Finance Friday: Are Gen Y’s Housing Concerns Really That Scary?

As Generation Y continues to stress out about whether or not it will ever be able to afford owning a house, as opposed to renting or living in a condo, my own personal attention has recently been drawn over to this subject.

As some of you may know, I live alone in a rented studio apartment in a neighbourhood that is within walking distance of my full-time job, and is just one- to five-minutes away from good public transit infrastructure. If it wasn’t for the fact that I coach football at a local college about 30 kilometres from my place, I would probably not have a car. As it is still the middle of the football off-season, my car typically doesn’t get driven more than a couple of times a week. But I digress…

Earlier this week I listened to an episode of the Radical Personal Finance podcast (among a trio I have recently recommended) that spoke about a book that I am bound to read in the near future: Dr. Tom Stanley’s The Millionaire Next Door. In Episode 161, Josh Sheats pays tribute to the lessons learned from Dr. Stanley’s writing, and mentions how his work has affected his own life and philosophy regarding money.

Throughout the hour-long recording, a number of very interesting statistics were mentioned (as it appears that the late Dr. Stanley’s work was quite numbers-intensive). Here’s one that really jumped out at me:

“…half of the millionaires in America [at least back in 1996] do not live in “high-status” neighbourhoods…now that means that half of them do, but half of them don’t…your house actually drives many of your expenses…”

Joshua Sheats, Radical Personal Finance

The house and the neighbourhood where we choose to live often exert some strong yet subtle pressures on us to lead our lives in a certain way. This affects the financial decisions we make, which in turn affects the amount of wealth we have and can accumulate.

Flip back to my earlier comments – if I didn’t need a car (my second-largest monthly expense), I would be freeing up significant cash flow that could be diverted toward investment opportunities. If I lived further from where I work, then I’d probably need to use my car more, thus consuming more money-munching gas. Taking a holistic view of things, by driving more and walking less, I’d be leading a less healthy lifestyle than I do now. Clearly, it’s not just our personal bottom line that is significantly altered by our housing decisions.

Josh continues to explain that often times the types of cars that your neighbours drive will influence the kind of cars that you in turn buy. Or, if everyone is redoing a certain part of their house (let’s say…the roof or driveway) every five or six years as opposed to every ten or twelve years, you may be tempted to do the same. “Keeping up with the Joneses” is a popular slogan used to describe this phenomenon, but the commentary from Dr. Stanley goes a bit further and would suggest that we are in control of how much exposure to this mentality we may face.

Of course, the simplest thing to do to treat this issue of competitive consumption is to simply tune out the spending habits of those closest to your dwelling…but is this really that easy to do? I’m not sure if I can really validly comment on this, because I’m not a homeowner.

What I will say as part of my own opinion is this: for most individuals and even for most families, there is simply no need to live in a large and lavish house. This article in the National Post may raise a few millennial eyebrows:

  • Throughout the mid-2000s the average size of a house in Canada was 2300 square feet.
  • In 1975, the average house size was only 1075 square feet (the Boomers grew up in houses half as small as the ones they live in now!)
  • Rolling back a little further, coming out of WWII, the average house size was actually less than 1000 square feet – this was at a time when the developed world’s population was beginning one of its greatest spurts of growth in history.

No need to even mention the well-known fact that family sizes have been declining for decades – it’s much more pertinent to ask: what the heck are people doing with all that extra space? Is it really necessary?

I certainly wouldn’t want to spend an excessive pile of hard-earned cash and/or limited time on elevated property taxes, mortgage interest, insurance, utility costs and maintenance work just for the sake of having an extra few hundred square feet to fill. Without a doubt, my preference would be to invest all that money and spend time with people that I care about in ways that are more meaningful to me.

There isn’t anything inherently wrong with housing as a general concept. A place to live is a basic need for every person in the world. Where people often get into major financial trouble is when they see extra bedrooms and bathrooms, or a double garage, as a “need,” when it’s really more likely just a “want.”

The grandparents of my generation were able to make their expansive families function in small spaces, while my parent’s generation opted to raise small families in expansive spaces. I’m appreciative of both generations (I sincerely love both my parents and grandparents), but think that my own generation will find its middle ground, stress less, and live better than it does now.



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