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RRSP and TFSA - so you’re in Canada.
I was in the exact same situation as you last year and decided to focus on maxing out RRSP and TFSA when I went from negative to 0 net worth. Starter houses are like $1M and condos that aren’t a literal shoe box start at $650K. It will take you a couple years to save for a down payment, after which your monthly payments would still be like $3K+ (mortgage at 5% down + $400 condo fees, + 150-300 taxes). That’s crazy expensive and you’ll end up living pay check to pay check and contribute very little to retirement. Housing isn’t worth it Canada unless you’re a very high income earner (like 125-150 base+), dual income household, and/or your parents give you a downpayment.
I’d focus on building your investment nest egg, continue renting, and evaluate your housing desires in a few years.
Go to indigo and buy a couple personal finance books! That’s literally the best investment you can make today lol
I’m almost in the exact same position as you rent, income, and excess 2K per month to save wise. I decided against it because if my payment is an additional $1200 over rent, I only have $800 buffer left. That’s a pretty low savings rate on $110K + easy to eat into some months if you go on vacations or some larger expenses come up like wedding / car at some point in the future.
You’re effectively going to have very little investments since all your money (down + future contributions) is tied up in the house. That takes away a lot of flexibility (say you wanna take 3 months off or maybe try a less stressful job or get laid off and can find only a 80-90K job in the future).
Expenses in life are only going to get higher once you have a family, kids, cars, house in the future making it harder to save. And salaries in Canada suck unless you wanna work a super stressful job like consulting forever.
If you can resist the temptation to buy a place now (it’s engrained in Canadians as a good investment but that’s because boomers got houses for like 2-400K) I would try to save at least 50-100K+ in your retirements account and then think about a house. If you do that, compound interest and small contributions will carry that to a couple million in retirement (https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/)
Also something a fellow fish said that I found helpful “what’s the point of being high income earner if you spend it all on housing”. I’d take advantage of the fortune you have of being a high earner in your 20s and set yourself for the future by delaying this purchase like 3-5 years. It’ll also be much easier then cause hopefully you’ll have a higher salary and maybe even dual income HH.
*I use you as a generalization. That’s just how I’m thinking about it cause houses in Canada are stupid expensive and you have to give up a lot if you want to own one.
This book also shaped a lot of my opinions above and is recommend quite a bit in this bowl (https://www.amazon.ca/Will-Teach-You-Rich-Second/dp/1523505745)
Thank you for sharing - All of that makes sense. I have ordered the book as-well. But given how crazy the prices of condos are getting in Toronto Y-O-Y, will it not make it more harder/impossible to buy a condo 5 years down the line?
No constructive advice. Just congrats on paying down your debt!
Thank you! 😊
Thank you M1. A bit more context below-
My current base is 110k and I am single with no responsibilities. In last two years, I diverted 2k each month + bonuses +tax refunds against tuition credits against my student debt. I am hoping to continue to do so for next 1.5 years to save for my down payment as-well-as use my little RRSP (14k) for the same. (Comes to a total of ~58k)
Assuming that my monthly expense for condo is 3k, current rent is 1800, so that gets me to a deficit of 1200. I feel I can pull that off. However, my only concern is - is it worth tying all cash against property? Is there any buffer that I should think of and maintain before taking the plunge?