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Thread: Your Money of Your Life: Downsizing, Living on Less

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    Default Your Money of Your Life: Downsizing, Living on Less

    I stopped dancing a long time ago, and continued to live the stereotypical 'dancer' lifestyle. I have a fancy luxury car, nice home, and closet full of expensive things, but as I get older, my priorities are changing.

    I've been thinking a lot about moving to a much lower cost home, in a small town.

    I would like to spend my condo equity on a house that I can pay for in full immediately, and not have any ongoing mortgage / maintenance fees. I'd also like to dump my huge BMW and have something that is not financed, something that is cheap on gas / repairs and insurance.

    I guess I'm just not willing to pay what it costs to look good anymore, I don't want to be part of the consumerist lifestyle now. The stress and pressure of keeping up appearances in the big city feels like a treadmill. Yes, I could continue, but why?

    Are there any other ladies who have given up the high life and just gone low budget?

    I feel like I worked hard for 12 years, dancing etc., and if I can, I'd like to live a low-budget lifestyle now - with a bit of savings in the bank, and no ongoing monthly 'costs' to have this 'luxurious' life.

    There is a small town a few hours away from me, with houses I can afford to buy outright. Low property tax. I could probably find an office job paying enough to cover my regular expenses like food, gas, utilities, etc.

    Has anyone else ever gone through this?
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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    I have. The good news- life is less stressful. The bad news- it sucks. I used to live well, enjoy much lesiure & have great times. Now I budget and go without. I feel like Henry Hill at the end of "Goodfellas" - "now I live like a schnook."

    I'll get back to hustling soon. My 2 cents- always keep wanting more, & be willing to work for it.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Why not try renting out your condo and sell the BMW for a 2015 (something less expensive) lease and see how you like it for a year?

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    any other ladies who have given up the high life and just gone low budget?
    I have. The good news- life is less stressful. The bad news- it sucks. I used to live well, enjoy much lesiure & have great times. Now I budget and go without. I feel like Henry Hill at the end of "Goodfellas" - "now I live like a schnook."
    I was in a similar situation after ~12 years worth of dancing, and decided to shoot for the 'best of both worlds' by relocating way south of the border. The much lower cost of living down here easily allows me to cover the cost of 'necessities' without rigorous budgeting. In other words, it's possible to live 'well' down here on an amount of monthly US dollars that would be considered 'poverty level' in the USA.

    And the exemption from US income tax allows me to realize interest / dividend / capital gains earnings from my savings and investments which are 20-30% higher than they otherwise would have been net of taxes. This, combined with the much lower local costs of living, effectively means that I don't really need to seek out other income sources.

    Obviously, becoming an ex-pat isn't for everyone ... since it requires the person to spend at least 330 days per year OUTSIDE the USA if the US tax exemptions are to remain in place. On the other hand, living within walking distance of a 'caribbean' beach which is very popular with vacationing rich north American and western European businessmen provides some unique advantages !!! And, obviously, having very low local costs of living - plus having a higher amount of 'passive' income available from savings and investments thanks to the US 'foreign earnings' tax exemption - resulting in no need to work at a 'vanilla' job, offers a unique advantage !!!


    Circling back to your particular scenario, obviously a huge component of any decision regarding sale versus renting out your big city condo, and leasing vs buying a lower cost small city house, are contingent on what's likely to happen to real estate market valuations over the course of the next few years. While I'm not 'endorsing' such prognostications, a number of 'talking heads' are of the opinion that US single family home real estate prices are nearing a downturn ... attributable to both a slowing of the US / world economy, and to the FED finally allowing interest rates to increase. See and for a couple of such 'talking head' opinions.

    If one gives credence to such 'talking head' opinions, the resulting decision would be to completely sell out of the big city condo ASAP in an attempt to cash in on 're-inflated' local real estate prices before a declining real estate price trend becomes obvious, while renting or leasing the small city property in anticipation that it can be purchased for 'cash' at significantly lower price levels a couple of years from now ( due to higher mortgage interest rates making such properties less affordable for mortgaged buyers ).

