Reader Case Study: Starting From Scratch In Canada; Where Do I Go From Here?
Welcome to this month’s Reader Case Study in which we’ll address Alison’s questions on how to map out her financial future. Case studies are financial dilemmas that a reader of Frugalwoods sends to me requesting that Frugalwoods nation weigh in. Then, Frugalwoods nation (that’d be you), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study.
P.S. Another way to get support on your financial journey is to participate in my free Uber Frugal Month Challenge! You can sign-up at any time to join the over 18,900 fellow frugal sojourners who’ve taken the Challenge and saved thousands of dollars.
I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not to condemn.
With that I’ll let Alison, this month’s case study subject, take it from here!
Hello Frugalwoods nation! My name is Alison and I’d love to hear from you clever people about how you’d move forward if you were me. I’d summarize my situation by saying I’m basically starting from scratch, what with achieving a positive net worth (sort of) this past March, and I’m not sure how to get to where I want to go from here. I just turned 29 and I live in the Canadian prairies.
I’m a museum conservator and I hold both masters and bachelor’s degrees in the field. My job is a government position that comes with typical government characteristics: its reliable and stable with reasonable pay, but little chance to advance (in my view), and a pension. I went to university straight out of high school and did some paid internships for several years before I secured this job two years ago. I never really saved anything as an intern and it’s only in the past year that I started paying attention to my budget with an eye towards longer term goals.
In addition to my day job, I run a small Etsy shop in my spare time and right now it’s more a method for selling old costumes I’ve made over the years as opposed to a sustainable business. I see myself running out of product in a year or so. I’m slowly developing another side business in conservation, but I’m so busy that I find it challenging to devote time to it. Additionally, the client base is small. I do a bit of sewing for people as well but I’ve found it difficult to charge people an amount I feel is fair. Maybe I make sewing look too easy!
I’m a homebody and I love puttering around and working on projects. These days I make almost all of my own clothes. It’s tons of fun and such an amazing creative outlet. I cook from scratch and spend quite a few hours every weekend prepping my food. I’m also playing around with a little balcony garden and growing some vegetables–or trying to, at least!
I’ve done various forms of weightlifting over the years and right now I’m having a lot of fun with CrossFit. I go to an amazing gym that focuses on creating a community of supportive people. I’m not that great at it actually and I’m no competitor! But I’ve made slow progress since I started last fall and it’s been a huge confidence builder for me. Eventually I will be able to do pull-ups unassisted!!
Where Alison Wants To Be In 10 years:
- I want to buy a home. In ten years, I want to be in a small detached house that I purchased with a sizable down payment (~25% ideally) and also have a nest egg saved up. Doing the math, it looks like I should have a down payment saved up in about five years and also have my student loan paid off, which is from my parents and has 0% interest. At that point, my take-home pay should be enough to cover the additional expense of owning a home. I also estimate that this is when I’ll reach the top of the pay scale for my job.
- I expect to be able to afford a home with good bones, but which will need some work, and I’ve budgeted for minor renovations in my calculations. I appreciate homes with character and I’m trying to educate myself about how much work and expense the renovations will require. Based on my estimated home-owner budget, I will only have a few hundred dollars leftover every month; hence, my savings rate will be small. Assuming I buy a home, I estimate I’ll have about $20k in savings in ten years.
- Honestly much the same as now, but a bit more expanded. I’d love to have a nice garden, a sewing room, and a cute home. Travel is not a priority for me at all. Family is, however, and I travel to my hometown every year at Christmas. I wish I lived closer to them, however, I live where the work is. In my specialty, permanent positions are rare and I’m lucky to have the job I do. Something might open up in my hometown in the future and I’ll pursue that if it does. I want fitness to still be a part of my life as I love going to the gym. I’m not sure I’d feel the same with a home gym but that might be something to explore. I was just gifted a bike and am very excited to start commuting to work by bike some of the time. In this imaginary future, I’ll prioritise my commute when looking for areas to buy a home.
- I would love to become more involved in my local community, perhaps as part of a community league. Volunteering with girl guides is on my bucket list as well. I don’t know how I’ll fit all that in though since I don’t have time for it now! I’d also love to be able to buy higher quality, local meat products and give more money to charity.
- I enjoy my job and I have a talent for it. I would like to expand my role and do more treatments, more research, and write more papers. I want to collaborate with curators and put wonderful objects out there for people to enjoy. I definitely see all of these things happening for me if I stay where I am. I’d also like to explore private work as a method for boosting my income and possibly gaining some freedom in later years. It would be an interesting mix to work part time for my institution and supplement my income with private work. I have doubts that there is enough of a market to support this, however, and I don’t see the business building up enough in the next ten years to replace my current income.
