Old-school financial advice that no longer applies to modern day life
BNN Bloomberg
Buying a starter home, living on one income and staying in the same job for 40 years — life was very different for older generations and many young people have realized what worked for their parents doesn’t necessarily work in today’s modern world.
As younger Canadians continue to face high housing costs, slowing wage growth and other challenges, age-old financial adages have become outdated, forcing a rethink of what smart money management looks like today.
Here are some common rules of thumb for money management that financial advisers say need re-examining.
“If you’re trying to stick to this rule, you can only afford to buy a home that’s $500,000, which is well below the average across the country, and it doesn’t go very far in most major cities,” said Jason Nicola, certified financial planner at Vancouver-based Nicola Wealth.
He cites research that shows just how much things have changed from previous generations.
The home price-to-income ratio has steadily grown over the past several decades. Data shows that in the early 1980s, the home price-to-income ratio was about two to three. Now, the ratio sits closer to six or seven.
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