As the primary breadwinner in her family, Monica is facing a paradox. The 47-year-old public-sector employee says her biggest financial concern is not owning her own home. Yet living in Vancouver, with its absurd housing prices, she doesn’t necessarily want to.
“We’ve stayed away from real estate because to stay in Vancouver it would be out of our reach,” says Monica, who has a husband and an eight-year-old son. “I’m not crazy about a condo, and that’s about all we could likely afford, even in the suburbs. I don’t want to be house-poor.”
Given that she and her writer husband, Blake, 50, have deliberately chosen not to pursue property ownership, she feels they should be concentrating on setting money aside for their golden years. At that point, she’ll collect a pension of about $4,300 a month.
On top of the $1,850 they pay monthly to rent a house and $270 a month to lease a car, they put some money away regularly into their son’s registered education savings plan (RESP), which will total about $7,000 by the time he graduates from high school. To date, Monica has turned to her bank for financial advice, and her registered retirement savings plan (RRSP) consists of that institution’s balanced funds.
While Monica admits feeling somewhat discouraged about her financial future, she isn’t ready to give up on getting her house in order just yet.
“Since we don’t own our own place, I think we should be saving more money, but I feel like we’re always behind,” Monica says. “I’m reading a book by Gail Vaz-Oxlade called Never Too Late[Take Control of Your Retirement and Your Future] that talks about saving for retirement even if you’re starting in your 40s. I’m watching [Ms. Vaz-Oxlade’s TV series] Til Debt Do Us Part.
“I hate owing money,” she adds. “2013 will be the year of financial organization.”
Summary of finances:
Combined income of about $121,000.
$42,000 in Monica’s RRSP.
$10,000 in savings.
$5,000 in credit-line debt.
$7,000 in RESP, the value in 10 years, invested at a monthly rate of $40.
If all things remain equal, this couple are likely heading for hardships in retirement, where their income will be substantially lower than it is currently, and their savings are too low to materially impact retirement income.
It is interesting to surmise that, if they had purchased a home in Vancouver ten years ago, their bottom-line would probably look healthier, but for all the wrong reasons. Many couples with similar incomes but who own their homes have had their household balance sheets ‘bailed out’ by unnatural gains in RE prices. As a group we have become over-dependent on home values for our future financial health.