- I do have a few other ideas to generate more income. My favourite idea is to develop a line of PDF and printed sewing patterns. The PDF angle is great because it’s passive income once the product is created. Paper patterns, on the other hand, are a different kettle of fish. I would need to learn a lot to make this happen: CAD, logistics for printing and distributing paper patterns, pattern grading, not to mention designing the garments themselves. I have one pattern I would like to put out there as it’s a great beginner project that’s simple and very wearable… Anyway this is something I have a lot of passion for, but the skill gaps and time needed to make this happen seem like a big barrier.
Take Home (Net) Income
|Monthly after-tax income||$3,688.35||After all deductions, taxes, pension etc|
|Annual Total:||$44,260.17||Includes day job and side hustles|
|Rent||$1,150.00||I’m moving at the end of August and looking for an apartment that charges $850 or less in rent, which will help a lot|
|Hobbies, entertainment, dining out, clothes, etc.||$390.00||This includes eating out, hobbies, entertainment, and anything not captured elsewhere. Clothing also comes out of here, but I sew most of my things these days.|
|Student loan repayment||$300.00||Payment on my 0% interest rate student loan that I received from my wonderful parents.|
|Groceries||$200.00||Pretty consistently within this. I use my credit card rewards to supplement my grocery budget to the tune of about $400 per year.|
|Household||$160.00||Laundry, cleaning supplies, other consumables.|
|CrossFit||$157.50||Uggg I know it’s expensive, but this has so much value to me. I’m there four times a week and have made some great friends. There’s a chance I might be able to barter some of my sewing for a membership and I’m going to look into that.|
|Travel||$110.00||My yearly flight to my hometown at Christmastime takes up most of this.|
|Car Insurance||$106.00||Liability and collision. I’ve saved enough to pay in one lump sum when this comes for renewal in August. I’ll look for the best deal and hopefully save some money.|
|Car sinking fund||$100.00||For repairs and an eventual replacement (in the distant future, I hope).|
|Gas||$75.00||I usually don’t quite hit this this total.|
|Gifts||$75.00||Christmas also comes out of here. I try to make gifts for people as much as possible. For example this month I’m making some receiving blankets and a simple dress for two different sets of friends who had babies recently. About $30-$35 each project.|
|Cell Phone||$49.95||Freedom Mobile, lowest cost option in my area last time I checked. Not great competition between providers up in Canada but I’m open to suggestions.|
|Internet||$34.60||Lowest cost option in my area. Really not bad considering the state of Canadian telecom companies.|
|Charity||$30.00||I’d love to increase this.|
|Pension contributions||$35,114.00||This money is essentially inaccessible to me until retirement age and is better measured in payout per year, I guess? Not sure how to value this.|
|Emergency fund||$2,350.00||Currently refilling this, aiming for $7,500 and should be done by December.|
|2015 Kia Rio hatchback||$15,000.00||Low mileage, bought it new for my first car. I would not do that again, but you live and learn. I paid it off in April.|
|Student loan||$28,742.00||Loan from my parents for my higher education. 0% interest rate.|
Alison’ Questions For You:
- How do I effectively plan for my longterm financial future as a single person?
- I’ve written my 10-year plans from the perspective that I’ll still be single, which is a defining factor in planning my future. It seems like most successful FIRE (financially independent/early retired) folks are paired up and, while I’m seeing someone right now, I can only truly plan for my future as a single person. As I see it, the numbers boil down to me working for an additional 27 years and retiring with a reduced pension at age 56, a small nest egg (~$250k) saved up given some additional income, and a paid-off home. I’d probably have a yearly income of about $40k at that point. It’s not a bad plan, but it feels like I’ll be spending my whole life working. Perhaps that’s just the reality of being a single-person household?
- My pension: help me learn to appreciate it!
- I’m surprisingly resentful of my pension these days. I lose about 14% of my pay to this plan and the legislation surrounding it only allows me to take a payout that would be converted to an annuity with almost the same restrictions as the pension itself but with higher expenses. Not a great financial move. I was unprepared for this high of a deduction coming out of my paycheque as it’s double my last place of employment. In light of this, I rented an apartment that I thought I could easily afford but that’s really too high a percentage of my take-home pay. Lesson learned: ask what your exact take-home pay is before building a budget based on a new job! I feel like I have to live in the real world of dollars and cents while a big chunk of my money disappears into a plan that promises to take care of me in the future. I feel trapped and am impatient to move onto the next phase of my life, which I view as homeownership. I’ll be 34 by the time I look for my first home and I can’t see a way to get there faster. Any advice on how to think about my pension more positively?
- Should I/could I save more?
- Maybe I’m just not frugal enough to expect to move at an exceptional pace (I’m looking at you CrossFit). I could work very hard on my side hustles, but that would take away from all the other things I do with my spare time and that’s a choice I’m making and maybe I’m not willing to give that time up. Maybe that’s just the way it is and I should try to be more patient. I know I need to practice more gratitude and I’m working on that. Any advice on whether or not you think I could or should save more?