    In terms of vehicles, when I 'retired' in 2008 I elected to go with function over style ... and at present own both a 2005 and 2010 Subaru. I purchased both for cash as 'used' dealer owned ( actually demonstrator / lease return ) vehicles, with mileage in the teens or 20's ... at something like a 25-35% discount over price when new. The 2005 now has over 100,000 miles on it, but has yet to develop a rust hole or a 'major' problem, and I still drive this vehicle regularly. The recently purchased 2010 is in 'perfect' condition, and I typically only drive it when I'm travelling a long distance, need to haul a lot of 'cargo' ( i.e. a monthly shopping trip into Mexico to hit WalMart, etc.), or want to 'look good' when I arrive somewhere. The 2005 WRX still gets about 32 mpg ( if I keep my foot out of the turbo ), while the 2010 Forester gets about 26mpg ( not bad for a quasi-SUV ) ... something which is of particular importance down here way south of the border where gasoline is more expensive than in the USA. The all-wheel drive is also pretty important down here way south of the border, given that road condition isn't the best. And, obviously, having two vehicles available is also pretty important given that there are only two accredited Subaru dealers within 100 miles of me ( one in my new country's capital, and the other in the large Mexican city with the WalMart ) !

    I'll start shopping online for another Impreza / WRX if my 2005 starts to develop any 'major' problems. But I am told by other Subaru owners that 150-200,000 miles without 'major' problems is actually pretty common, thus I'm hoping that my old WRX will last until 2017-18 - thus allowing me to shoot for another 'deal' on a 2015 model with mileage in the teens or 20's.
    Last edited by Melonie; 09-14-2014 at 06:41 AM.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Melonie,

    I'm writing from Canada. 6 months ago I had the chance to sell my condo to an investor (sold at 5% below market value, but with no agent commission - yay).

    Around that time there was a lot of rumors that the Bank of Canada might raise interest rates (didn't happen), and doom and gloomers were forecasting a California style melt down in the property market. While that hasn't happened yet, it was still a relief to cash out. I was constantly worried my condo fees would go up, property tax was going up, even my hydro was way more expensive than when I first bought the unit. I was able to rent an identical apartment in the same building for 80% of the carrying costs of the unit I owned; I jumped at the chance. So I have the equity I saved up sitting in the bank now, making virtually no interest. I feel like I'm ready to make a move / decision in the next few months, so I don't want to invest in anything that locks my money in.

    The opportunity to move to a lower-cost country has always appealed to me, but as you probably know, establishing a romantic relationship in poorer locales is fraught with problems. I'm 32 and looking ahead, I need to be in a long term relationship with someone who speaks my language and doesn't see me as a 'ticket out' or goldmine. I dont think that the expat life would work for me these days. Maybe someday.

    In terms of downsizing in Canada, the winters / snow is a major consideration as far as vehicle is concerned - much like it would have been for you in NY. So finding something economical, but something that can handle the winters, is a bit of a dilema. On the other hand, if I'm in a small town and not often on the highways, it might not be so difficult to buy a car that can suit my needs. I may be able to just sit home on snow days.

    The housing is a more difficult question. These persistent rumors about a crash just will not die. We are expecting a federal election soon, and I often wonder if the powers that be have kept interest rates depressed to keep people happy until election time. Certainly it's within their power to do that. We are bombarded with dire warnings from all the banks and even the minister of finance that Canadians are taking on way too much debt - both credit cards and housing related debt, and we are reminded daily this is unsustainable. On the other hand, interest rates are remaining at historic lows, - I saw an ad at my bank recently for a 1.9% mortgage interest rate, locked in for 2 years. I'm no financial wiz, but even I can see that's a dangerous proposition to offer a borrower - surely those rates are going up within the next two years!

    The latest news says

    "Canada’s housing market has defied expectations for a slowdown or crash but most economists expect homebuilding and sales to slow when mortgage rates rise. Mortgage rates remain low and borrowers are taking on near record levels of household debt to get into the market.

    “The Bank of Canada may be looking for a rotation away from housing and the consumer, but low rates continue to support residential investment,” CIBC World Markets economist Nick Exarhos said in a research note.

    “But despite recent resiliency, we still expect housing’s contribution to growth to slowly wane as we progress through this business cycle, with affordability concerns and a weak labor market putting pressure on the building sector going forward.”

    http://business.financialpost.com/20...owing-further/

    The labor market is exceptionally challenging now. I am seeing evidence of it every day. Surely this cannot be sustainable.

    But if it takes 2-3 years for the housing market to drop, and lets say 4 years until it bottoms out, and if I spend $13,000 on rent each year until then, if values fall - lets say 15% and using a $300,000 house for example, I'm not in much different position than if I had purchased rather than rent. And the 'experts' all agree that the major crash will happen in major cities and surrounding areas, places where homes are so overpriced that the vast majority of would-be buyers have no hope at all of ever owning. (Vancouver, Calgary, Toronto).

    The taxation I'm facing here hasn't been a major factor lately, mostly because my savings aren't earning any interest.
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Luvly, since you were asking the ladies for advice, I'll delete this if you want, but I had some thoughts as I was reading your opening post.

