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Nine straight winners of the Hospital Home Lottery in New Brunswick have sold their prize home, some for hundreds of thousands of dollars under value. I'm giving them an A grade in personal finance.
The reason why people keep selling their dream homes is that they can't afford to run them. A winner from a few years ago reported that total insurance, property tax and heating costs came to about $2,625 per month. "It would be considered a dream to have a home like that, but it's not necessarily realistic in terms of cost to maintain it," she said.
There's a lesson here for both young people buying a first house and people moving up to a bigger home: Consider the cost of ownership. List the fixed costs you'll face in the new home and see how much of your household cash flow you'll have left to live on. If they're honest, some people will find they can afford to buy a home, but they can't properly afford to own it.
Consult the Real Life Ratio calculator to see how affordable a home is. The argument for toughing it out in an unaffordable house is that it has the potential to be a good investment. But how many years will you have to struggle with money until you see a payoff?
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Today's featured financial tool
I wrote recently about how foolish it is to say the reason millennials can't afford houses is that they're spending too much money on frivolous things like restaurant meals instead of saving for a downpayment. Here's a calculator that proves this point brilliantly.
Ask Rob
The question: "I am a 55-year-old who was recently let go at my place of work after 25 years. I have to make a decision in the next few months on whether to take my pension as a lump sum payment or as monthly payments for life. Is there a methodology/model that factors in all the decision points to determine what is my best choice?"
The answer: Sounds like the ideal question to present to a fee-for-service financial planner. You'll get an objective analysis because fee-for-service planners are paid on an hourly or flat-rate basis and not through commissions on investments sold. Find a planner near you using this directory.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length.
What I've been writing about
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