I got a three-month head start on working from home after I quit my full-time job in December 2019. At first, I worked from a laptop at the dining room table. It wasn't ideal, especially when our kids were sent home for online school.
We later carved out a section of the kids' playroom and turned that into an office with two small desks, and then eventually upgraded our desks, chairs, and computers. It's still not ideal, but it works.
We also turned a spare room in our basement into a home gym after our regular gym shut down. We have a bike, a treadmill, a bench, adjustable dumbbells, and TRX straps. We even installed some mirrors and put up a “Come With Me If You Want To Lift” decal on the wall to complete the vibe.
But, the gym is located right below our sunken living room and so I can't lift my arms over my head without hitting the seven foot ceiling. Again, not ideal.
Like many people who've spent more time at home over the past two years, we have an ever increasing list of annoyances about our current living arrangements. That, plus our kids graduating out of their current schools next year, got us thinking about making a change.
We started talking to a local home builder that builds in a nearby community that we like. They have a beautiful floor plan with a custom office and gym that really suits our style and taste. After some back-and-forth we signed a purchase agreement last month. Looks like we'll be moving in about 10 months.
Now, I know what you're thinking. Why would you want to make a big move in this economy?
Buying a home is as much a lifestyle decision as it is a financial decision. Our current house served its purpose for the last 12 years while we raised a young family. Now we're in a much different place with different needs. From a lifestyle perspective, we need to make a change.
Financially, we need to start with a reasonable budget for the house and determine how we're going to fund it. How much are we going to put down, and what will our new mortgage payment be? Can we handle the payments if interest rates rise above 5% or 6%?
We had our financing approved specifically so we don't have to sell our current house before we move into the new one. But what if we can't sell our house, or the real estate market drops by 10-20% (or more)? Do we take the price hit and sell, or do we rent out the house for 1-2 years and wait for prices to recover.
The new house comes with a draw schedule for deposits. We're using a portion of our own funds, a portion of existing home equity, and a portion from a new draw mortgage.
We decided to use the funds in our TFSAs rather than withdrawing more from our business. Mercifully, we transferred our TFSAs from an all-equity portfolio into an EQ Bank high interest TFSA in January. We'll tap into those funds first for the initial draws before we dip into the line of credit and new mortgage.
We still have more than $650,000 in retirement savings invested across our RRSPs, a LIRA, and our corporate investing account (that number was much higher six months ago), so we're not at all jeopardizing our retirement plans.
Our new mortgage payment won't cut into our travel budget or stop us from saving more for retirement (you better believe we'll fill up our TFSAs again).
While we're excited about this new transition, we're also nervous about interest rates and inflation, stock markets, and real estate prices. But I also remind myself that we have a financial plan, and this transition fits within our plan and still allows us to live the life we want to live (including raising my arms over my head in the gym).
Besides, buying a home is a transaction typically measured over 10-25 years. It's not reasonable to expect the economy to be perfectly sound throughout that time. Interest rates will move up and down. We will experience a recession or two. House prices will rise and fall.
We can't time that with any precision, so we make the best decision we can (both lifestyle and financial) and move forward.
I'll be sure to share more about our home building experience and my thoughts on down payments and mortgage terms and everything else housing related as we get further into the process.
This Week's Recap:
Last week I told you to stop checking your portfolio and I think that's good advice to follow for the foreseeable future.
My commentary is featured in this article on why young investors shouldn't focus solely on dividend stocks.
From the archives: Addressing major gaps in your retirement plan.
Promo of the Week:
I used to meticulously study the rewards credit card market looking for the best card to use for groceries, gas, dining, travel, etc.
The golden age of credit card rewards are long behind us, I think, and so now I focus on having one core Visa and MasterCard, which are widely accepted everywhere, and then I also hold a suite of American Express cards for their much richer rewards.
The Amex Cobalt card is my favourite. My wife and I each hold one and aim to spend $500 each on groceries with the Cobalt card every month. The Cobalt card pays 5x points on groceries. Those points can be converted to Aeroplan miles, which I value at 2 cents per mile when redeemed for flight rewards.
$12,000 spent on groceries each year gives us 60,000 Membership Rewards points. We transfer those to Aeroplan (1:1, so 60,000 Aeroplan miles). 60,000 Aeroplan miles are worth $1,200 in flight rewards. So we're technically getting a 10% return on our grocery spending. No brainer.
In the first year that you hold the Cobalt card, you'll get 2,500 bonus points for every month you spend $500 (up to 30,000 points in a year). So, if you follow our spending pattern, you'd earn 30,000 points for your regular spending, plus 30,000 bonus points in the first year. Not bad!
Sign up for the Amex Cobalt here.
Weekend Reading:
A couple of good reads from Dimensional. First, is there a light at the end of the inflation tunnel?
Next, a look at market returns through a century of recessions.
Ben Felix explains why dividends are irrelevant as a predictor of differences in expected returns:
A nice piece by Michael James On Money who explains what you need to know before investing in all-in-one ETFs.
A question I get from time-to-time: Should you borrow to invest with the Smith Manoeuvre? I suggest doing a risk assessment that includes the possibility of interest rates rising, stock markets falling, you losing your job, and changes to rules and regulations.
I loved this article by Adam Collins on why perfectionism ruins portfolios.
Justin Bender reviews the pros and cons of two of the most boring portfolio assets – Bond ETFs and GIC Ladders:
A shocking CBC Go Public report showed that Canada’s big banks are more likely to upsell racialized, Indigenous customers.
Finally, a look at why more retirees are choosing to go back to work.
Have a great weekend, everyone!