    Perhaps you could continue this, but for how long? A future reduction in your income is obviously inevitable at some point. The only question is whether you make the transition in time to preserve what you have saved.

    If you think that your higher earning days are coming to a close and you have a chance to purchase a nice house with no mortgage payment or association dues, then IMHO that is a no-brainer. Even with the dip and boom cycles that real estate goes through, real estate appreciates substantially over time, and houses far more so than condos. The reason is simple: God isn't making any more land. Just be sure to steer clear of housing communities with home owners' associations. There is a heck of a lot of freedom in not having a mortgage payment, rent,, HOA or condo association dues to cover.

    The car issue is a little trickier. If you simply won't be able to make the payments on a reduced income then it is what it is, but if you can pay the car off then it is something you might want to consider. Most car loans front-load the interest payments, so the principal balance stays pretty high until closer to the end of the finance period and there is often little upside in trading a car in. Also, once you pay it off, you could enjoy a period of time with a car that is still in good condition and with no car payment. A BMW is a good car and can easily give you 200k+ miles before needing serious repairs. I buy a foreign SUV about once every 8 or so years and often enjoy several years of good driving without payments or serious repair bills. I use $1,200 or so as the threshold over which I will not spend on a single repair when my SUV exceeds 150k miles, at which point I buy another car. You can never completely avoid car expenses as a car is a continuously depreciating asset, so the best that you can hope for is to get the most out of each vehicle that you buy.

    Finally, I'm not sure that I would equate a smaller budget as meaning a bad standard of living. You'll be starting with a house free and clear, a nice car (whether you ditch the Beamer or not), some savings and very manageable living expenses. That is one heck of a great start to a new life, giving you countless options, and I suspect is a much better position than that of most girls who leave the business. The rest will be what you make of it.

    In any event, good luck!
    Last edited by rickdugan; 09-14-2014 at 09:21 AM. Reason: spelling

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    The housing is a more difficult question. These persistent rumors about a crash just will not die. We are expecting a federal election soon, and I often wonder if the powers that be have kept interest rates depressed to keep people happy until election time. Certainly it's within their power to do that. We are bombarded with dire warnings from all the banks and even the minister of finance that Canadians are taking on way too much debt - both credit cards and housing related debt, and we are reminded daily this is unsustainable. On the other hand, interest rates are remaining at historic lows, - I saw an ad at my bank recently for a 1.9% mortgage interest rate, locked in for 2 years. I'm no financial wiz, but even I can see that's a dangerous proposition to offer a borrower - surely those rates are going up within the next two years!
    If you give credence to the 'talking heads', the housing market situation ( i.e. bubble ) in Canada has been driven not only by low interest rates / 'subprime' credit availability, but also by a huge increase in housing demand which is related to Canadian 'export' businesses, and also by the 'purchasing power' of the Canadian dollar relative to major world currencies. See

    Those 'export' businesses primarily revolve around oil, metals, fertilizer etc. ... which are already experiencing significant price drops as worldwide demand decreases across the board. Thus it's unlikely that the rapid growth rates of recent years ( and the associated demand for additional housing ) will continue. Canada is even more likely to be affected, because China has been Canada's major commodity 'export' buyer in recent years and China is now looking to Russia instead.

    In regard to Canadian dollar 'purchasing power', the Loonie has dropped from US$1.04 to US$0.90 over the course of the past 3 years. As the Loonie's purchasing power declines, world market prices for food, energy etc. become more expensive for those paying in Canadian dollars. And adding CDN$100 a month to a Canadian family's grocery bills, gasoline costs, utility bills etc. as the direct result of loss of 'purchasing power' means CDN$100 less they can afford to pay toward a monthly mortgage payment. This translates into a direct reduction in demand for Canadian single family housing ... thus lower Canadian housing prices.

    And to make matters worse, the Canadian gov't recently tightened it's 'buy a house in Canada and get a Canadian Passport' program ... see ... which had previously attracted loads of rich ( primarily Chinese ) foreign buyers thus boosting housing prices in Vancouver, Toronto, Montreal etc.

    IMHO Canadian real estate faces a lose / lose situation in the near term. If Canada wants to stop the fall in 'purchasing power' of the CDN$ they will need to increase interest rates. But doing so will make Canadian housing significantly less affordable for non-cash buyers due to increasing interest component of monthly mortgage payments. On the flip side, if Canada doesn't raise interest rates thus allowing the Loonie's loss of 'purchasing power' to continue, rising CDN$ denominated prices of food, energy and related items will still leave Canadians with less money available to spend on monthly mortgage payments even if present interest rates aren't increased.

