Is living within your means weird?

Changing attitudes about housing, debt and delayed gratification make some people question what used to be the norm.

Eleven years ago this month, my husband and I bought our first home — the same 950-sq.-ft., two-storey, three-bedroom midtown Toronto semi we now live in with our 10-year-old son. At the time, we were both in our mid-30s and had saved up the traditional 25 per cent down payment. We have good jobs — he’s an urban planner, I’m a journalist — but neither of us earns a salary on par with a doctor, lawyer or other highly paid professional.

So far sounds pretty average, right? But we did a couple of things that may have surprised our friends and family. For one, we qualified for a much larger mortgage than we took on — the bank was prepared to lend us nearly twice as much as we ended up borrowing. Our decision to buy a small property even though we could have afforded something larger meant we wouldn’t feel house poor — and we wouldn’t have to worry that a job loss or some other unexpected hardship would leave us scrambling.

Another conscious choice we made was to negotiate a variable-rate mortgage but to set our biweekly payments as if we had gone for the five-year fixed rate. In other words, we paid more every month than we needed to — and those extra funds went directly toward paying off the principal amount of the mortgage rather than the interest on the loan.

Those decisions, combined with very favourable interest rates over the past decade, have allowed us to shave nearly 10 years off our 25-year amortization. We hope to retire our mortgage in about four years. We have no plans to move, either: we never considered our tiny house a “starter home” but rather our forever home.

Do I think everyone can do what we did? Of course not. We were extremely lucky in many ways, including continued employment and low interest rates — not to mention that we got into the real estate market when the average price of a Canadian home was less than $300,000, as compared to an average of more than $450,000 today.

What’s interesting, though, is that the decisions we’ve made are looked upon by some as odd — or perhaps even foolish. Never mind that in 1975, the average size of a house in Canada was 1,050 sq. ft. — about the same size as our place, which is now considered tiny.

Catherine Baab-Muguira, who wrote in Money magazine last year about her experience buying a small, beneath-her-means house in the U.S., found she encountered similar attitudes. Her own sister asked her point blank, “Why’d you shoot so low?” As Baab-Muguira sees it, that question captures a skewed set of values: “If you ask me, the question is not, ‘Why did we buy so much less than we could have?’ Instead, it’s ‘Why is buying only what you need a weird thing to do?’”

In a similar vein, when 30-year-old Sean Cooper made the news a few months ago for paying down the $255,000 mortgage on his $425,000 Toronto home in just three years, he was subjected to a surge of online hate. While some commenters did laud his achievement, many others made fun of his work ethic.

So, now that I’ve shared my story, I suppose I should prepare myself for the onslaught, too.

KEEP THE CONVERSATION GOING

Do you think it’s a good thing to spend within one’s means, even if it means making do with less? Or is that a fool’s game when borrowing is so easy? Post a comment below.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Tamar Satov

Managing Editor, CPA magazine
Tamar is a journalist specializing in business, parenting and personal finance. She blogs regularly in this space with advice and anecdotes on her efforts to raise a money-smart kid.

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