Most of us have at least a vague vision of a dream home we’d like to buy in the future. It might be an upscale condo in a big city, a relaxing beach house, or simply a nice home in a suburban neighbourhood. Whatever the case, it’s a place we aspire to find or create one day, possibly even to live in during retirement.
The trouble, of course, is finding a way to bring the dream to life in a financially responsible way. Most of us are inclined to push that vision of a dream home toward the upper end of what we could conceivably afford, which makes it a challenge to bring about reality. Particularly if we’re talking about a potential retirement home though, a little bit of diligent long-term planning can help to put you in a better position to fulfill the dream.
Here are four steps we’d recommend.
1. Start Now
“The key to achieving success is the ability to take action.” That’s actually a quote from another article you may have read here, on the pipedream of perfection. It speaks to the important notion that one of the most important parts in any effort is to go ahead and get started. And this should absolutely apply to your effort to one day fund a retirement dream home as well. If you have a vision in your mind, and you know you’ll need to work hard to afford it, it’s wise to start making general plans and setting aside money as soon as you can.
2. Keep Your Retirement Fund Going
If you do have a retirement fund going — likely an RRSP if you’re based in Canada — it’s also important to keep it going without interruption if at all possible. This is essentially because withdrawing your RRSP early causes you to lose the power of compounding interest, essentially reducing the power of your savings. Of course, if the money is needed for an emergency, you’ll have to assess the option. But so long as it’s possible, leaving your retirement fund untouched (and adding to it regularly!) puts you in the best position to have a well-funded retirement, and possibly afford that dream home.
3. Plot Out the Details
If you’ve got many years to go before you’re buying a dream house, you have plenty of time to think about the specifics. But it’s never too soon to start! To begin with, there are plenty of common dream home features people tend to generally agree upon — things like ample kitchen space, walk-in closets, energy-efficient appliances, and so on. And from those, you can really start to flesh out your vision in more detail. This is something you should enjoy doing, but it’s also a way to gradually come up with a more specific idea of what the home might cost. This in turn will help you with your planning.
4. Upgrade Your Current Home Strategically
You should also keep in mind that if you eventually move to a retirement dream home, you’ll presumably be selling the home you’re in now. Naturally, that can bring in a significant chunk of the money you’ll need to purchase the new property. In the meantime, you can maximize the resale value of your home by making sure that any upgrades you invest in are strategic and worthwhile. There are actually a lot of common home improvements that don’t do much to enhance value (such as landscaping decisions or a new roof). But others — like a kitchen or bathroom remodel — can make the home all the more valuable. In the end, the more your current home is worth, the more you’ll be able to contribute toward the next one.
Being able to afford your dream home can take a lot of work, and a lot of people wind up having to compromise when it comes time to move for retirement. By preparing early though, you can increase your chances of securing the exact property you want later in life.