- How’s my savings, investments, and first-time homebuyers plan?
- I’ve opened an account with a low-cost broker here in Canada and it’s sitting empty at the moment while I top off my emergency fund. I’ve opened a Registered Retirement Savings Plan (RRSP) specifically to take advantage of the first-time homebuyers plan the Canadian government offers. An RRSP is funded with pre-tax dollars and is taxed as income when you take it out unless you qualify for this homebuyers plan. Essentially, you save your income tax rate (mine is 21% I believe) on this transaction. You are required to repay the amount you withdraw within 15 years, which I feel is totally doable and I intend to repay it much faster than that. I would lose the gains on this money during the repayment period as well, which reduces the value of using this plan somewhat, but I still feel it’s worth it. The alternative is a Tax-free Savings Account (TFSA) which is funded with after-tax dollars and the gains grow tax-free. My emergency fund is in a TFSA. There are no restrictions on withdrawing and you don’t lose the contribution; however, you have to wait until the next calendar year to refill that contribution room.
- Does this approach seem like a good idea? It seems to be a popular program but, as with saving for retirement in general, people are bad at repaying the homebuyer’s loan. If there’s one thing I know about myself, it’s that I will have the discipline to see a plan through if I can.
Thanks in advance, Frugalwoods nation!
Mrs. Frugalwoods’ Recommendations
First off, I want to say that I don’t think Alison is starting from scratch at all–to the contrary, she’s doing a great job! Alison has already completed the very challenging first steps of tracking her spending, making longterm financial projections, and creating a budget to enable her to reach her goals. That’s pretty advanced right there! So a round of applause for Alison in her efforts to map out her future. I understand that she wants to be further along on her journey, but I also want her to pause for a moment to congratulate herself for everything she has accomplished.
The real failure is when we don’t plan at all–when we don’t know how much we’re spending, when we’re unsure of how we’re going to pay off our debt, and when we have no articulated longterm goals and no sense of how to hone our finances in order to achieve those aims. And if that sounds like you? Don’t stress. The first step is to track your spending like Alison has done. Without knowing exactly where your money goes every month, there’s no way to craft savings, debt repayment, or investment goals. If you need to start tracking your spending today, I use and recommend Personal Capital for this purpose because it’s free and easy. If you’d like to know more about how Personal Capital works, check out my full review.
Savings Accounts Side Note
One of the easiest ways to optimize your money is to keep it in a high-interest savings account. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources because your money is sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:
- Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
- Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.
And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while sleeping. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, here: The Best High Interest Rate Online Savings Accounts.
While Alison has already done the yeoman’s work of articulating her longterm aspirations, I sense some uncertainty in her plans. I encourage Alison to do a bit of soul searching in order to gain greater clarity around her goals. Alternately, it’s entirely OK to say “I’m not exactly sure” and to continue stashing away money for the eventual day when her goals do crystallize. No one has ever wished they had less money once they realized what their dreams are. Saving for the future is a way of shoring up your ability to take advantage of fabulous opportunities–and yes, to manage the challenging pitfalls–that life will inevitably throw your way.
Retiring Early Isn’t For Everyone
Something that surprised me was Alison’s mention of her concern over working for most of her adult life. Since she articulated that she enjoys her job and is very good at it, I was surprised to hear she wanted to quit. Retiring early doesn’t need to be your goal in order for you to live a financially independent lifestyle. Frugality is a means to accomplish early retirement, but it’s also a means to accomplish a fulfilling, financially stable life where you do happen to work (that’s what I do, after all).
The difference between a frugal person working and a spendy person working is that the frugal person is not reliant upon their paycheck for their survival. It’s not that a frugal person hates their job, it’s that they’re ensuring they won’t starve or be without a home if they happen to unexpectedly lose their job one Monday morning. Frugality is the ultimate personal insurance. It’s also what would enable Alison to one day start her own sewing or conservation business if she so chose.
Alison shouldn’t consider working to be a failure or a bad thing–especially seeing as she’s very happy with the work she does. But I do agree with her that having a nest egg as a buffer–and not living paycheck to paycheck–is a much more financially viable path.
If Alison decides that early retirement is in fact a true goal, then she’ll need to dramatically reduce her spending (everything unnecessary to survival will have to be eliminated) and increase her income through either side hustles or a higher paying day job. That’s the trade-off she’d need to make and she may decide it’s not worth it since she’s happy with her job to begin with.
Time Use Prioritization
Something that stood out to me in Alison’s story is that she feels she doesn’t have enough time or money. I think many of us feel this way and what I always recommend–and what works or me–is the ethos of ruthless prioritization. And I really do mean “ruthless.”