    PS, depending on exact timing, if you had converted the proceeds of your Canadian condo sale to US dollars, you would have already experienced a ~6% 'gain' ... because the same amount of US dollars would now reconvert into ~6% more Loonies !!!

    PPS in terms of 'investments', the same housing data showing demand / pricing for single family homes likely to decline also shows that the demand for rental housing will increase as a natural side-effect. Perhaps it's worth considering the purchase of a multi-unit property in that Canadian small city ... with the rental revenues and landlord tax write-offs providing a better overall 'rate of return' than conventional investments ?
    Last edited by Melonie; 09-14-2014 at 03:37 PM. Reason: r

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    I'm working on doing this. I've never been a dancer, but I'm a cam girl. I have always had the urge to be out, away from big cities and huge populations. I use to have a huge house, fancy car, etc. etc. but now... meh. I think my priorities changed when I started having kids.

    I'm not mortgage or car payment free, or free of other debts yet, but I did move to the middle of no where to a small house on a piece of land that was given to me and my husband by his father, which has saved me a TON in housing costs. The land is paid for, the house has a very small mortgage compared to what we were paying. The cost of living in this tiny (and I mean TINY) town is much, much lower. All our bills are lower except gas, because my husband still has to drive to Dallas (2.5 hrs one way) to be able to work at the bigger hospitals for better pay/experience. But he doesn't mind the drive and the extra gas bill has been worth it. He traded in his nice muscle car for a newer car that gets excellent mileage.

    My goal is to eventually some day become completely self sufficient... to be able to be debt free, live off our land, even be "off the grid" if possible. But this will take a LOT of time. It's a very long term goal, but I feel like we are making progress on the first steps by moving away from Dallas and getting to a much, much less populated area.

    I agree with SnuffleUffleGrass on that life is much less stressful. But I don't agree that "it sucks". I think that is a HIGHLY personal opinion. You might want to take baby steps to see if you think you would like it before making such a drastic change because it is likely going to be a lot different than what you are used to. I knew I would love it living "smaller" and more "slow paced". I absolutely love it. You couldn't pay me to move back to a big city.

    I don't have any advice on investments and all that, just wanted to say that yah, it can be done if you are the type of person who can be happier on less. And keep in mind, less doesn't always have to equal "cheap" or "not nice".
    xoxo ~ Sarah




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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    The more I think about the Canadian housing market, the more anxiety I feel. The Bank of Canada Chairman is appointed by sitting Conservative cabinet members, who all have a MAJOR vested interest in telling us 'everything is ok' and there will be a 'soft landing' etc. The Real Estate Boards also are deeply invested in the status quo. Anyone who tries to point out otherwise gets the Peter Schiff treatment from 2007 and 2008, when the other talking heads mocked him relentlessly for his forecast of a downturn in the market.

    Watch this to see what I mean: http://www.youtube.com/watch?v=_HFNJw7xGSA

    We are treated as irrational, dangerous people, akin to yelling "FIRE" in a movie cinema when we try to point out how illogical the market is.

    Whatever minimal concessions we get from the forecasters are tempered, i.e.: the price drop will hit condos only, in major cities only...

    A random title search on home ownership for single family houses in my neighborhood shows an average of $400,000 indebtedness per home, with a 'supposed' value of $500k-$600k. Normal people are priced out of the market. On any given Sunday there are no parking spaces at the Home Depot, because so many people are buying hot tubs and new appliances on monthly payment plans. At the same time, when I look at jobs available on LinkedIn etc., I am seeing 75+ applications have been submitted for a single opening. Virtually nobody I know owns their car or home outright, and even my friends' PARENTS are taking second mortgages to buy those 'must have' items like boats, sea doos, and cottages.

    It's difficult to accept being a renter, paying out every month in rent when I'm used to owning, but at the same time, my spidey senses are telling me to hold off until at least 2017 before buying again. Let the next election roll around, see if rates go up, and take it from there.

    But with all things considered, its still a tough call.
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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    It's difficult to accept being a renter, paying out every month in rent when I'm used to owning, but at the same time, my spidey senses are telling me to hold off until at least 2017 before buying again.
    The rent versus own equation is fairly complicated these days. The 'payback' equation involves direct or imputed effects of property taxes, maintenance costs, tax consequences ( i.e. mortgage interest tax deduction equivalent cash value ), liquidity risk, possible gains or losses on principal value, etc. as well as a direct comparison of monthly payments. In today's 'dynamic' real estate environment, I don't disagree with your assessment of hanging back a couple of years to see if a stable future direction becomes apparent regarding interest rates, real estate market values, etc.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Quote Originally Posted by Melonie View Post
    ( i.e. mortgage interest tax deduction equivalent cash value ),
    There is no mortgage interest tax deduction here, but the capital gains on the principal residence is tax free. Which adds to your point; the only tax benefit would be dependent on an increase in property values...

