Young And Thrifty http://youngandthrifty.ca Saving Generation Y Mon, 22 May 2017 01:04:25 +0000 en hourly 1 https://wordpress.org/?v=4.7.5 Buying a House with a Partner – If You’re Not Married http://youngandthrifty.ca/buying-house-partner-youre-not-married/ http://youngandthrifty.ca/buying-house-partner-youre-not-married/#respond Mon, 22 May 2017 01:04:25 +0000 http://youngandthrifty.ca/?p=17334 It turns out, buying a house with a partner – even if you’re not married – isn’t the crazy, off-the-wall idea it used to be. We can thank statistics for that: In 2011, Statistics Canada released their data about marriages in Canada, and the percentage of Canadians who were in common-law relationships had jumped from […]

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It turns out, buying a house with a partner – even if you’re not married – isn’t the crazy, off-the-wall idea it used to be.

We can thank statistics for that: In 2011, Statistics Canada released their data about marriages in Canada, and the percentage of Canadians who were in common-law relationships had jumped from 3.5% in 2001 to 11.5% in 2011.

So what would have been a fringe interest – buying a house with a partner you’re not married to – back in 2001, is now something that’s a legitimate possibility. Dare I say it, it might even be mainstream-adjacent. (But like, so is VR. We live in such interesting times, you guys.)

But jumping into hundreds-of-thousands of dollars of debt with someone you don’t have a contract with (ahem, normals call it marriage) isn’t for the faint of heart. I should know: I bought a house with my boyfriend a few months ago.

Related: Cohabitation Agreements and Living Together Common Law – What You Need to Know

If you’re gearing up to dive into homeownership with any kind of partner you’re not married to, here’s the (yes, long) list of things you’ll need to do to make sure you’re both taken care of and prepared for the process.

Because the last thing you want to hear in a home-buying experience is “Surprise!”, trust me.Click To Tweet

Buying a House With a PartnerGet transparent, fast

Whip it out.

And by “it”, I mean your bank accounts, credit scores, debt and savings.

Yeah, that IS even more fun than you thought it was going to be.

Related: How to Split Finances With Your Partner

In all seriousness though, you’re about to dive headfirst into the largest purchase of your life with another person. You both deserve to know exactly who you’re getting into this with, from a financial perspective, even though you’re not married.

Sure, you know which side of the bed they prefer, but do you know how much they have in their RRSP? You should.

When you’re getting the financial details on the table to prepare for a house purchase, you’ll want to talk through at least the following details:

  • How much do you make?
  • How much can we put down on a house?
  • What’s your credit score?
  • How much do you have in savings?
  • How much debt do you have?

And if this seems like a lot, all at once? It’s because hopefully, you’ve at least dipped a toe into these waters if you’re going to be buying a house together. If not, feel free to tackle this over multiple sessions, but you will need to get it all out there eventually.

Related: Talking About Money Before Getting Married

Don’t be the guy or gal who asks the mortgage broker to lie to your partner about why you can’t get the mortgage you want, because you didn’t tell them about your debt or your income. You don’t want to be that person.

Make sure both people are involved at every stage of the process

Since this is a joint purchase, it should be really, really, aggressively joint, especially since you’re not married yet.

You and your partner should aim to participate equally in each part of the process, from attending open houses (fun!) to mortgage pre-approval meetings (also fun, but I’m a nerd, so).

Each step will give you a great opportunity to check in with each other, and figure out which page you both want to be on.

If you’re at an open house, and you honestly think you won’t be happy long term without a master bathroom? Tell your partner. If you see a house you love, but the price tag makes you really anxious, and you think it’s a bit out of reach for the two of you? Tell your partner.

Every conversation you have during the process will help keep you on the same page, and make sure you’re tackling this as a team.

Figure out how you want to handle the legal stuff

Since you’re not married, buying property together is probably the biggest legal commitment you’ve made to another human being, ever.

You can skip the big party and the white dress all you want, but there are still going to be contracts involved in the process, and you’re both taking on a pretty big responsibility to one another. That means you’ll need to talk legal to each other.

Specifically, the biggest thing you’ll want to get clear on, and the one that will impact how much legal help you’ll need from the pros, is how you want to handle joint ownership of the house.

