Many Canadians still view homeownership as a way to measure their personal successes and milestones. To confirm, we ran a social media poll on 1,027 millennials. Almost two-thirds (61%) say that they see owning a home as a measure of success. Even though homeownership may not be an accurate picture of someone’s financial status, many agree that it’s hard not to see buying property as a significant milestone.
There are many benefits of owning a home, from the ability to customize and update whatever you’d like to the feeling of permanence and stability. But to say there is a correlation between a person’s overall success and their ability to own a home might be a stretch. Is homeownership truly a measure of success? First, we need to determine what success looks like to the average Canadian.
What Does Success Look Like to Our Peers?
We asked millennials what qualities make them see their peers as successful, and got various answers. While some people said that high-paying salaries and owning multiple properties were key indicators of success, others were more focused on how happy people are, whether or not they feel fulfilled, and if they’re lucky enough to be paid to work in a job that they genuinely love.
Still, the more common answers did weigh heavily on money-related milestones:
- How often they travel
- The ability to spend money on non-essentials without worry
- How much debt they have
- What vehicles they own
- Owning a business
“I personally still view homeownership as a measure of success because it shows that someone has been able to save up and work towards a goal,” says Martin Dasko, owner of personal finance site, Studenomics. But Dasko also believes there is more than one way to measure success.
“Your dream lifestyle will depend on your goals,” says Dasko. “My dream lifestyle involves doing work that I enjoy while being in control of my schedule.”
We may view certain status items as others finding success, but that isn’t always the reality. Dasko says he has plenty of friends that own homes or have high-paying jobs, but they aren’t happy and don’t feel fulfilled. “I would much rather make less money and be in control of my schedule.”
Which brings us back to the main question that we all want to know: does owning a home actually make you successful?
Is Homeownership a Measure of Your Success?
Although this idea might seem silly to some, a 2019 Zolo survey found that nearly 9% of millennials’ wanted to buy a home to show they are successful. While most people plan to buy to find permanence (40%) and for room to grow with their family (26%), many continue to feel strongly that owning a home makes you seem successful in your peers’ eyes.
Janine Rogan, CPA and personal finance expert, thinks this is the case because of how much emphasis older generations put on owning a home.
“Many millennials view homeownership as the pinnacle of financial success,” says Rogan. But she sees the reality as many people putting small down payments on a home and buying outside of what they can afford.
A 2017 Bank of Canada report proves this is true, with nearly 50% of new buyers putting down less than 20% on their homes.
“Saving 20% down, making extra mortgage payments, or paying off your home in full – now that is the real feat,” says Rogan.
In other words, just because some people view homeownership as one of the ways to determine success does not mean that it should be your primary reason behind buying a six-figure property.
Instead, homeownership can provide you with a personal sense of accomplishment. There’s certainly no reason to scoff at purchasing a property that resulted from saving a significant amount of money. If owning a home makes you happy and provides you with stability and security, that in itself is an excellent reason to feel successful.
John Robertson, Ph.D., author of The Value of Simple, a blogger and co-host of the Because Money podcast, asks whether you see driving a Mercedes as a measure of success. Ultimately, a vehicle is just another way to get around. “Same for owning a house,” says Robertson. “It’s just one way of putting shelter over your head and making a home.”
If you look at your home as just another place to live, rather than a badge to show you are doing well financially, it’s essential to consider the numbers first.
Is Buying a Home a Smart Money Move?
The neverending debate around whether buying a home is a wise financial move continues to be a point of conversation for many Canadians. Yet, a 2020 Financial Literacy vs. Financial Sufficiency report from Zolo found that 24% of millennials say saving a down payment is their top financial goal for 2021 – and a whopping 74% of Canadians say that COVID-19 only increased their desire to buy a home.
But Dasko says that If you’re buying a home because it’s what society tells you to do, or someone has convinced you that it’s an excellent investment, it may not be the best move. Buying a home comes with more than a mortgage payment. You’ll also need to consider other expenses such as property taxes and annual maintenance.
“If you’re not ready for this move, then it can be a financial disaster,” says Dasko.
When you’re making the difficult decision to choose between renting and owning, here are a few important questions to ask yourself:
1. Can You Afford a Home?
Before you make any financial decision, it’s always essential to run the numbers to determine whether you can afford to purchase a home. Look at your current income and expenses, and determine how much money you have to put towards your monthly bills.
