Is your home the cause of your financial issues?

Is your home the cause of your financial issues?

Written by Caitlin Wood
Last Updated November 24, 2015

Buying a home for the first time is a mile stone in any young adult’s life; it’s something that the average Canadian plans and works hard for. Buying a new home is more often than not a great investment and something we always encourage, but the important thing to remember is that buying a house is not always the best idea (even if it is a good investment) and it costs a lot more than you think it will.

We see this scenario a lot; a young couple or individual purchases their first home, they have a steady job and saved up for their down payment but after a year or two of home ownership they’re having financial issues and they don’t what went wrong. There are a multitude of reasons why you might be having financial issues but if you’re budget seems to be in order and you have your debts under control, it might be time to look at your home as the cause of your money problems.

Why Your House Might be Causing Your Financial Issues

The reality of owning a home is that it costs a lot, it’s not any more complicated than that. The cost goes beyond your monthly mortgage payment and if you’re unprepared you could find it difficult to deal with the never ending stream of expenses that you’ll encounter as a homeowner.

There are many reasons why people buy houses but one of the most popular reasons is because they’re tired of paying rent and not having anything to show for it. The idea of investing in property is extremely appealing and can be a great idea. Your bank and real-estate agent will definitely encourage you; they’ll provide you with all the right numbers and convince you that in the end you’ll be saving money or that you’ll make money once you decide to sell the house.

This is of course is all true but they may forget to include all of the extra costs associated with owning a home when they present you with the final numbers.

  • Property taxes, school taxes (which could be thousands of dollars a year depending on where you live).
  • Utilities including electricity, gas etc. (also depends on how large of a house you own).
  • Extra expenses like internet, cable, satellite, Netflix etc.
  • Repairs and maintenance (you own the house so if something goes wrong or breaks you have to pay to fix it).
  • New larger furniture to fill up your new larger home.
  • A lawnmower, tools and other home repair necessities (you’re now responsible for the upkeep of a house and lawn).
  • Snow removal service (if you live somewhere where it snows a lot)

All of a sudden your affordable monthly mortgage payment has doubled in price and a couple years into owing your home you’re having trouble staying afloat.

Unfortunately this is where the borrowing starts and then comes the debt. When we don’t have the cash to cover an expense borrowing the money, either through a credit card or a loan, seems to be the next best thing. This is of course how the financial issues start, borrowing money you don’t have to cover expenses you weren’t prepared for. This happens to the best of us and as much as we like to think we’re prepared, owning a home is expensive and unfortunately it can lead to financial problems and even debt.

The important thing to remember is that all these issues can be fixed, it will take some time and effort but you can turn your finances around and get back on track to having a healthy financial future.

Fixing Your Financial Issues

If you’re currently experiencing financial issues because the cost of owning your home is significantly more than you both expected and planned for, do not panic. Here are some steps you can take to get your finances back on track:

  • Reduce your expenses. Creating a budget and learning to reduce your expenses are the first things you should do as soon as you realize you’re having trouble meeting due dates or covering the cost of daily living.
  • Look for alternate ways to earn more money. Get a second job or sell items of value you no longer need or use.
  • Consider taking on a renter. The rent you collect could help pay for your monthly mortgage payments.

If making more money and cutting back on expenses it’s enough for you then you might want to consider something a little more drastic:

  • Sell your house. If you feel as though owning a house is altogether too much responsibility then selling it could fix your cash flow issues.
  • Consider seeking the help of professional. A credit counsellor or debt management program could help you learn to better manage your finances.
  • Apply for a consumer proposal. If you have a lot of debt then a consumer proposal might be a good option.
  • File for bankruptcy. This is of course a worst case scenario and should only be considered as a last resort. But if your financial problems are bad enough, bankruptcy could help you start fresh.

Financial issues can be caused by countless different situations and circumstances, but if you’re having trouble keeping up with your finances and you can’t quite figure out what’s wrong you should take a look at your house. Is it hard for you to make your mortgage payment each month? Is your bank account completely drained after you make a payment? Is your house a money pit that just keeps on taking? If any of these seems familiar then your home might be the source of your money problems.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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