making way less than us paying huge mortgages.

    • I’d like to add, my point is there is essentially no difference between those who truly have money, and those who are living life on credit. In fact, those living life on credit, are more likely to spend more than the truly affluent, because as I was taught, you don’t spend money unless you have it (except for the mortgage but even that I expect to pay off in a few years time, although I probably won’t because rates are so cheap)

      • Exactly. Easy credit creates the illusion of wealth. That’s why I’m scared for Vancouver’s economy. It’s hooked to cheap credit and will have a hard time absorbing the shock. I think the “no fun city” will literally live up to it’s nickname…

      • pricedoutfornow

        I was thinking about this as well. When I was growing up in the 70s and 80, I had friends who were poor. Dirt poor. There often wasn’t enough food at the end of the month-kind of poor. We knew who these people were and their financial situation. These days, I think a lot of people are poor but at the moment, have a lot of cash available to them in the form of credit. But this won’t go on forever, the credit eventually dries up. And we will see, once again, who is really financially secure, and who has been faking it. Right now though, everyone looks rich!

      • Well, in fact, I’d like to say that I like to ACT poor. I bike to work, even in the rain (10-15 km each way, depending). Or I take the bus. I drive my BMW only for errands with the wife. I have no need to be showy. Our kids will not be going to prestigious schools because I went to an inner city school and had just as good an education as the preppies. I save up, money begets more money, and in the end, I will be the one laughing to the bank, while the ones who splurged on the Porsches and BMWs and were pretenders will be drowning in their debt.

  9. Everyone is asking the wrong question. It’s not how much you need for retirement, but how little. The 4% rule…this man describes it way better than I can.

    http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

    On the flip side, I would suggest finding a job you actually like. A nice luxury we have in North America.

    • Agreed!
      The money for nothing, easy credit ethos we are living with is very much related to this absurd notion of working and earning money only for the purpose of “retiring” into a life of idle luxury. Seems really pointless to me.

    • “On the flip side, I would suggest finding a job you actually like. A nice luxury we have in North America.”

      I’m not sure that there is any way that I could agree more with you.

      I’ll trade a up a good chunk of annual income just to have a job in a work environment I enjoy. Not hating your job that you spent the majority of your waking hours at is a major factor in my quality of life calculations.

  10. listen to 44:30 secs. Why live in Canada and be a serf?

  11. Frugality pays off in the end. Always does.

    There will be pain for those who haven’t heeded the ample warning. Always is.

    • To paraphrase Keynes, in the end we are all dead.

      I know people who had no cash and needed a car to get to work, therefore they almost *had* to buy a *new* car on credit – no money down, zero interest payments – otherwise they wouldn’t be driving.

      So when people like that get ready to pull the trigger on a car, they might as well go for the $35k car instead of the $25k car because it makes no sense (in terms of monthly payments) to cheap-out at that point.

      They are “all-in”, anyway…..might as well go big or go home.

      😉

      Meanwhile dummies like me get the cheapest car we can afford and pay it off in three years, not sure why…..while the people with no savings driving the new Audi all have a good laugh at us driving around in our sh*tbox.

      🙂

      Welcome to the inverted reality of Mark Carney…..

  12. I’m glad someone already brought up Mr. Moneymoustache, thats whom I was going to reference as our idea of retirement. Its also why I threw in “work part time” in the original post.

    Ill clarify more details that some may be curious about.

    We are still young, late twenties. I own/operate my own business, and my partner is employed in a field she is educated in. She is in the first few years of her career, nowhere near her earning potential.

    We currently make $100k – $120 per year, the majority coming from my earnings. I have had the fortune of earning a good income since my early twenties, putting a large amount away while still living at home.

    We placed a large downpayment on a condo which will be paid off before the end of this decade. Our TFSA’s are maxed out and earning 5-6% in a portfolio composed of commodities, REIT’s and some telecoms. We actively manage our investments, and like to stay on top of financial trends.
    Partner also contributes to her RRSP’s, employer throws in its share.

    We have no debt to service other than our affordable mortgage, so a disproportionately large portion of our income is dedicated towards savings, investments, and mortgage pre-payments.

    Our retirement by 40 plan makes a few (perhaps hopeful?) assumptions.

    Those are;

    – Further weakness in the local market
    – Rental rates staying strong or moving up
    – Capitalizing on partners earnings growth potential
    – Slowly backing away from my business and allowing for less of my direct involvement.
    – No life threatening World meltdown

    We hope that local real estate weakens, allowing us to purchase a duplex (or more, depends on levels of discount) for cash, while keeping the paid off condo. Live in half the duplex, rent out the other side and rent our current condo.

    At 40 that will leave us with a paid off condo, a paid off duplex, $300k invested, RRSP’s, and TFSA’s. A self sustaining business income, partners consulting/ part time income, rental income, investment income, no debt, just taxes.