It’s always a good idea to do some research to determine how much of a mortgage you can afford and make a list of all the additional costs you’ll incur once you become a homeowner, such as waste, water and electricity.
2. What Is Your Ideal Lifestyle?
If you think about your future, and the first thing that comes to mind is travelling the world (post-COVID-19, of course) and having the ability to pick up and go anytime you’d like, homeownership might not fit that idea.
Instead, you should be preparing for a life that includes taking care of your asset by completing and paying for regular maintenance, and looking for a place to build a stable community. Of course, owning a home doesn’t mean you can’t travel regularly, but it does mean a lot more planning and organization for when you do hop on a plane.
3. Will Owning a Home Change Your Financial Situation for the Better?
Suppose you’ve done your due diligence on whether you can afford to buy a home and believe homeownership aligns with your dream lifestyle. In that case, the next thing to do is practice living on the estimated budget you’ve completed in step one.
If you try your new budget and find yourself continually stressed about money, you may want to consider looking at a more affordable mortgage. You may also consider renting for an extended period so that you can save up a more significant down payment, which can help get that monthly mortgage down to a more manageable number.
Robertson says one of his most important lessons was his first time moving out of his parents’ home to head to grad school. He and his dad ran the numbers, and it turns out that he would save money by buying a home rather than renting if he had planned to stay for more than five years. But, Robertson couldn’t confirm that timeline. Instead of taking the risk, he chose to rent – a choice he’s continued to make ever since.
“Renting wasn’t always throwing money away,” says Robertson. “I built a popular spreadsheet to do the analysis, incorporating the various factors like paying down the principal and investing the difference.”
Can You Have Permanence and Stability as a Renter?
With so many people desiring a permanent place to plant roots and settle down, it may feel like homeownership is the only option. “Security of tenancy is definitely one of the biggest risks that renters face over homeowners,” says Robertson.
But, Robertson says it doesn’t always have to be this way. The most common lease options you’ll have as a renter are anywhere from six months to one year. But that doesn’t mean you can’t do longer. Robertson says that many landlords want a long-term tenant’s stability as much as the tenant wants the stability of a long-term lease.
“I have an acquaintance from work who signed a ten-year lease, giving his family the surety that they’ll be there until the youngest is off to university,” says Robertson.
You may also feel restricted as a renter or get the itch to renovate if you continually see others who own their home changing their paint colours every couple of years. Again, Robertson says there is always a way to find wiggle room. “While you can’t just start knocking down walls as a renter, again, everything is negotiable.”
In a previous house, Robertson says he and his wife split the cost of installing a dishwasher with the landlord, giving the kitchen the modern conveniences they wanted. “We’ve replaced fencing we didn’t like the look of, put in a new railing in for a staircase and keep debating whether to add a garden shed,” says Robertson. “And, of course, all the little things like repainting and putting up Frozen wall decals.”
Any decision we make regarding where we live should always align with our current financial situation before any other factor. You shouldn’t rush into buying a home you cannot afford to prove to others that you are doing well. In fact, that choice would be somewhat counterintuitive.
Final Thoughts
Being a homeowner has completely changed my life. I feel a certain sense of stability and pride that I never used to feel as a renter, but that doesn’t mean these aren’t feelings you can have anywhere you live. It’s just a matter of making sure the home you choose to settle down in complements your lifestyle.
“I don’t feel a need to own real estate to progress along my life trajectory or feel successful in what I do,” says Robertson.
Everyone has different goals in life. For me, owning a home was a major one. But so was having a family, and that’s not a relatable milestone for every Canadian. How can we say one thing defines our success when everyone’s picture of success is wildly different? The short answer is that we can’t.
Robertson says you shouldn’t put off actual major life events for the sake of owning the structure that keeps out the snow. “Trust me; babies do not care if their crib is in a rented room, as long as it is filled with love.”
Homeownership does not mean you are any more or less successful than someone who chooses to rent. Just like eating avocado toast and drinking lattes doesn’t make you any less financially savvy than someone who does the opposite. There are better ways to determine your success, such as living within your means, saving enough for retirement, and enjoying your life to the fullest.
