Weekend Reading: FOMO Edition

Millennials are experiencing FOMO – or the fear of missing out – a social angst driven phenomenon that appears when something exciting or interesting may be currently happening elsewhere. FOMO, a close relative of YOLO, is fuelled by social media and the desire to stay constantly connected with what others are doing.

When it comes to housing – especially in hot real estate markets like Toronto and Vancouver – FOMO is pushing young Canadians into risky financial situations. In some cases, housing prices are rising faster than first-time buyers can save up for a downpayment. Millennials see their friends and relatives, many of whom got into the housing market years earlier, making a killing on their investment, and understandably want a piece of the action.

That’s one reason why this blogger decided not to wait until she saved up a 20% downpayment to buy her first home in Halifax. In her case it’s a well thought out decision, given that she has a clearly defined savings goal, has already been saving for a year, and has a reasonable budget of $300,000. But it’s clear, as even the author admits, that emotions can often trump math when making a big decision like buying a home.

Meanwhile, this smart Millennial has a different fear of missing out and it has fuelled an ambitious goal of saving 50% of her income:

“Sure, you can be afraid that you’ll miss out on going to that third musical festival this year, or that all of your friends have been to Thailand and you haven’t, but here’s what’s even scarier to me.


Not taking advantage of the only time I’ll ever have the power of 35 to 40 years of compound interest on my side.”

This Week’s recap:

On Monday I compared Facebook to Kijiji in this secondhand economy smackdown.

On Wednesday Marie delved into financial planning for couples: planning your new financial life together.

And on Friday we opened up the Boomer & Echo mailbag and answered questions about renovating your home for resale.

Weekend Reading:

As I mentioned above, emotions often guide our buying choices. That’s why I’m so fascinated with behavioural psychology and the biases that we display when making decisions. Here’s a chart outlining 20 cognitive biases that screw up our decisions.

Blogger Krystal Yee muses about the crazy Vancouver real estate market after observing a nearby home selling for $1.4M. Yee rents and concedes that she’ll never buy a home in Vancouver.

Dan Wesley explains with first-hand experience why condos aren’t a good investment.

Notorious real estate bear Garth Turner reveals a rare human moment when he describes his experience buying a rundown commercial building and restoring it into a three-bedroom apartment atop a hipster cafe.

As FinTech helps reshape the financial services industry, here’s a sneak peek at what’s next for personal financial services.

A paper released by the School of Public Policy at the University of Calgary argues that proposed changes to financial advisor compensation could lead to an “advice gap” where advisors are forced to leave the industry, leaving smaller investors without access to financial advice.

Rob Carrick disagrees, saying the idea that investors will be adviser-less if fee reforms are made is wrong.

“Mutual fund sellers are no thin blue line protecting us from a retirement crisis.”

Meanwhile, Canadian investment firms have close to $1-billion dollars in outstanding regulatory fines.

How does time and rate of return matter to an investor? Preet Banerjee explains in this video:

Michael James describes a financial product that he’d like to see created that addresses longevity risk while still being exposed to the stock market.

Being out of the market for the past 7-10 years has been far more damaging that any difference in mutual fund fees. Here’s where even mediocre funds beat brilliance.

Carl Richards says the solution to maintaining a budget is awareness.

Here are five things every soon-to-be parent needs to know about parental leave.

Move over RRSP, TFSA: Here are 7 strategies for maximizing investment returns you might not know about.

Your interactions on Facebook are creating a great place for companies to advertise. Here’s how you’re making Facebook a money machine.

According to American research into senior housing, assisted living is now topping $5,000 a month in some places.

Adam Mayers on avoiding the pain in managing health-care costs in retirement.

Air Canada says parents must pay to guarantee 2-year-old can sit with them on flight.

You can now use Aeroplan miles to pay for taxes, fees, and surcharges on your flight rewards. But beware: you’re getting about 33% less value for your miles than when you redeem for airfare alone.

