Tuesday, October 18, 2011 / by Justin Hoffmann
Your future should not be entirely defined by what is affordable. When it comes to where you’ll live and how, concentrating on finances alone may short-change you in the long run.
One long-time reader is living proof that adapting your finances to achieve your dreams is a powerful alternative to designing your life around a lack of money.
When two people close to Tina Lowe (identity protected) died prematurely, Lowe promised herself she would not to spend her life sitting at a desk. She wanted to retire at 60 and start enjoying life.
“Friends and family couldn’t understand how I was doing it, but I did it anyway because that is what I wanted to do,” said Lowe, explaining how she achieved home ownership and early retirement without the million dollars that pundits say is essential to a successful future.
Lowe was almost 50 when her 30-year marriage ended, leaving her financially vulnerable. For a few years, Lowe held down two jobs to make ends meet. Eventually, a move to a small, less expensive apartment on the outskirts of town allowed her to quit the part-time weekend job.
Lowe invested time and effort in learning about money. She took advantage of her employer’s shared-contribution program and a loan from a friend to build up her Registered Retirement Savings Plan (RRSP). She also invested time in learning all she could about pensions, indexing, RRSPs, and, later, Tax-Free Savings Accounts (TFSA). From company seminars to reading anything she could find on the principles of investing, Lowe made sure she fully understood how money made money. By the time Lowe left work at 60, her RRSP fund totaled almost C$50,000.
Economic volatility did not shake Lowe’s determination to leave work on schedule. Meticulous planning and appreciation of the rewards of a simple lifestyle maintained her commitment. Creative back-up plans added security.
When Lowe noticed an advertisement for a condominium that could be carried for about what she was paying in rent, she revived the dream of home ownership that had been abandoned in favour of early retirement. Once again Lowes began researching diligently. She learned how condominiums work and what gave them sustainable value. When she discovered that prices increase with the number of amenities, square footage, and the higher in the building you are, she decided to buy at a smaller unit on a lower floor and in a less “lux” building. Lowe bought the location and neighbourhood she loved and saved thousands of dollars. Lowe discovered a south-facing, self-contained fifth-floor, 344-square-foot unit with a balcony. Since the small building was free of fancy amenities, monthly maintenance fees remain affordable. The unit increased in value over her pre-construction purchase even before she moved in.
“It will be tight because it has been since day one, but I’m doing it,” said Lowe emphasizing that not smoking or owning a car stretches her income further. “It is important not to let anyone put you down or discourage you. When I first found this place, I had been to [a] real estate seminar and they got me going. Then I had one family member really put me down. Finally, a friend who is an accountant thought it was a good idea and encouraged me, and I thought, ‘I can do this.’ You must use knowledge to survive. It is very tight—I am not going to kid anyone, but I am still very happy I retired at 60.”
Knowledge is power. Take the time to understand which costs may become a challenge in the future. You may decide a part-time job will supplement investment or pension income. Consider housing like co-operatives where contributing skills and “sweat equity” may make the important affordable difference. Perhaps teaming up with friends or relatives will increase your buying power.
Continuing with income-generating projects will be increasingly commonplace, both out of interest and necessity.
Developers realize that they are creating new communities within the subdivision or high-rise they build. Some perceptive developers create work-live options that will provide services for residents while creating income streams for owners.
Churches, legions and other non-profit organizations have become community-builders in a “bricks and mortar” sense of the word by developing housing for their congregations, members and neighbours. Often this housing is below market value.
Communities involve varying numbers of people, but their strength lies in individual resilience, self-actualization and freedom. Property ownership is one outward symbol of these marks of individuality since no two properties – even condominiums, row houses etc. – are identical.
Over the past 20 years, the national home ownership rate has risen steadily. Although low interest rates, increasing disposable incomes, and stable employment conditions are credited with that improvement, the future still holds potential for growth. The wish for continued control over one’s home and life keeps increasing numbers of Canadians intent on investigating their all their options.
Waiting for great times to return is not a strategy, it’s a tragedy. Put your money to work for you in even the smallest ways. Think before you spend—“What else could I do with that money?—so you keep more of what you earn and continually move dreams closer to reality.
Remember, the impossible may take a little longer, but you can make it happen with perseverance.
by PJ Wade