Alison should sit down and perform an audit of her time, in much the same way as she’s performed a thorough and excellent audit of her finances. I’m of the belief that you will absolutely make time to do the things that matter most to you, but it requires an honest accounting of where your minutes and hours are spent every single day.
It’s so easy to let the precious resource of time slip through our fingers without even realizing where it’s going. But with concerted prioritization, and a system in place for every day, Alison should be able to bring her time use into alignment with her priorities.
Parallel to the conversation about time usage are Alison’s side hustles. I can’t tell if she wants to build up a sewing and pattern making side hustle or if she feels she should for the supplemental income. I encourage her to reflect on this and on whether or not she wants to do it. And if she genuinely wants to do it? She can–and should–create that time and space in her life.
Conversely, if she’s not truly passionate about it, don’t sweat it. Let it fall by the wayside while she focuses on the things that do deeply matter to her. How we spend our time is the summation of our lives–spend it as you wish and as it fulfills you.
It’s not exactly easy to build up a side business while working a full-time job, but as someone who did it, I can tell you that it’s entirely possible. I used to wake up at 6am in order to work for two hours on Frugalwoods before going to my office job and then I put in another few hours in the evenings and much more on the weekends.
I had to restructure how I allotted my time and I let a bunch of stuff go by the wayside: I stopped watched TV, I stopped painting my nails, I stopped cleaning the house so often, I stopped shopping–I basically cut out everything that wasn’t bringing me lasting fulfillment. I didn’t cut out my yoga practice or my hiking, because those are chief priorities for me. So I’m not recommending Alison chop everything out of her days, merely that she do a comprehensive overview of how her time gets used.
Buying A Home
Since this sounds like a top priority for Alison, I recommend she start researching real estate in her area now. She may have already begun this process, but I suggest going to open houses, browsing listings online, and tracking asking and sale prices of homes in her price range. Getting a feel for the market early on is a fabulous way to ensure you’re ready to pounce when the right property comes up.
In addition to the practical benefits of researching home buying in advance, it’s also a way to keep her goal top of mind and to feel as though she’s making progress even though she won’t be ready to fork over a downpayment for another few years. Mr. Frugalwoods and I looked for our first home for a good five years before purchasing, which turned out to be an excellent strategy.
To Alison’s point about looking for her first home at 34, I think that’s fantastic! That’s an impressive age at which to buy a property solo and Alison shouldn’t feel bad about that for a moment! Rather, that’s a point of congratulations!
My main comment on Alison’s expenses is that it’s all about priorities. She doesn’t have a ton of discretionary spending and while she certainly could save more, it’s largely a question of if she wants to. Since she has mapped out a solid financial plan at her current level of spending, she should feel confident in sticking with that.
My main concern is that she’s very dependent on her paycheck at present and she mentioned that permanent positions are rare in her field. If she were to unexpectedly lose her job, what’s her game plan?
I LOVE that Alison is in the process of building up her emergency fund–that is the #1 hedge against financial ruin. Way to go, Alison! I do want to caution, however, that her projected emergency fund goal of $7,500 would only cover 2.5 months worth of living expenses at her current spending rate. That’s not a whole lot of runway in the event of a job loss. I’d advise either upping her emergency fund total or reducing her expenses.
On the other hand, Alison is very wisely looking for a cheaper apartment to rent, which I commend her for wholeheartedly. She’s right that she’s spending way too much of her take-home pay on housing and reducing that is one of the biggest impacts she can have on her savings rate. Kudos, Alison!
In great Frugalwoods tradition, let’s take a run through all of Alison’s spending:
- Rent: as previously mentioned, Alison is an absolute rock star for finding a less expensive apartment. Woohoo! If she’s able to find a place that’s $850/month, she’ll save a whopping $300 per month ($3,600/year).
- Hobbies, entertainment, dining out, clothes: at $390, this is a fairly steep category. However, this really comes down to Alison’s priorities. If these are all things that bring her happiness–and she’s aware of the financial trade-offs inherent to spending this money–then that’s fine. Conversely, if she wants to move faster towards her home ownership goal, this is a category ripe for cutting.
- CrossFit: I don’t recommend Alison do away with this since she derives so much joy from it. However, she mentioned she might be able to barter some of her sewing for a free membership, which I highly recommend exploring. And if not her sewing, perhaps there’s some other arrangement she could work out? Volunteering at the front desk? Cleaning the gym? I used to volunteer at the front desk and take out the trash at my yoga studio in exchange for free classes and I’ve heard of similar arrangements from readers at their studios/gyms. Worth asking at the very least!
With all of these items, and everything else in her budget, it really comes down to a question of priorities and how quickly Alison wants to achieve her house-buying goal. There isn’t a right or wrong answer, just different time frames.