Big Cajun Man Alan Whitton wonders how self-driving cars will change other aspects of our lives, such as the need for car insurance.

An argument that Harvard University should be spending much, much more of its endowment money.

Finally, an interesting read on the unmasking of the men behind Zero Hedge, Wall Street’s renegade blog.

Have a great weekend, everyone!

From The Boomer & Echo Mailbag: Renovating For Resale

From the questions we are receiving, it seems that some of our readers are on the move. They want to get the best bang for their buck when selling their residences.

Q. Which home improvements have the highest return on resale value?
Q. We are in the process of selling our “starter” house and moving up to a larger home. What can we do to maximize our sale price?
Q. What is the impact of landscaping and curb appeal on resale/selling prices?

A. How much you spend on improvements should largely depend on how long you plan to live in your home. If you are thinking of selling your home in the near future, it’s useful to consider any remodelling project from a buyer’s perspective.

It’s difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home’s value when it comes time to sell. But, prospective buyers look at a home very differently than the homeowners do.

Related: Our shocking basement renovation bill

There is no simple equation for determining which projects will garner the highest return. But, a reasonable buyer should appropriately value these improvements:

  1. Kitchen remodel. This is considered by many to be the best boost to your home’s value – upgrade counters, cabinets and appliances, or redesign for efficient work-flow.
  2. Bathroom remodel. Bathrooms are considered the most effective rooms to update. Especially popular are improvements to master ensuites such as large, walk-in showers which have replaced whirlpool tubs as desirable. If your home has only one bathroom, consider adding another one instead of remodelling the existing.
  3. Increased living space. Adding outdoor living space such as a sun room, deck or patio increases the value of your house. Finishing a basement converts it to a functional area that can significantly add to the livable square footage in your home, especially one that can be converted to a suite or accommodate large families.
  4. Landscaping and curb appeal. A buyer gets their first impression from the exterior of your home. Money spent on landscaping can add a significant amount to the resale value of your home, 7 – 15 % of a home’s value according to HGTV’s Carson Arthur. Don’t over-landscape, though. Maintain a green and healthy lawn and neatly trimmed shrubbery. Mature trees can enhance property values 20%.
  5. Other. Hardwood flooring is the most sought after flooring by home buyers. Add more storage – options to consider include built-ins and garage shelving.

Every home owner’s first priority is maintenance. If you’re renovating with an eye to selling, make sure you’re not just covering up problems. Take care of the “boring” basics, especially in an older home – replace an aging roof and siding, update the heating/cooling system, replace windows and doors to be more energy efficient as they near the end of life expectancy.

Related: Singing the home renovation blues

Don’t spend your money on an extensive kitchen remodel when your roof is two layers of shingles and 30 years old. For a buyer, knowing the roof needs to be replaced is a bigger issue than a functional – but dated – kitchen, no matter how awesome the remodel is.

Renovating for resale

If you are selling soon and your renovation budget is limited, try these small projects:

Small budget projects (>$2,000):

  • New fixtures and hardware can have a big impact on the look of a space. Consider upgrading the hardware on bathroom and kitchen cabinets as well as towel racks and faucets. Caulk the tub and re-grout tile. Change the backsplash.
  • Update light fixtures and opt for new window coverings.
  • Changing and refreshing the wall colours can completely transform a space. It’s one of the simplest and most affordable renovations to do. You don’t necessarily have to paint the entire house, just high traffic areas and any brightly painted rooms. Use neutral colours – gray, putty, beige.
  • Nothing drives away would-be-buyers faster than grime and weird smells in a messy home. Take care of minor repairs. Do major decluttering and a thorough cleaning. Consider home staging.

Final thoughts

To appeal to a wider number of prospective buyers, ensure your renovations blend in with the overall style and design or your home. Don’t “over-improve” and price yourself too high for your location. Make sure the cost is in keeping with your neighbourhood or you will not get value.

Ensure workmanship is of good quality and materials are consistent with other homes in the area.

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