Stuart and Sheila with their first child three years ago in Toronto. Since the Financial Facelift, they’ve added another child to their family and have moved to the countryside.Matthew Sherwood/The Globe and Mail
The birth of their first child three years ago got Stuart and Sheila thinking about leaving their nice but cramped two-bedroom Toronto apartment and buying a house. He was 31, she was 39. Together, they were bringing in about $127,000 a year.
If they bought, they wanted to put 20 per cent down to avoid paying mortgage insurance. At the time, they had $33,000 saved. A suitable house would cost at least $500,000. Thanks to their modest lifestyle, they had a budget surplus of more than $2,500 a month.
"We're looking at making a move to a larger home in three years and want to make sure that this decision will not adversely affect our financial future," Stuart wrote in an e-mail at the time. Neither has a work pension.
Their questions concerned both short- and longer-term considerations: Should they rent or buy? How would having a second child affect their financial situation? They had no wills or powers of attorney, no life insurance and no disability insurance.
Warren Baldwin and Matthew Ardrey of T.E. Wealth in Toronto did the original Financial Facelift. In their analysis, the financial planners thought Stuart and Sheila would have no trouble saving up the needed down payment of $100,000 for a $500,000 house in a few years.
The planners figured Stuart and Sheila could have the mortgage paid off in about 22 years. Then they could begin catching up on their unused RRSP contribution room. Once the registered retirement savings plans were maximized, they could shift their savings to their tax-free savings accounts. They would each work to age 65 and retire comfortably, leaving an estate.
Well, much has changed in three years. Today, Stuart and Sheila have two young children. She is taking time off from work to care for them, so their income is lower. Meanwhile, Toronto house prices continued to climb, eventually eluding the couple's grasp. They did not buy.
"It's crazy to try to do that in today's market unless you're both making six figures," Stuart said in a telephone interview. "It doesn't seem like a path that is feasible without considerable risk long term," he added. "What if one of us lost their job?"
Instead, they fled the city, moving to an old farmhouse with fields and forests all around where the children can run and play freely while their parents prepare the evening meal. They pay about $1,250 plus utilities for rent, about $1,500 a month with everything included. Stuart commutes to work each day, which can take anywhere from 45 minutes to an hour.
"It's a sacrifice I was willing to make for my family, especially in the early years," Stuart says. "We have a big garden and chickens and we're minutes from the beach," he says. "Of all the people driving down the 400 (highway), I probably have it the best."
When they lived in the downtown apartment, getting the little ones ready for an outing was a big production, Stuart says. "Here, they're able to run outside and play. It's valuable for their well-being." Even winters in the country are lovely, Stuart says. "I can ski from the back yard along a trail through the woods. It's a beautiful forest with huge oak and pine trees. We can skate when the lake is frozen."
Sheila and Stuart know their idyllic lifestyle will come to an end in a couple more years when she goes back to work and the family moves back to the city. The commute is just too far. They're going to have to adjust their expectations, Stuart says. Houses have become less affordable while their income when Sheila goes back to work will be only slightly higher than it was three years ago.
Stuart shudders at the prospect of moving to some suburban townhouse with no sense of neighbourhood or community. Buying a condo apartment is out of the question. "We want access to outdoor space." With both of them working, "we can't see the kids as much," he adds. As well, daycare in Toronto is expensive.
In the meantime, they are looking at ways to beef up their down payment substantially, including talking to their parents about "a bit of an inheritance early," Stuart says.
"There are lots of people in my cohort facing the same thing," Stuart says. (He's now 34.) "When you're making $70,000 a year, you can't spend $800,000 on a house." With both parents working and commuting, "you can't see the kids as much," he adds. "The tradeoffs are upalatable. It's gotta break."
So did they benefit from the advice of the Financial Facelift?
The planners pointed out that Stuart and Sheila had no wills, no powers of attorney and no life or disability insurance. "This is a significant pitfall when it comes to planning, especially now that they have a child," the planners wrote at the time. This has since been remedied, Stuart says.