Alison’s Specific Questions
1) I think Alison is extremely smart to plan for life as a single person. If she does end up in a longterm relationship, then hopefully that’ll just add to her net worth/family earning power. But either way, she’ll have set herself up for success. There’s no downside to making these plans on her own. Being in a stable financial position is great if you’re single and also great if you’re married.
2) Alison’s pension is a wonderful benefit of her job and, while it’s tough to appreciate those longterm savings, they are a boon. The power of compounding interest in on her side with this one and she’ll be sitting pretty when she retires. There’s also a lot of peace in accepting things you can’t change. If she’s locked into this pension plan–which is sounds like she is–then don’t waste energy militating against it. Accept it, forget about it, and move on.
3) As I noted above, this is really about priorities and the timeline in which Alison wants to reach her goals.
4) I don’t know much about these Canadian-specific plans, but I know we have loads of Canadian Frugalwoods readers, so I encourage you all to chime in with your relevant experience. My main comment here is that Alison needs to ensure her brokerage truly is low cost. Fees will cripple your net worth over the lifetime of your investments if you’re not careful. For reference, in the US, low-fee index funds through Vanguard have an expense ratio of 0.04%, which is considered very low and I don’t recommend spending anything more than that. In terms of Alison’s ability to repay within the 15 year timeframe, I have no concerns about her ability to do so–she is organized, efficient, and on top of her finances, so I wouldn’t see that as a reason not to engage in that plan.
In summary, I advise Alison to do the following:
- Keep building up her emergency fund and consider if an amount greater than $7,500 would be appropriate since that would only cover 2.5 months worth of living expenses.
- Perform an audit on how she uses her time to identify areas where her actions aren’t aligning with her priorities.
- Do some soul-searching on whether or not early retirement is truly a goal–it absolutely doesn’t need to be. If it is, however, Alison will need to dramatically slash her spending and increase her income either through side hustles and/or a higher paying job.
- Decide if the sewing side hustles are a priority and, if they are, make them happen. If they’re not, she should turn her focus to things that are priorities.
Ok Frugalwoods nation, what advice would you give to Alison? She and I will both reply to comments, so please feel free to ask any clarifying questions!
Would you like your own case study to appear here on Frugalwoods? Email me (firstname.lastname@example.org) your brief story and we’ll talk.
Updated September 20, 2017 with Alison’s Decisions:
I really appreciate your hard work and insights and those of the readers. I’ve re-read the post a few times and it still makes me pause to think.Well my big move to a cheaper apartment was disastrous. I applied myself to watching the market, evaluating what was important to me and what wasn’t. I applied for, and was accepted for, an apartment that had everything on my list of needs and some of my wants. Unfortunately it also had a cockroach infestation. I am so lucky that I built redundancy into my plan and had an overlap of a few weeks between my old apartment and my new one. Even with this, I ended up with three business days to find a new place to live which was ultimately unsuccessful. I ended up staying a friend for a few weeks, and it was uncomfortable for both of us. August was crazy and horribly stressful. The property management company has also been pretty terrible to deal with although I suppose I should feel lucky they’ve let me out of that lease because legally they didn’t have to or could have made it far more difficult. I’m still waiting on the return of my deposit cheque.So I’ve ended up in a lovely main floor apartment of a 100-year old house. I love it (it has a dishwasher!!) but there are essentially no additional savings to my monthly budget as a result of this move. But it’s safe, infestation-free, and close to transit for my winter commute. I’ve been biking to work whenever I can. We got snow today (in the middle of September) so I’m not sure how much biking time I have left. I’ve pulled back on some things that I love to make room for other things that I also love but equilibrium still eludes me some days. My main financial goal right now is that emergency fund. I have increased my goal to $10,000. I would really rather have $18,000 or six months of expenses. Honestly I don’t know if I have the patience to get there before starting to save for a house. In any case I’m working to save save save. After all this business with renting and landlords and property management companies, home ownership could not come quickly enough.I’ve tried to give myself some slack lately, and allow for some more impulsive happiness in my life even if there’s a bit of spending attached. I biked to the farmers market and bought some flowers last weekend and seeing those on my kitchen table when I come home after work truly does make me smile.Thanks again,Alison
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Wow, Alison is doing a great job already! The Etsy items are gorgeous, I could see that business expanding if that is a passion/area of further interest.
I like your recommendation to ruthlessly prioritize your time. I am often amazed at how much time I waste. And I don’t realize it until I look back. When I prioritize my day and use my time wisely, I find more than enough time to pursue my passions and goals.
Good luck, Alison!