The default setting is that both of your names will be listed as owners, and in the case of any division of assets, the house is 50% yours, 50% theirs. Plain and simple, and this option won’t require any legal help beyond the typical real estate lawyers involved in the sale.

But if one of you is putting down 80% of the down payment, and paying 80% of the ongoing costs, is that something you want to take into account? You can, if that makes sense for you: You’ll need a partnership agreement that lays out the percentages and responsibilities for each person, and you should consult a lawyer to get that drawn up.

This process is important to talk through before any money gets put on the table, too, because it’s a critical part of your new home-buying partnership. There are a lot of feelings that go into who-pays-what, and a metric ton more feelings that go into a house.

Talking through these things ahead of time might not be easy, but it is necessary.

Get life insurance, stat

If you get hit by a bus, will your partner be able to handle the financial commitment of the house on their own?

No?

You need insurance.

I’m no insurance broker, but I can tell you what my partner and I are doing to handle our insurance needs. We looked at our future plans, our current income, and our house price. We picked an amount that would cover the house and a few years of our salary, and both got coverage for that amount, for a term that would see us through raising kids if we’re lucky enough to have them.

The one thing I will say as an absolute? Do not buy the mortgage life insurance that your bank offers you as an upsell. It’s a horrible deal, since you’ll pay the same amount every month for a payout that declines as you pay off your mortgage.

Go get a term life insurance policy instead, and call it a day.

Make sure you’re both aligned on this as a Life Choice

Yeah, you thought the financial talks were detailed?

If you’re not married, you need to treat buying a house together as if it’s basically the same thing.

It’ll cost you thousands of dollars, and everyone will like it on Facebook. No drunk uncles, but like, otherwise pretty similar.

From a purely pragmatic standpoint, do not go into this without having discussed what your future will look like as a partnership.

  • Do you both want kids?
  • Would you prefer to have dogs instead?
  • Are you going to get married someday?
  • Do you both want to live in this place for a while?
  • Are you both committed to living in this city for a while?

Do not – I repeat, do not – end up selling your house in a year and a half because whoops, you forgot to have the kid talk before buying a place together and now you’re splitting up because you want them and they don’t, or because you bought a one-bedroom when you both want seven kids, yesterday.

You will lose money on closing costs alone, and the logistics will be a nightmare.

Have the talk now.

Build a collaborative budget

A big part of buying a house together is building out a budget – current and future – that works for both of you.

Personally, we’ve benefitted greatly from friends who are a few years and a few steps ahead of us, so we’ve gotten all the heads ups of what to expect and what curveballs to plan for. (One friend even sent me a Snap of her daycare invoice, which was probably the worst thing I’ve ever seen on Snapchat.)

We both knew we didn’t want to feel like we had no money to spend on fun every month, and we both knew we’d have to factor in a parental leave plan and a daycare-budget plan sometime in our future.

From those starting points, we worked backwards and built a budget that would allow us to handle our housing costs, other commitments and still have the flexibility to do those things.

Get clear on what you want to do and have in your life – and your budget – along with your partner. Making those numbers work will help keep you on track during your house search, and avoid getting sucked in by houses that are a bit outside your budget.

Assign “project managers” to different parts of the process

There’s a lot that goes into buying a house, and logistics are a big part of it.

  • Who’s in charge of finding a realtor and working directly with them?
  • Who’s going to figure out the mortgage stuff?
  • Who’s booking movers?
  • Who maintains the budget and keeps track of what you’re spending?
  • Who’s going to shop around for house insurance?

Take advantage of the fact that you’ve got a partner in this, and divvy up the work.

Make sure one of you has the ultimate responsibility for different parts of the process, and that you’re both clear on who’s doing what – so that you don’t end up with no way to move on the 1st of the month because “I thought you were booking the movers!”

Communication is your real secret weapon

No matter how prepared you are for the process, things will come up. You will run into issues, whether it’s a surprisingly low credit score, or a debate about increasing your max purchase price juuuuust a bit.

If you’ve already been through the life talks, and the money talks, and the budget talks, you and your partner should be well-practiced at handling tough conversations (a great perk, beyond just getting clear on the contents of those conversations.)

Oh and speaking of conversations, one more you should prepare for: Literally every person you deal with during this process will ask you if you’re going to get married.