    Talking heads constantly say the absence of the interest tax deduction is a major factor distinguishing us from the scenario that unfolded in the US property market.

    Anecdotally, there are workers repairing a set of stairs at my building today. These are 19 year old kids who work for a small contracting business. I overheard them say they are making $36 per hour, and three of them indicated their 'work truck' is leased. I can't help wonder what happens when these people get laid off if the home repair business slows down.

    I vacillate between wanting to buy a house, and wanting to invest in shorts of housing related sectors here, lol.
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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Anecdotally, there are workers repairing a set of stairs at my building today. These are 19 year old kids who work for a small contracting business. I overheard them say they are making $36 per hour, and three of them indicated their 'work truck' is leased. I can't help wonder what happens when these people get laid off if the home repair business slows down.
    Also anecdotally, this seems to form a 'snowball' effect. As new home construction slows down due to increasingly unaffordable home prices / rising mortgage interest rates, the construction workers tend to transition from new home building to existing home repairs. Thus in 'slow' real estate markets, the demand for build repair services arguably increases ... as homeowners tend to hold onto existing properties ( and perform necessary repairs ) while waiting for better real estate market conditions before selling.

    But in 'distressed' real estate markets, delinquent and foreclosed ( former ) homeowners, and homeowners who find themselves 'underwater' on present equity value versus mortgage balance owed, generally could care less about spending their own money for home repairs. In the USA, Detroit is the obvious example ... with block after block of vacant foreclosed houses that haven't seen a repair ( or even a lawnmower ) in months or years. Thus it makes perfect sense that a home repair contractor's 'work truck' would be leased versus owned ... because it allows them to cash in on home repair work while it lasts, but also allows them to 'bail' with minimal losses if demand for home repair work falls to the point of unprofitability.

    However, this circles back to your dilemma ... figuring out whether future Canadian real estate markets will hover at 'slow' before returning to 'normal', or whether 'slow' will actually slip toward 'distressed'. The 'talking heads' will tell you that this is a function of future Canadian after-tax income levels, future Canadian interest rates, future CDN$ denominated prices for food, energy and other 'necessities', debt levels ( thus debt 'service' costs ) of Canadian consumers, overall Canadian economic growth rates ( = demand for well paid workers, = demand for single family homes ), etc.


    Talking heads constantly say the absence of the interest tax deduction is a major factor distinguishing us from the scenario that unfolded in the US property market.
    Arguably, this is only part of the story. Yes the fact that US taxpayers 'subsidize' mortgage payments ... and the fact that US taxpayer subsidy grows in size in proportion to the homeowner's income ( thus tax bracket ) ... tended to encourage home ownership. But most of that encouragement actually wound up being directed toward expensive upscale properties in expensive upscale areas ( i.e. 'gentrification' ). However, Canada has experienced the same phenomenon without the need for taxpayer funded encouragement !!!

    At a more basic level, the past differences between Canadian and US real estate market volatility can be explained by higher Canadian mortgage 'equity' requirements, lower volatility in the Canadian 'middle class' jobs market, as well as a cultural difference which arguably made middle class Canadians more reluctant to take on high levels of debt. As to whether those differences still exist, you're in a far better position to judge than I am !!!
    Last edited by Melonie; 09-17-2014 at 03:29 AM.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    I happened to run across this picture ... which is arguably worth 1000 words ...





    ... which amply illustrates that 'starter' houses ( < $250k price tag ) are absorbing major drops in resale value, while 'luxury' houses ( > $1 million price tag ) are the only segment where resale values are rising. This obviously ties back to earlier comments that 'discretionary' income levels and creditworthiness are problematic at the 'starter' end of the market, while the proverbial Chinese millionaires ( seeking a 2nd citizenship ) are driving up the 'luxury' end of the market.

    One conclusion which can also be drawn is that remaining 'middle class' buyers, who ARE able to pony up sizeable down payments and obtain affordable mortgage financing, don't choose to purchase homes in the 'starter' price range. This is most likely the result of 'location'.

    Also, the Toronto Sun had this to say ...

    (snip)TORONTO - Sales of existing homes in Canada rose in August from July, hitting the highest level since January 2010, the Canadian Real Estate Association (CREA) said on Monday, but it predicted sales will peak in the third quarter and decline in 2015.