This case study spoke to me on so many levels. I, too, have a love-hate relationship with my pension (and my husband’s) seeing as the likelihood of us collecting in full from my state feels like a gamble. To keep perspective, we don’t factor it into our calculations, but we hope it’ll be an extra cushion when the time comes. I also struggle like Allison. We are chasing FI, not necessarily FIRE. In this amazing community, it seems strange to say we want to keep working. But I get so much fulfillment from teaching that I can’t imagine life outside the classroom. I also wanted to commend Allison for working charitable giving into her budget. I know the instinct for some people when they are looking to cut back is to cut that out. She seems to be looking to do the opposite. That really stood out to me 🙂
I don’t know that I can give a ton of advice besides to not just look at your time, but to look at your passions. She seems to have created and curated so many outlets for herself, which is a real asset. Maybe she could monetize one or more; or maybe it’s best to just love your passions as hobbies.
Regardless, best of luck, Allison. It seems like you’ve set yourself up really well and are going to keep moving forward.
I haven’t ever had a pension, but my parents do. I agree with Penny’s comment above – I’m not necessarily looking to FIRE, but rather financial independence is my main priority. I enjoy working and having an impact. It would be great to shift some of that focus to more personal things that I care about.
My advise is to continue increasing your income, whether it’s at your current job or starting a side hustle, reduce expenses like you’re allergic to them, then aggressively invest the difference. Find all possible ways to invest young to employ the power of compound interest in your favor.
Hi Allison, thank you so much for sharing your story! I think you are doing great job tracking your expenses and have set goals for yourself.
I think you have made the right decision to move to a cheaper place since the current rent takes up a large chunk of your paycheck. I agree with Mrs. Frugalwoods that your hobbies budget can be cut down a bit. $100 saved a month is $1,200 a year.
Also, I’d check elance and other freelance website to try out different side jobs to see what you really like and are good at. You can then phase out your dependence on your paycheck. Best of luck!
These words were very important in your text “The difference between a frugal person working and a spendy person working is that the frugal person is not reliant upon their paycheck for their survival. It’s not that a frugal person hates their job, it’s that they’re ensuring they won’t starve or be without a home if they happen to unexpectedly lose their job one Monday morning. Frugality is the ultimate personal insurance. It’s also what would enable Alison to one day start her own sewing or conservation business if she so chose.”, sometimes it feels like we lost on something not to be in a position to retire early but hey, its not the end of the world especially if your job is not too boring. Thank you.
Hi Allison, I’m also an avid sewing and share your interest in designing patterns. Have you heard of the Pattern Workshop online course for creating PDF patterns? I haven’t yet but have heard good things about it! There’s also lots of useful information in the MakerStyle and Crafty Planner podcast episodes that interview pattern designers, if you don’t yet follow either of those.
Best of luck to you! It sounds like you’re on a good path!
Love the Makerstlye podcast! The recent episode on paper patterns totally changed my view on producing them. I haven’t heard of the Crafty Planner one though, I’ll check it out. Thanks!
Hi Alison! Good job on the thorough analysis you did of your expenses! And you have fabulous hobbies.
You mentioned you would want to repay the amount taken out of your RRSP for your home purchase faster than the 15 years deadline. I thought I would do that too, and so I always contributed more than the minimum amount of repayment requested. But I decided to only allocate the minimum amount to the homebuyer’s plan repayment, and the difference between my RRSP contribution and my homebuyer’s plan repayment gave me an RRSP tax deduction in the current year. I think there is no real advantage in repaying faster – as long as you still contribute to the RRSP as much as you can!
Also, great idea to take advantage of the TFSA – I am amazed that not everybody in Canada takes advantage of it. Cheers!
Wow. For someone who is “starting from scratch,” you are doing excellently, Allison! I’m very impressed! Thank you for sharing your story. I admire your side hustle and your prioritization of the things that matter to you (CrossFit, family, etc.). It’s also refreshing to know that you desire to give back to the community as well. People can be so hyper-focused on their personal, more selfish goals, such that giving can oftentimes fall on the back burner, or not be in the picture at all.
I encourage you to keep doing what you are doing. Keep your priorities in line with your values and try to save whenever possible. I love that you are seeking to save around $300 on rent per month in the future. I’m sure you will find that savings will add up quickly.
I wish you the best and have high hopes for you and your future!
It’s great to hear Allison’s story! Allison, would it be possible to get a roommate, so that your potential $850 rent could become half that? Maybe someone from CrossFit?
I’m impressed that you’re so crystal clear on some priorities–CrossFit, not traveling. That’s wonderful that you’ve already determined two things that are and are not really important to you.
Since you love your job and are good at it, is there a way to become a consultant in your field? That might be a great way to earn extra income to help your progress toward saving for a house. Also, maybe you might consider a house with an “in law suite” or something similar that you could rent out on AirBnB? Just a thought.
Thanks for sharing your spending and your goals!! Good luck to you!
Hi Alison! I’m impressed with your level of financial reflection. You took a good, critical look at your current situation and are willing to ask for advice. Good for you!