Yes, including your realtor. And your parents. And your home inspector. And your coworkers.

You’ve been warned.

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Why you might not be ready to start paying off your debt http://youngandthrifty.ca/might-not-ready-start-paying-off-debt/ Mon, 15 May 2017 01:11:18 +0000 http://youngandthrifty.ca/?p=17336 Why you might not be ready to start paying off your debt first appeared on Young And Thrifty

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I want you to imagine something…

You’ve just gone downstairs into your basement (in this world you own a lovely house with a basement… yay!!!) and you instantly notice two things:

  1. There is about a foot and a half of water covering what used to be a very fine shag carpet
  2. Someone’s stuck a garden hose in your window and it’s adding more water by the minute

What do you do? 

a) grab the ole wet dry vac and start cleaning up the water in your basement? OR

b) run out of your house, turn off the garden house and figure out who the %&$# put it in there in the first place?

You’re of course entitled to your opinion, but I feel like the best solution in this case is to figure out the whole garden hose situation… right? 

But that’s not always how we think about debt.

Your debt is not the problem… where it’s coming from is….Click To Tweet

Well… that’s kind of a stupid statement isn’t it? Of course your debt is a problem, but it’s not the problem.

It’s just like in my brilliantly crafted water metaphor…

The water in your basement is a huge problem, but it’s not a problem worth solving until you fix the real problem… the source of the water.

I talk to a lot of people about debt, and so many of them are just demoralized.

They’ve tried to pay it off, but they just can’t seem to make any headway. They’ll make a dint in it, and then it will come roaring back.

And they’re spending a ton of time and money trying to fix the problem, except that it’s the wrong problem… or at least it’s the wrong problem to start with.

Fixing the leak before you wipe up the mess…

I’ve had two major debt sources in my life: tax neglect and dental neglect

I’m self-employed and therefore it falls to me to set aside my own taxes… which I was NOT doing. So when the government came to collect… I didn’t have any money for them…. and somehow ignoring their calls and letters didn’t seem to make things better.

I was thousands of dollars in debt.

The dental side of things was more subtle. I don’t have the best teeth, but I also didn’t take care of them and ate forty tons of sugar a week through my teenage years. Somehow that combination of circumstance led to a mouth full of cavities that I refused to treat (being a ‘poor’ student and all).

The need for fillings became a need for root canals and before I knew it I was sitting on the requirement for over $12,000 of dental work.

Opps.

In both these circumstances I had major problems that had led to pretty predictable results.

• don’t set aside money for taxes… you’re going to have tax debt

• don’t take care of your teeth… they’re going to rot and cost money to fix them 

If someone would have swooped in and covered both those dollar amounts… it wouldn’t have really fixed anything (although it would have been really really nice). 

What I needed to do was ‘fix the leak’… and that’s what I (eventually) did. 

I won’t bore you with the details, but suffice it to say … I got an accountant, I set up a savings account, and I built a habit that had me taking of a big percentage of every cheque that came in and putting it aside for the government. I also stepped up the brushing, floss twice a day and stopped drinking three slurpees for after dinner treats. 

And eventually… I paid off the debt. 

The nice thing was, since I had done the work to stop the source of that debt, I only had to pay it off ONCE. 

Paying off debt is hard… so make sure you only have to do it once

This is what I work on with my clients.

Sometimes I even ask them to… gasp… wait to pay down high interest debt… 24% credit cards… until they’ve set up a system and a structure that allows them to pay it off for the last time.

Because a major cause of debt for people is that their monthly cashflow doesn’t add up.

They’re expenses are higher than their income.

And that tends to create some debt.

But if that’s the case, it’s useless to lecture about ‘the costs of high interest debt’. It doesn’t matter how ‘full the basement is’ if there’s a garden hose adding more water to the problem by the minute.

What people need is help getting control of the cause of their debt, and then they can work on cleaning up the mess once and for all.

So… how do you do that? 

Ya. Isn’t that the question you’d love a 5 step checklist for…. well I tried with the infographic above… it’s not as easy as that might sound.

In reality it’s both simpler and much more complicated than paying off the actual debt. Simpler because it’s really about answer the question: where is this debt coming from?

And more complicated because it can’t be fixed by a ‘side hustle’ or ‘consolidation’.