    The industry group for Canadian real estate agents said sales were up 1.8% last month from July. Actual sales for August, not seasonally adjusted, were up 2.1% from August 2013.

    CREA's home price index rose 5.3% from August 2013, matching July's year-over-year gain. The national average price for homes sold in August, not seasonally adjusted, was $398,618, up 5.3% from the same month last year.

    "Sales activity in recent months has remained stronger than was anticipated earlier this year," Gregory Klump, CREA's chief economist, said in the report.

    Klump said sales bounced back after a slump early in the year that resulted from a harsh winter, a trend bolstered by a decline in mortgage rates.

    The persistent sales strength has put renewed focus on concerns that Canadian households are over-reaching to get into the market and on fears of a housing bubble.(snip)
    Last edited by Melonie; 09-22-2014 at 08:05 AM.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    No matter what happens in the markets, you have to do what is right for you. Right now is a good time to make changes.

    Do you want to have two properties? or One? What costs would go into keeping two properties? Do you currently have the best mortgage interest rate and terms you can get?

    If you sell your car, what other car would you buy? These are all questions you should ask yourself.

    The way I manage my own money........ if the worse of the worse happen, what is the least I would make? For example All my monthly bills added together has to equal or less then $1200 a month. I base that on what I would get from unemployment if the worse happened. That includes rent, utilities, credit cards, car, insurance..... everything. I keep myself on that budget. Any other money I earn over that I consider extra. From there I decide what percentage I save for emergency, retirement, etc

    If you have debt, the fastest way to downsize is to pay it all off. People under estimate how much a month goes out the door in interest paid on debt.

    I would suggest Dave Ramsey books, website, and radio show if you are moving in this direction. I dont know if he broadcasts in Canada, but you can find it online. All of his advice is based on down sizing, getting rid of debt, and saving. It gives you a basic frame work to start with.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    If you have debt, the fastest way to downsize is to pay it all off. People under estimate how much a month goes out the door in interest paid on debt.
    Indeed this is the case !!! Credit card interest and auto loan interest are the two most obvious in addition to mortgage interest. But other forms of imputed 'interest' can be less than obvious ... i.e. annual member fees on credit cards, monthly 'budget' billing by utilities, 'late' fees imposed by banks and creditors, etc. This direct and imputed 'interest' can add up to hundreds of dollars per month ... and essentially only serves to make the rich even richer.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Well I'm resurrecting an old thread because the housing market in Canada is making news again.

    http://www.theglobeandmail.com/repor...ticle20971607/

    And, all things being equal, higher interest rates usually drive real estate values down, he says. That frightens him because consumer debt levels are high and more than half of Canadians’ assets are tied up in real estate.

    “The most vulnerable – i.e., the 1 million Canadians whose current debt servicing costs are 40 per cent or more of disposable income – may have to sell their real estate, crystallizing losses and setting back their retirement plans,” Mr. Connor says in notes for his speech. Others will find that it’s harder to save for retirement once mortgage rates rise.


    and even more disturbing

    Consumer debt in Canada has risen from 87 per cent of disposable income in 1990 to 164 per cent today, making it the highest among G7 countries. More than 70 per cent of people age 55 to 64 held some form of debt in 2012, up from 61 per cent in 1999. Forty-three per cent of households led by Canadians age 65 and above held debt in 2012, up from 27 per cent in 1999. And the fastest growing segment for personal bankruptcies is among near-seniors and seniors, he says.

    I'm wrapping my head around renting until mid 2016, because this has disaster written all over it. The fact many analysts and journalists are not shy over the past week to talk about 'the impending housing crisis' (Its suddenly not crazy to refer to this as a thing) makes me think we're closer to disaster than I previously suspected.

    I had thought we'd have stable interest rates until after the next election (late 2015) and see rising rates in early 2016 when either (a) the conservatives have safely won the next election, or (b) the Liberals win the next election - in either case rates are going up.

    It may actually happen in 2015, but I think the Bank of Canada chairman will bend over backwards to make sure the people who gave him his job (conservative party) remain in power.

    Watching videos of Ben Bernake in 2005-2006 say there is no housing market crash on the horizon has helped me convince several friends that we can't trust the talking heads, etc.
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    ^^^ arguably, the fact that the Canadian Dollar is down below US .90 is at the root of this turmoil. It means that every 'world market' commodity, from food to gasoline to you name it, as well as every imported item, from medicines to electronics, becomes instantly more expensive for Canadians. This creates a budget squeeze for Canadian mortgage holders whose after-tax incomes are not rising. To stop the Canadian Dollar's decline, normal action would be for the RBC to raise interest rates on Canadian gov't bonds. But this would immediately trickle down to higher mortgage and consumer interest rates, and would potentially trickle down to higher tax rates, therefore relieving one problem but creating two new, and even bigger, problems.

