A financial shock is coming for those who jumped into the housing market during the COVID-19 pandemic – The Globe and Mail

Opening the economy is going to be very educational for recent first-time home buyers.

the pandemic was the worst thing to happen to canada’s real estate market if you’re a buyer. But let’s not ignore a small benefit for first-time buyers who entered the real estate market over the last 17 months and had to deal with sky-high prices and blind offers. Pandemic lockdowns have given these buyers the opportunity to lower the cost of home ownership, much like professional athletes preparing for the season at training camp.

now, training camp is ending. The economy is gradually reopening as we slowly get the upper hand on Covid-19, and that means a shift to more normal spending from the reduced cash outlays of the lockdown period.

Recent homebuyers, start preparing now for the big spending days ahead. don’t get sucked into the vortex without a plan to manage your spending.

the rob carrick real life ratio is a guide to how much mortgage you can afford and meet other important financial obligations

The long-awaited post-Covid discretionary spending spree is variously dubbed the Roaring 20s; revenge spending; yolo, well you only live once; and muflt, to make up for lost time. A recent personal finance column warned about the risks of indulging in this spending in ways that increase debt. the smart splurge is one you can pay for with your savings.

But returning to a more normal life will also exert more subtle financial pressures. even without big trips and other purchases, you’ll spend more.

A return to a more normal life means the resumption of non-discretionary costs, such as childcare and transportation. Have you noticed the price of gasoline lately? the gasbuddy website shows that the average price per liter across the country has gone from about $1.10 in early 2020, before the pandemic hit hard, to about $1.35 recently.

If you’ve been getting a car insurance discount for minimal driving during the pandemic, you’ll want to let your insurer know if you’re getting back to normal mileage. costs will increase.

Clothing is an example of an expense that straddles the line between discretionary and mandatory. your work and formal attire has been frozen for 15 months. Is it ready to go or will you need to upgrade or freshen it up to look presentable at the office or at events like weddings?

a recent covid spending tracker from rbc economics featured the headline “canadians continue to delay clothing spending plans”, with a chart showing how spring shutdowns kept 2021 clothing spending well below pre-pandemic levels.

resuming socializing will also change your spending. If you meet friends on a patio for a drink, expect to pay double or triple the cost of buying alcohol and drinking at home. takeout meals have gone up in price, but are still below the cost of a restaurant bill that includes alcohol and tip.

Stores and malls that are reopening will reintroduce you to the lure of impulse buying. browsing amazon and other websites lacks the tactile thrill and immediate gratification of seeing something you like and then holding it in your hands.

Combat the power of retail with a “back to normal spending plan” for the home. make a list of expenses that will arise or resume in a more normal world and strategize how to absorb them.

You may find some savings on pandemic expenses that will no longer be needed. How many subscriptions to online streaming services have you acquired in the last year, and how many will you need if you have something to do other than watch TV? There may also be room to cut some of the fat from grocery bills if food and cooking lose some of their importance as emotional support.

One of the financial realities of going back to normal is that there will be less money to save. Canadians who were lucky enough to keep their income intact during the pandemic were able to save an estimated $200 billion in the last year as a result of being stuck at home and not out in the world.

Economists speculate that the amount of money saved in each paycheck will slowly decline due to lingering concerns about the economy. But recent homebuyers may find that a switch to normal expenses leaves them with little or nothing to save.

Such is life when you buy a home in today’s real estate market. Actuary and author Fred Vettese has an upcoming book on how young homeowners can juggle a mortgage, childcare, and retirement savings. stay tuned.

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