It’s about behaviour, and habits, and self-awareness.

It’s about really honest with yourself about the consequences of the choices that you’re making.

It’s about changing some of the things that you might really like about your life.

And that shit is hard.

But unless you answer it, it’s not worth putting a penny towards the debt that you already owe.

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Book Review: The Richest Man in Babylon by George S. Clason http://youngandthrifty.ca/book-review-richest-man-babylon-george-s-clason/ http://youngandthrifty.ca/book-review-richest-man-babylon-george-s-clason/#respond Wed, 10 May 2017 13:17:55 +0000 http://youngandthrifty.ca/?p=17194 If you’re remotely interested in personal finance, you have probably heard of the book entitled The Richest Man in Babylon by George S. Clason. You have probably heard that it is a recommended read. I have always been meaning to read this book but never had the opportunity to, until I picked it up from […]

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If you’re remotely interested in personal finance, you have probably heard of the book entitled The Richest Man in Babylon by George S. Clason.

You have probably heard that it is a recommended read. I have always been meaning to read this book but never had the opportunity to, until I picked it up from the library recently because I put it on my 2017 Personal Finance Goals books to read list.

It was written by George S. Clason way back in 1926 and is considered a classic.

Personally, I think a lot of the big personal finance books probably just re-hashed portions of this book, modernized it, and put their individual spin on it. The advice in it is spot on, and obviously pertinent almost a century after it was written.

I personally don’t like reading classic style writing (or other stuff with a lot of verbosity) but as I got into reading this book, it got easier to understand and read. It is a quick and easy read, not a long read at all. The book is set in Ancient Babylon, and the stories and lessons by an individual named Arkad, the Richest Man in Babylon.

The great thing about this book is that it kind of combines with The Secret or the Law of Attraction meaning that those who attract money will have more money and it will come easier.  Like begets like.

Here is an outline and the main tenets of what you will find in The Richest Man in Babylon:

Start thy Purse to Fattening

The Richest Man in BabylonJust like many financial gurus recommend today, the Babylonians recommend saving and investing at least 10% of your income. According to Trading Economics, the household savings rate from 1981 to 2016 was a dismal 7.49%. We can do a little better than that.

Control thy Expenditures

Spend less than you earn. This is the golden secret – but it’s not rocket science. Control your wants and focus on your needs.

Make thy Gold Multiply

Invest your savings and make your gold multiply. They’re not telling you to invest in gold here, it’s just an analogy.

Guard thy Treasures from Loss

There were some good stories in here about being too naïve in investing your money. Being wise is very important when investing your money and it is crucial to avoid investments that seem to sound too good to be true.

Make of thy Dwelling a Profitable Investment

This is an interesting recommendation from The Richest Man in Babylon, which is to own your home. This is contrary to the popular advice that we are receiving now and I suppose it’s important to put into context that owning your own home doesn’t mean having a mortgage that is ten times your annual salary. Perhaps there should be a caveat in the book that the North American Dream to own a home can be fraught with danger.

Ensure a Future Income

This is really important, but I don’t think people who are working pay much attention to it since not everyone seems to be saving for retirement. He recommends making sure that you have enough money in retirement, when you aren’t able to work anymore. Also, to ensure you have enough money to take care of your family when you pass away.

Improve thy Ability to Learn

Finally, this is always good advice for anyone, to strive to become wiser and more knowledgeable so that your ability to earn more money can be developed and strengthened.

As you can see, these are classic recommendations for anyone interested in personal finance and a great first step to foray into investing in yourself and the future of your family. In addition to these, recommendations, The Richest Man in Babylon also shares the five laws of gold, including not to share your gold with your family.

Here’s a free PDF version of The Richest Man in Babylon that I found on the Internet. Here’s also a  full audio book in just under 5 hours of The Richest Man in Babylon.

Readers, have you read The Richest Man in Babylon? What did you think of it?

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Who’s buying homes in Canada – Infographic http://youngandthrifty.ca/whos-buying-homes-canada-infographic/ http://youngandthrifty.ca/whos-buying-homes-canada-infographic/#respond Mon, 08 May 2017 00:32:10 +0000 http://youngandthrifty.ca/?p=17359 Who’s buying homes in Canada – Infographic first appeared on Young And Thrifty

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I don’t know if housing has always been a loaded conversation in Canada… but it sure seems to be right now. 

