Posted by Canadian Dream on June 3, 2011
I have an interesting email earlier this week which I won’t post the entire email, but in summary Rochelle asked:
My question is about how you manage to keep your “eye on the prize”? How do you keep strong during your end-game? Have you had to deal with any of these major temptation delays? Do you fear being debt free and potential let down you might feel once you have attained that goal?
I have literally asked myself almost the exact some questions several times in the last couple of years. Perhaps not all at once, but almost the exact same wording.
The answer depends heavily on your motivation for becoming debt free in the first place. My personal motivation for becoming debt free has largely for the desire to have that added flexibility once we hit that state. At that point I can either continue to work at my current job or switch careers to something else that pays less if I want. Since I’m personally still not sure about if I will fully go for full financial independence or just a semi-retired state I personally put a greater value of paying off my mortgage that people with other plans.
Yet the one issue that seems to keep coming up is should I accept some debt for investment purposes. In this case I have been faced some major temptations over the last year as I’ve looked around at some investments which potentially could earn me more than paying off the mortgage. While I keep considering stopping the additional payments to do this, I keep reminding myself of my motivation of getting rid of the debt in the first place.
In Rochelle’s case the motivation might be different, so an investment might make sense if being debt free isn’t essential to her plans. If being debt free is desired, then here is how I’ve dealt with the issue: keep busy with other things.
Honestly, that is the best idea in the world when you have a problem you aren’t sure how to solve. By working on the other areas of your life, you make progress on things that are important to you but also free up your mind from the treadmill of your current thought to realize how you feel about it. Problems like this are often best solved when you come at them sideways, the emotional part of the decision is actual the major issue. On the money side it is usually more clear cut: will you make more money going into debt than staying out of it? The emotional side is where the problem lies thus logic here won’t be particularity useful.
So while at times the decision seem obvious that I should push off paying down the mortgage to invest instead, I’ve chosen a different path because it feels right to me. It took me a while to realize that the issue was not in my logic, but rather how I felt. I hope that helps.
Anyone else got some ideas on what Rochelle should do?
Posted by Canadian Dream on March 17, 2011
Last week Ross asked the following question:
How do I go about getting my wife to start reading this blog or some of the articles above? She is already great at budgeting but isn’t as motivated or excited by the thought of early retirement as I am. I think if I could get her reading some of these blog posts it would give us something more to talk about as well. Thanks.
Well I’m not an expert on this one, but I do understand your problem since I had the exact same issue for a number of years and to some degree I still do. You see my wife initially was good about not spending too much and knowing the value of saving, but she didn’t have any interest in my early retirement plans either. To her the idea was a bit too far out there to really care about.
So how did I get her interested in my plans? Well to be honest I think her curiosity got to her about what I was writing about on the blog and she realized if she wanted to know what I was thinking about she would have to read it. So after writing this blog for a few years she finally started reading it. She then also developed an interest into the family profiles they do in Moneysense which I leave around the house. Then finally she developed her own interest in the meltdown of 2008 and frankly has read more books on that than I have.
On one hand this is great, but on the other she still not that particularly interested in my early retirement plans, she likes the idea, but doesn’t want to discuss it too much since it is still so far away.
So how did all of that happen? Well first off remember you can’t force people to do anything, all you can do if make the conditions right for them to want to do it. So to support an interest in these things here are a few ideas:
- Leave a few magazines about money around the house or even print off a few of your favorite articles from blogs. That way they are an invitation to learn without forcing it on her.
- Talk about money in a more general sense that she is interested in. For example, saving for your next vacation or perhaps expand that idea to wouldn’t it be nice to take a year off and see the world or perhaps it would be nice to able to work at something she enjoys but doesn’t pay that well all the time. Start slow and work your conversations up to early retirement.
- Lay the groundwork for early retirement, but cultivating interests outside of work for both of you. Also make sure to encourage her to have her own interests and activities. You don’t need to spend every second together.
- Talk about how nice it is to have the security of an emergency fund. Then just keep building the fund way past the usually six months expenses. At some point the idea of having a four year fund starts to get interesting.
Regardless of how you approach the topic do not force the issue. Keep the conversations interesting and useful for now if you have to. If you get pushed off, so be it. Let it the issue lie for a while than slip it in again for a different angle. You might have to approach the topic for various angles to find what will eventually draw in your spouse to talk about it.
So do you have Ross’s problem as well? If so, what worked for you?
Posted by Canadian Dream on March 8, 2010
The majority of reader’s questions I get tend to be situational like: can I retire, do we have enough for me to stay home from work? So it was a bit of surprise to get a question that was looking purely for my speculation on a topic:
I would love to read an article about your opinion of a future “generational housing bubble” regarding our aging baby boomers and our current population growth not turning over enough people to replace them. What happens to house prices when baby boomers start selling their homes and moving into senior friendly housing?
The past 30-40 years of baby boomer house buying has fueled demand and driven up house prices creating an affordability barrier for the next generation, which in turn caused the lax mortgage rules. They made mortgages cheaper instead of homes, and that only gave prices nowhere to go but up. Now a 3 bedroom home is just barely affordable for the average income family. If the gov’t is going to deflate this bubble instead of waiting for it to burst then they will have to tightly reign in the growth in house prices that people have come to expect.
Well this question came in right after my post on the new measures to deflate the housing bubble. So obviously the government has tried to take a bit out of this housing bubble, but not too much. Why? I’m strongly speculating here it has to do with not pissing off the baby boomers by causing their housing values to crash right after the 2008 stock market correction. After all the majority of them do vote (compared to other age categories) so the new rules I suspect are walking a fine line of doing something to cool housing, but not too much. The decision was more of a political one than a practical one.
So what will happen to the housing market in the long run? I still think we are doomed to a large house value correction on average (how it plays out in regional markets is impossible for me to guess at). Why? It’s the basic balance of supply and demand. There are too many boomers with non-starter houses and second houses (cabin or investment property) and too few buyers that can afford to pay what they want for those properties. As they age and want to get rid of those homes (or more likely need to get rid of since they don’t typically have enough saved for retirement) it will put too many houses on the market all at once. For a while the boomers might try to stick to their guns and ignore the reality but in the end some might start getting a bit desperate to sell and that would trigger a spiral down in prices.
Yet there is a large hole in my speculation. It assumes that the majority of boomers just stop working, since there has been a lot of talk about doing some work in retirement you may end up with a more balanced exit of the boomers from the market. In this case it might avoid a crash in housing prices and we might just end up with a more gentle correction that goes slightly down followed by a leveling off in prices as incomes need to rise up to a more equal footing to house prices.
So that’s my speculation on the market. Right now I would guess at about 50-50 odds for either case occurring. The boomers are not typical in a lot of ways so trying to predict their overall movement in a market is gamble at best. What’s your thoughts on this generational bubble? Will it correct or not?