    • 1. I do not see where the cash for a duplex is coming from (to make it all cash purchase).
      2. Why do you think the rent is going to stay strong or even grow. when the RE prices go down the rent might go down as well. The own to rent ratio may improve but your condo that you bought expensive is probably not going to be cash flow positive for decades to come if you consider the loss of opportunity to invest the money tied in it and the increase in the maintenance fees as the time goes and the condo ages.

      • Savings alone over the next decade should be able to pay for a duplex. (market conditions being in favour) We are are able to put away about 40k of our income annually, not accounting for investment growth or the possibility of putting more away as our incomes grow.

        As for rental rates, YVRHousing has provided excellent write ups on rental rates in similar markets down South. As credit becomes tighter and people are unable to buy, yet still need to live somewhere, the rental market becomes heated. Granted we have a large supply of condos, so a flat rental market is not an unreasonable assumption.

        As to the current condo, it indeed offers a poor yield. Once paid off and rented at current rates it offers a little over 3% yield. Not a fantastic investment, but it has provided us with stable housing at an affordable price, and at similar cost to renting. Since our mortgage is not an inordinate financial burden, we are able to pay it off quickly, drastically cutting the interest costs.

        That being said, there are no guarantees in life, just odds.

      • Burt -> Thanks for all the further info and thoughts.
        If you’re making 6% on your investment portfolio, what about a plan where you simply accumulate investment capital until you can live off that income? In other words, do you need three properties, with all the market uncertainty that that entails, to make this work? I ask this because I can’t see Vancouver RE going from being this overpriced to being an attractive investment anytime soon.
        Also, have you factored in the cost of property management or time spent on being a landlord?

      • Burt – I am in Detroit right now and apparently while their rent prices have not fallen so much as the RE, they have fallen as well and are too really low now. I think that they are going to fall in Vancouver too just not as much as the RE – let say the RE corrects by 50 percent and the rent falls by only 20 percents so while the own to rent ratio is going to improve overall for the new buyer as rent is going to get relatively more expensive than own, it will get worse for you as you have already paid near the top of the market. And your maintenance fee is going to increase at least by 5 percent a year as the building ages.

      • Cyril Tourneur

        How can a rental market become heated? Rents are constrained by incomes so unless wage inflation becomes rampant, there is no danger of an “over heated” rental market.

  13. Yah, conditioned to debt
    Benumbed ’til death.

    Enjoy being financially cautious. I am at the other end of life. Retired. And debt free. People used to call me ‘cheap’ but I just plodded along with thrift shop clothes and such and retired early. I enjoy my sleep – and my days.

    Take care

  14. Rusty's Revenge

    for the bears:

  15. The world is a lonely place for financially responsible people. We are seeing credit caused bubbles in many countries.

  16. @VREAA

    We haven’t completely committed to the idea of purchasing more local RE. ( At least I haven’t) As it stands right now its a compromise we have come up with, my partner has always dreamed of a vegetable garden as part of her long term goals. Thankfully she is smart enough to realize that buying that patch of dirt right now is suicide, so the idea behind the duplex was to provide her with her needs while meeting my investment criteria.

    If it was myself only to consider, I’m not too interested in owning land or a house, ever. Rather spend the maintenance time on projects I enjoy, or earning money. For me liquid investments are key, I would be more than happy to keep our money invested elsewhere and spend more time monitoring our portfolio – financial markets are a guilty pleasure of mine.

    @Olga62

    Don’t disagree too much. Only exception being that our condo currently serves as a great place to live, and its negligibly more expensive than renting. I rather pay the mortgage off and be left paying maintenance fees+taxes rather than rent the same unit for more money.
    Also, while I do hold a bearish view I think that Detroit and Vancouver have little in common. While Vancouver is horribly overpriced, it is a great place to live and offers many benefits that other Canadian cities do not.

    I actually think a massive price crash in the long term would be great for the city and only serve to propel its growth. Affordable housing would be a good way bring back many people who love the city but can’t afford it. With those people we can hopefully bring some fresh ideas that help us grow into the future.

    • pricedoutfornow

      +1-bring back the real people! Down with the fake, over-enthusiastic, debt-driven realtors!
      Sometimes as I’m walking around my neighborhood, I wonder to myself-what will this city be like in ten years? Say, when all the dust has settled from the fallout of the real estate bust? When kids graduating from high school think to themselves “Gee, I can go to university here, get a job, buy a house and live my life”. When the only topic of conversation at dinner parties is NOT real estate and people actually have other interests. I can almost see it…I believe it will happen. Life will return to “normal” and Vancouver will be an alright place to raise a family, have a job and just live (sans the backdrop of million dollar-falling apart-rats in the basement houses for sale). The past ten years have just been a sad blip, to be remembered by all as a time when everyone who owned a house in Vancouver thought they were a millionaire. Pity.

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