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Phone: (613) 966-8052

Is Consumer Debt Getting in the Way of Home Ownership?

Is home ownership a goal on the horizon for you or a distant pipe dream?

Is consumer debt or student debt keeping you from taking the next step?

For millennials, dealing with a heavy consumer debt or student loan debt can seem like the norm. It can also make those important milestones seem out of reach. That’s why this month, we wanted to talk about how millennials can set themselves up for financial success and make adjustments when they need to.

Not your parent’s generation

Boomer parents seem to have a lot of sympathy for their kids when it comes to economic circumstance with as much as 96 per cent subsidizing their millennial kids. This stat comes from an RBC poll that breaks down the figures:

  • Nearly half of boomer parents are spending $3,729 per year on their 30-35 year old kids.
  • In Ontario, boomers are spending $6,694 on their 18-35 year olds each year.
  • Some of the reasons parents want to help is due to cost of living, housing prices and education costs which hinder their kids’ ability to move forward without help.

 

When it comes to home ownership, millennials may have the same trajectory in mind as their parents did at their age, but high housing prices, low wages and debt loads stand in the way.

3 Ways to reduce consumer debt and plan the next steps

Financial readiness is determined by your ability to cover your expenses, manage debt and save money for future plans. This can look different for everyone at any income level. And, even if you’re working with a low income, you can utilize financial tools and resources to help you meet those milestones — it just may take a little longer. Here’s where to start:

  1. Add up your debts. New mortgage rules are strict enough without a heavy debt load standing in the way. Plus, your debt makes it that much harder to save up for a down payment. Add up your balances to see what you’re working with. If it’s manageable on your own, great! If you need help, look into your options by using our repayment options calculator, talking with a licensed debt professional, or commit to paying off your debt on your own.
  2. Make necessary cuts and save the difference. Necessary expenses include shelter, heat, hydro, food and transportation. And, there are obviously extras that we can’t live without such as our smartphones and laptops. However, cutting a few services such as subscriptions or memberships you’re not using can get you closer to your goals. Use our budget worksheet to map out your monthly expenses.
  3. Consider your future expenses. Owning a home is a huge responsibility. You’re on the hook for those monthly mortgage payments, insurance, property taxes, home maintenance and those out-of-the-blue expenses. It’s important to take into account those future housing expenses by forecasting what your monthly budget will look like when you’re a homeowner. Based on your current income, are you prepared for these responsibilities? Even further down the line, consider adding having children into the mix and the financial hit parental leave can cause.

 

Resources to help you reach your financial goals sooner

If you’re ready to buckle down and make your goals a reality, here are some resources to help you get there and stay motivated to keep making progress:

The Wallet Diet – Finance blogger Christine Drummond blogs about paying off debt, saving for a down payment, but also, practical lifestyle advice. Follow her for solid motivation.

The FCAC – The Financial Consumer Agency of Canada is your go-to guide for any financial query. Your Financial Toolkit offers everything you need to hit the ground running.

Practical Money Skills – The name says it all. This site is a great resource that offers online calculators (like How much house can you afford?) and tips on how to save an emergency fund.

Is consumer debt standing in the way of your future goals? Have you made a plan to deal with it? Follow us on Twitter to find more daily debt advice and money motivation. #LeaveDebtBehind #FirstTimeBuyer #Millennials



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