I think your rent is the greatest category you can sacrifice in right now. Live small for a while to build up that nest egg.
Crossfit sounds very important to you so I would stick with that but do try to barter for a lower rate as Liz mentioned. Could you use scraps to sew some headbands for Crossfit?
Entertainment: I don’t know if part of that is eating out. If so, that’s a place to cut. Have friends over for potlucks. It’s fun and inexpensive.
Because you’re in a profession that doesn’t offer a lot of opportunity for salary increases you will have to beef-up your side hustles to increase savings as you simultaneously cut spending on rent.
Buying a home: don’t stress about this right now, Alison. So many people think they MUST own a home to achieve financial security but the truth is that if you buy a fixer-upper it can fast become a money pit and you do not have the resources for that at this point. There is nothing wrong with renting. I’ve bought several homes over the years and even with tax breaks and appreciation they did not all yield a positive return when sold. Don’t add the “must be a homeowner” burden to your list. Save like crazy right now for your emergency fund and keep at eye on the housing market but don’t worry about it.
You’re smart and willing to work hard. You’ll make it.
I have two pieces of advice for Alison.
1. Sell the car, buy one for $7,500, and out the excess j to your emergency fund. With a little searching, you should find a good deal on a $7,500 car and your monthly car budget will still cover repairs / replacement.
2. I know you mentioned a detached house, but when you are exploring at open houses, consider a duplex. This may not be much more house cost than what you are targeting, and would provide you a monthly income stream in addition to your day job for many years to come.
Thanks for sharing, Alison!
Selling the car is exactly what I came to say. When you have debt, there’s no reason to be driving a new car!
Her only debt is to her parents at 0% interest. The car is paid off.
I bought a near-new car 10 years ago, and love it. There have been times when I thought I should sell it and buy something cheaper, but it’s so reliable, it serves exactly the purpose I want and given how much cars drop in value after you drive them out of the salesyard, I figured I wouldn’t risk losing the peace of mind it gives me. I intend to keep it forever (until it or I die, whichever comes first!).
I’m with Liz — I bought a one year old used car, so not quite new but still decently pricey. I’ve had it 11 years and rarely had to spend much on maintenance. At this point, her car is paid off. It’s a sunk cost. To sell her car and buy another would take precious time, and she already says she doesn’t have enough time.
I like her idea of bike commuting to save on gas costs. Paying her insurance in a lump sum should also help save money over paying monthly.
I was also surprised when Alison mentioned feeling like she was going to be working forever since it sounded like she likes her job. I know I get caught up in reading about FIRE and then my husband reminds me that he likes his job and wants to see where his career takes him. And as a stay at home mom, I mostly love my job but also feel that my life would definitely benefit from some rewarding paid work.
I also wanted to make a comment about life being long. We met a woman at one of the national parks in Utah and she was turning around before the summit but she said she didn’t mind because she had done it when she had been there 25 years earlier when she was fifty. She was now in her mid seventies and doing the same vacation again because life can be long. If you stay fit and you are lucky you will still have a long retirement.
And one more thing, would you be able to work part time in the future when you are closer to financial independence and still like your job but want more time for yourself? That might suit you better than full on retirement.
Can you find some way to work in some paid work as a SAHM? I suppose it depends on your kids. I am *amazed* at Mrs. Frugalwoods. I’m a teacher, and I keep my kids home in the summer. Our daughter is three but only sleeps about 11 hours total and doesn’t nap. I don’t know when I’d get much work done.
I also get caught up in FIRE stuff before remembering that I enjoy my job. So I love that Mrs. Frugalwoods brought that up in the post. I think she accurately summarizes it — I just don’t want to be dependent on my job. I want to be able to leave if I need to without worrying about money. Thankfully, frugality helps with that.
I would like to say how awesome it is that you are taking control of your finances, especially as a single person! I could only imagine how hard that would be for me if I had to do that without my husband… On finding a house, do you have people who are willing to help you with the work and how much are you willing to do on your potential home? I’m not sure how your market is up there, but my husband and I bought a house at the age of 20 for dirt cheap. It was a piece of crap and we had to do without some of the things I call “luxuries” now (cabinets, flooring, etc), but it was a very fun learning experience and made us love that house much more!
Whatever you decide to do, good luck with your journey and try to enjoy each step of the way! 🙂
From everything that’s been laid out above, it sounds like you’re doing a great job already Alison! As a lady in my 20’s, I hear ya on the whole planning for the future thing. It’s tough. I just started to see someone and can’t guarantee he’ll be around in the future (although I certainly hope he will be!), so I’m planning the future as though I am single. It gets depressing, but you are doing way more for yourself and your future than most single women our age! I also sew so I think it’s fabulous you’re really getting into it. I would encourage you to work more on the pattern and sewing side hustles. It’s a rare skill these days and people always need clothes adjusted or altered. Good luck!
