Life runs on one clock, money runs on another

Being a parent, I was fascinated—so I did the polite thing and kept listening in as discreetly as possible. As they named different communities and speculated about who lived there, I noticed one defining factor doing all the work in their determinations: the homes.

“Yeah, that area probably has younger families because there are mostly townhomes.”

“Older kids, possibly in high school, in that area because the homes are mostly single-family detached homes.”

I desperately wanted to interrupt them. Recognizing that inserting myself into two strangers’ conversation probably wasn’t the polite thing to do, I decided to write an article about it instead. Because here’s the thing: their logic made complete sense. And that’s exactly what I found so interesting.

The life we’re supposed to progress through

For the sake of level setting, let’s play out the scenario those two women were benchmarking against.

You’ve started your first job, or perhaps you’re a young couple in your twenties looking for your first home. You scrape together a down payment, maybe borrow a little something from either set of parents, and land your first condo apartment. It’s just right: not too large a commitment, and enough breathing room to get the hang of home ownership while still allowing you to dream.

A few years go by, work and life settle into something stable, and you’re ready to have kids. 

You’ve built some (but not a lot of) equity in your home, and you still have some down-payment savings to catch up on. Somewhere in the next two or three years, toddler in tow, you upgrade to the townhome. It isn’t necessarily easy, but you’ve built the credit, accumulated some equity, and saved enough to make the switch possible.

Let’s be honest: this probably isn’t your forever home, either. Maybe another child comes along and the townhouse starts to feel like a squash and a squeeze. If the market cooperates, you rinse and repeat what you did the first time: sell, pull out the equity, add whatever you’ve managed to save, and, perhaps by the skin of your teeth, end up in a detached single-family home.

Condo. Townhome. Detached house.

Young couple. Young children. Older children.

Lay the two timelines beside each other and the assumptions I overheard suddenly make perfect sense. Your home stage roughly tracks your life stage. Except, increasingly, it doesn’t.

The two clocks

I’ve been thinking about that conversation ever since, and I’ve started imagining our financial lives as being governed by two different clocks.

The first is our life clock, and it measures the things that happen simply because life keeps moving: we get older, careers progress, we get married, perhaps, children arrive and grow up. Parents age. Retirement, which once seemed impossibly far away, gradually gets closer.

Then there’s our financial clock, which measures something different: the amount of time we’ve had to build credit, accumulate savings, earn home equity, contribute to retirement accounts, progress through a career and allow compound growth to do what compound growth does best.

When everything goes roughly according to the traditional script, those two clocks move somewhat in sync. You start earning money when you’re young and start building credit. Maybe you buy a small property and accumulate equity while your salary rises and you contribute to retirement savings. Your family grows and eventually you need more space. Conveniently, you’ve also had more time to accumulate the money required to pay for it.