If you wanted a great year to buy a house, it’s hard to beat 2018.
The economy was stable back then, interest rates were low and inflation was a non-issue. New owners were able to basically cruise for a while. Get the feel of carrying the cost of owning a home. Feel their way. Find their footing.
The year 2021 was quite a bit different. House prices were surging, so you might easily have bought and then watched prices in your neighbourhood lurch even higher. That’s the good news. The bad is that inflation is soaring and interest rates are rising with a momentum we haven’t seen in decades.
We want to hear how the housing class of 2021 is doing in today’s financially stressful environment. If you’re between 20 and 40 and bought a home last year, please take this anonymous survey. I’ll report back on the results later.
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Rob’s personal finance reading list
When should you start your CPP retirement benefits?
Thoughts to help people work through the all-important question of whether to start CPP as early as 60, delay as late as 70 or start on time at 65. Factors like expected lifespan and the need for income are considered, as is the benefit of starting early and investing the proceeds. Also looked at here is when to start Old Age Security.
No joy for savers
Interest rates are rising on many fronts, but high rate savings accounts have barely moved. GIC rates are a different story.
It’s bad news when men postpone buying underwear
A fun article about indicators that may foretell a recession. Former U.S. Federal Reserve head Alan Greenspan tracks sales of men’s underwear, which tend to fall in a recession. Concern about the possibility of a recession is growing because central banks are expected to raise interest rates by a lot this year and next. Overly aggressive rate hikes could tip the economy into a downturn.
‘This money stuff can be intimidating’
Michelle Singletary, personal finance columnist for the Washington Post, reflects on lessons learned in 25 years of writing about money. Her thoughts on debt are definitely worth a look.
Q&A
Q: Why can’t people buy into a defined benefit pension plan like the Canada Pension Plan, the Ontario Teachers Pension Plan or the Healthcare of Ontario Pension Plan, even if they are not an employee?
A: For an answer to this question, I thought of veteran pension expert Keith Ambachtsheer, who in turn referred me to Derek Dobson, CEO of the CAAT Pension Plan (the Globe and Mail is part of this pension). Here is Mr. Dobson’s response: “Except for CPP (a government pension that applies to all Canadian workers), the biggest factor is the current pension legislation, whether it be at the provincial level or federal level. The current legislation only permits an employee to participate in a DB pension plan (like Ontario Teachers, HOOPP) if their employer participates in the plan.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
If you think house price gains are based on economic fundamentals, you need to try out the housing price tool from The Habistat. The recent trend line pretty much goes straight up in many places.
The Money-Free Zone
High on my list of best Canadian music: Crucial, by K-OS. An overlooked song of many genres combined brilliantly. Now, try this unplugged live version.
Tweet of the week
Former NHL star Chris Pronger on the financial problems of professional athletes. He estimates that more than 50 per cent of pro athletes have financial issues in retirement. Yes, they make a lot of money in their careers. Pronger tells you what they’re up against.
What I’ve been writing about
- What to do if that financial plan you paid thousands for disappoints
- The financial detail everyone should know before they retire
- Five reasons you should not buy a house until you’re at least 30
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