The housing ‘discussion’ has gotten out of hand… with warring sides yelling their arguments at each other without ever increasing rage. 

I find lots of things annoying about this discussion, but a few things rise to the top…

  1. 1. It’s not about Canada… it’s about Toronto and Vancouver… which really isn’t a Canadian conversation
  2. It rarely captures what people are actually thinking… like the people that are actually buying the house (not the 100s of people commenting on it)

And so I was really happy to stumble across a survey that tossed some data at a few interesting questions (or at least tried to get some answers from real people): 

  • What’s the most challenging part of buying a home? 
  • Do you think buying a home/condo is a good investment?
  • Where is the money coming from? 

Now, these results aren’t fresh off the boat, they’re from early 2016, but I think they’re still interesting. 

For example: did you know that first time buyers looked at an average of 13 HOMES before buying their current home. 

Cool right? 

Now, I completely understand if this infographic doesn’t change how you feel about housing, but it’s colourful and I poke gentle fun at middle aged folks with a carefully crafted cartoon (calm down boomers we all know that you’ll live forever). 

9 out of 10 people believe that buying a house/condo is a good investment

That’s a lot of people.

But what I found really interesting about these results is that when you break that information into generations… the number starts going down the younger you get.

89% of 45 – 54 year olds are on the good investment train… but only 76% of 18 – 24 year olds.

So maybe the housing bears are slowly winning this ‘discussion’ that we’re having… or maybe the big city markets have just broken the spirits of 14% of today’s youth.

At the very least it seems like the statement ‘buying a house/condo is a good investment’ is insanely situational.

Not only is it tied to region, it’s tied to personal situation and life goals and all that other fun stuff.

I find it hard to believe that buying a house/condo is a good investment for 90% of people, but maybe that’s my own bias showing.

(IF YOU WANT TO READ SURVEY RESULTS…. HERE’S THE LINK FOR THE ORIGINAL SURVEY.) 

 

Whos buying homes in Canada

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Introducing Chris and Desirae http://youngandthrifty.ca/introducing-chris-desirae/ http://youngandthrifty.ca/introducing-chris-desirae/#comments Wed, 03 May 2017 12:04:05 +0000 http://youngandthrifty.ca/?p=17352 Here at Young and Thrifty, Justin and I have always been about making personal finance easier and more fun than you’d typically find it in other places. But between the two of us, we’ve only got so many hours to help you guys find better, accessible ways to budget, invest, and save money. That’s why […]

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Here at Young and Thrifty, Justin and I have always been about making personal finance easier and more fun than you’d typically find it in other places. But between the two of us, we’ve only got so many hours to help you guys find better, accessible ways to budget, invest, and save money.

That’s why I’d like to introduce you to two new writers that you’ll see around these parts, starting this month.

Please welcome Chris, the writer behind From Rags to Reasonable, and Desirae, the writer behind Half Banked, to the Young and Thrifty team!

We knew when we were looking for contributors that we wanted them be unique and entertaining.  We needed folks that were different from ourselves and that could offer new perspectives on personal finance. It’s easy, after all, to make “save more money” posts – and that’s not what we’re about here.

new writers

Chris is a unique voice in the Canadian personal finance world, literally – he balances his work as a financial planner with his career as a professional opera singer. (I know.) His blog, From Rags to Reasonable, is all about empowering artists and creatives to take control of their money, even on variable incomes. He’s got handy guides, hilarious original graphics, and his advice can help you out even if the closest you’ve come to being an artist was passing your Grade 9 art class.

While Desirae isn’t any kind of performing artist, she also brings a unique perspective to the whole how-to-do-money thing. When she realized that she had all these big goals (buy a house! Save an emergency fund!) and wasn’t saving enough to hit them on her ideal timeline, she decided to do something radical: save half her income, and write about it on the internet. That’s how her blog Half Banked was born, and it’s all about helping Millennials figure out a money situation that works for them – and if that includes lattes, power to you.

You’ll be hearing more from these two soon enough, but in the meantime, feel free to check out their blogs (here’s Chris’ website, and here’s Desirae’s) and give them a warm Young and Thrifty welcome!

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