    On the flip side, the lower Loonie may restore / create some additional jobs ... which might eventually translate into a higher damand for Canadian housing thus higher housing prices in areas where jobs are being added.
    Last edited by Melonie; 10-09-2014 at 02:01 PM.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Quote Originally Posted by Melonie View Post
    ^^^ arguably, the fact that the Canadian Dollar is down below US .90 is at the root of this turmoil. It means that every 'world market' commodity, from food to gasoline to you name it, as well as every imported item, from medicines to electronics, becomes instantly more expensive for Canadians. This creates a budget squeeze for Canadian mortgage holders whose after-tax incomes are not rising. To stop the Canadian Dollar's decline, normal action would be for the RBC to raise interest rates on Canadian gov't bonds. But this would immediately trickle down to higher mortgage and consumer interest rates, and would potentially trickle down to higher tax rates, therefore relieving one problem but creating two new, and even bigger, problems.

    On the flip side, the lower Loonie may restore / create some additional jobs ... which might eventually translate into a higher damand for Canadian housing thus higher housing prices in areas where jobs are being added.
    Orrrrr Canada can do what the U.S. Treasury did under Reagan and Clinton. Go into the currency markets and buy Loonies to prop up the price. One of several keys to Bob Rubin's good track record when he ran the Treasury. Most of his mischief occurred AFTER he left.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Quote Originally Posted by Melonie View Post
    ^^^ arguably, the fact that the Canadian Dollar is down below US .90 is at the root of this turmoil. It means that every 'world market' commodity, from food to gasoline to you name it, as well as every imported item, from medicines to electronics, becomes instantly more expensive for Canadians. This creates a budget squeeze for Canadian mortgage holders whose after-tax incomes are not rising. To stop the Canadian Dollar's decline, normal action would be for the RBC to raise interest rates on Canadian gov't bonds. But this would immediately trickle down to higher mortgage and consumer interest rates, and would potentially trickle down to higher tax rates, therefore relieving one problem but creating two new, and even bigger, problems.

    On the flip side, the lower Loonie may restore / create some additional jobs ... which might eventually translate into a higher damand for Canadian housing thus higher housing prices in areas where jobs are being added.
    No it doesn't. Canada's inflation rate is approximately 2 percent.

    http://www.tradingeconomics.com/canada/inflation-cpi

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    ^^^ as always, with gov't statistics, it's necessary to read the 'fine print' ... from your own link ...

    (snip)"Shelter costs rose 2.8 percent in August compared with the same month a year earlier. This increase followed a 3.0 percent gain in July. Natural gas prices increased 17.9 percent on a year-over-year basis in August, after rising 20.4 percent the previous month. Consumers also paid more for homeowners' home and mortgage insurance.

    The household operations, furnishings and equipment index rose 3.0 percent on a year-over-year basis in August, led by a 7.6 percent increase in the cost of telephone services. In addition, the cost of Internet access services rose in the 12 months to August.

    Food prices were up 2.2 percent in the 12 months to August. The cost of food purchased from stores increased 2.3 percent on a year-over-year basis, after rising 3.2 percent the previous month. This deceleration was led by prices for fresh fruit and fresh vegetables, both of which recorded smaller increases in August than in July. At the same time, consumers paid 9.3 percent more for meat in the 12 months to August. Prices for food purchased from restaurants were up 2.1 percent compared with the same month a year earlier."(snip)

    Based on the 'weighting factors' the Canadian gov't uses, the three major reasons responsible for a comparatively low 'official' inflation rate last month were a stagnating real estate market, a plentiful harvest of fresh fruits and vegetables, and 'model year end' deals on 2014 cars. The latter two are unlikely to continue for long, and the former .. a stagnant Canadian real estate market ... is what this thread is all about. And other factors in the same gov't report, i.e. a 17% increase in natural gas prices, an 8% increase in utility costs, a 9% increase in meat prices, rising insurance costs etc. are all contributing reasons why Canadians now have fewer dollars available to spend on real estate !!!

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    more housing related news trickling out of Canada ... from

    (snip)"Is the blindingly magnificent housing bubble in Canada running out of steam? Even the US housing bubble that imploded so spectacularly, pales by comparison. It’s so big and so all-encompassing that even the Bank of Canada and ratings agencies publicly fret about the damage it might do to banks, and the entire financial system, when it meets its maker.

    But in September, mortgages rates dropped once again to near historic lows, and home sales jumped to the highest level since February 2010. The Teranet–National Bank National Composite House Price Index inched up 0.3% from August – what it calls “national house price inflation,” a refreshing bout of honesty that their US counterparts would never dare to display. This “national house price inflation” was 5.4% year over year.

    Hot: Calgary (+9.5%), Toronto (+7.4%), and Vancouver (+6.5%). Regions east of Toronto were losing steam: Halifax (+2.3%), Montreal (+0.7%), Quebec City (+0.5%), and Ottawa-Gatineau (+0.1%).

    But on a monthly basis, there were already some losers: Hamilton (-0.4%), Montreal (-0.9%), Ottawa-Gatineau (-1.1%), and Victoria (-1.8%).

    So the Bank of Canada is publicly worried that the housing bubble is so vast and households so weighed down with debt that a “sharp correction in house prices” could take down the financial system(snip)

    with follow-up from

    (snip)"Ratings agency Fitch warned about the Canadian housing market in July. It was “20% overvalued in real terms,” based on Fitch’s own metrics, the report said. Had they looked at the above chart, they’d have come to the inescapable conclusion that it was 100% overvalued in real terms. Home-price bubbles are treacherous: “High household debt relative to disposable income has made the market more susceptible to market stresses like unemployment or interest rate increases.” That household debt to disposable income ratio has been hovering at near a record 164%.

    Low interest rates have been heating up the market. Fitch’s solution? Keep interest rates near zero, obviously. Forever. Period. Because raising them would prick the bubble, and its implosion would trigger all sorts of mayhem.

    Now Bank of Canada Deputy Governor Agathe Côté weighed in on the housing bubble. It’s on everyone’s mind. In a speech to the Chamber of Commerce and Industry of Saguenay, Quebec, she discussed among other things, the four key responsibilities of the BOC – monetary policy, the financial system, the currency, and funds management.

    The housing bubble falls under the key responsibility of managing the financial system, or more precisely under the objective of promoting its “stability and efficiency.” As part of its Financial System Review, the BOC “assesses vulnerabilities and risks.” Among the four “important risks” in her presentation:
    •A sharp correction in house prices
    •A sharp increase in long-term rates

    If those two occurred, all heck would break lose due to the factors Fitch had already pointed out. Home prices have skyrocketed, far outpacing household incomes"(snip)

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    The Canadian dollar continues to drop with no end in sight. Major Canadian banks are predicting a buy rate of $1.18 CAD = $1 USD by early next year.

    The price of oil is expected to continue to fall, past $80, which is around the cost of making a lot of Canadian oil industry ventures unprofitable.

    The prospect of a fall in prices gets more 'real' each day.
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Melonie, who made money when the housing crisis hit the US? Lets assume this is going to happen. What kind of professionals make money if the housing market takes a hit?
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    ^^^ according to the 'talking heads' anyhow, there were several different segments that benefitted from the last housing crash

    - the big banks who BOUGHT bankrupt mortgage loan companies ... because they picked up property for 'peanuts', plus picking up 'tax loss' write-offs which will reduce their US corporate tax bills for the next decade

    - defaulting mortgage borrowers ... who were often able to additionally borrow and spend more dollars via home equity loans etc. before the crash occurred ... then declared bankruptcy to escape repayment ... as well as receiving a couple of years worth of 'free' rent as the foreclosure process dragged on ... and who also mostly escaped 'deficiency judgments' and 'loan forgiveness' income taxes after the fact.

    - commodity investors ... who experienced a major upturn in particular commodity prices as 'dumb' investor money began to flee mortgage backed bonds, homebuilder stocks, REIT's etc. and sought a 'safe haven' alternative.

    - 'corporate' rental property owners ... who were able to A. access nearly 'free' money with which to B. purchase 'distressed' properties at a discount, and were then able to C. raise rents due to Americans being foreclosed and evicted / not able to qualify for post-crash mortgage financing, but still needing a place to live.

    However, be aware that much of this was actually the result of US gov't / FED policy to hand those big banks 'free' US taxpayer money, to selectively fail to enforce 'deficiency judgment' laws and 'loan forgiveness' income tax laws, etc. But Canada's gov't is on record as having a very different plan in regard to handling a future real estate crisis that could destabilize major Canadian banks ... see .
    Last edited by Melonie; 11-15-2014 at 02:40 PM.

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    Default Re: Your Money of Your Life: Downsizing, Living on Less

    Subscribed
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    Quote Originally Posted by Kirakonstantin View Post
    More fear-mongering? Really? Yes, this is not the 1990's anymore. Yes, things are changing. Either dance or don't. Freaking out and sowing fear isn't going to help anyone.




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