What really jumped out to me in reading Alison’s account of her situation is that she’s really built a life that she loves. At her age, many of us are still struggling to find meaning and fulfillment, but I really get the sense that she loves what she does- both for pay and as hobbies. That’s fantastic! And I think it really influences the strategy she should take. For someone that’s unhappy with their life, dramatic changes can often be necessary. For someone that’s doing well and is generally content, I’d say don’t sweat the small stuff. Take the advice of Mrs. Frugalwoods and the other commenters and look for ways to build a little extra breathing room in your budget and build yourself a cushion of financial freedom so that you never have to stress about losing your job. But otherwise, keep pursuing your hobbies, keep building a career that you love, and be proud of all that you’ve accomplished!
I love Alison’s story and the work she has done building a life that includes what is important to her.
What advice or steps do you all have for goal setting and soul searching to find your real priorities as Mrs Frugalwoods suggested to Alison in the post? I find myself doing very well at frugality, saving, etc, but haven’t been able to really articulate my why. I think I’m mostly intimidated by the idea of sitting down and looking inward, both bc it seems scary and also I don’t think I’d know where to begin asking questions.
I took some “soul searching” kind of classes in the past and we used a variety of methods for goal setting and soul searching. Journaling is always a good one- one exercise we had to do was write three pages each morning, and it had to be three pages, but it could be anything. I started with lists of things I needed to get done, and such, because it’s hard to write three whole pages, but eventually other stuff started coming out… long range goals, what was not important, what was vital, etc. etc. Try it- you might be surprised! Another exercise we did that really spoke to me was writing letters to myself- at 1 year out, at 2 years out, at 3 years out, at 5 years out, at 10 years out, etc. What was really fascinating was finding those letters much later and seeing how much of it had “come true”. Not necessarily in a fairy-tale sense, but once I identified stuff, I could work towards it. I don’t know if this will help you at all, but figured I’d at least throw it out there!
That’s great advice, Katharine! Another exercise I like is to write your dream bio–so basically what your ideal life would be as if you were writing out a professional bio.
Have you listened to the Slow Your Home Podcast? Brooke talks a lot about her Why and recently has had a short series about how to find your Why. One thing she did was write her eulogy. I even teared up listening to it. I think that series has been great for me and hopefully you find it useful too!
Just downloaded that episode! Thanks for the recommendation.
I love Brooke. Great podcast. As someone in her 60’s, I think she is wise beyond her years and has a lot of wisdom to share.
I should have said I am in my 60’s. Brooke is 30 something!
It might be worth considering looking at getting a roommate. That could help her cut her housing spending another couple hundred of dollars a month which could be very helpful.
Great job Alison! Sounds like you’re on the right track. Yay fellow girl guide and sewer!
Don’t forget you can invest in your TFSA. 🙂 I’d put a bit more research in to taking advantage of it. It’s a great tool!
Great job tracking expenses and mapping out a plan for your future, Alison! It sounds like you know what your main priorities are and it’s great to have that clarity. You mentioned home ownership as one of your goals. My advice would be to be sure you have a very realistic expectations about how much home maintenance would cost. When I first bought a house it was easy to underestimate the cost of diy projects because there would inevitably be some tool or piece of equipment I would have to rent or buy to get the job done. After living in my home for 7 years I sometimes think about how much more free time I would have if I rented and didn’t have all the maintenance. There’s an interesting blog I came across where a couple evaluated the amount of money they would need to save to own a home and then looked the opportunity cost of having that money tied up in a house. I think it was called Firecracker and was based in Canada. I’m not saying that you shouldn’t own a home if that’s truly where your heart is, but you just have to be sure you’re clear on what it entails. Best of luck to you!
Hi, you will love your pension as you get closer to when you retire! I am retiring in a year and then I can do something else if I want. People’s intentions can be that they will work until they are in their 60’s or 70’s but realty doesn’t always work that way. I work with many clients who physically and emotionally can’t work anymore and those without pensions have it rough scrambling until they get to 60 to get their CPP and 65 to get their Old Age pension. CPP at 60 isn’t enough to live on. It is a nice supplement. If you have a decent pension you probably won’t need to save a lot extra for retirement when CPP and the Old Age pension is added to it. Maybe do a quick calculation of how much money you would have to save each month to have the income that you will have from the pension. It might “scare” you into liking it. I guarantee that it will be more than 14%. If it is inflation protected it is even better. Do some research on the most tax efficient investments that you can have. You may not buy them at your bank, but you can “pick” their brain. Speak to someone there with credentials not just someone who is a mutual funds seller. Research into whether it would be better for you to “fill up” your TFSA account before a RRSP contribution. If you have a decent pension income then you may owe a bunch of tax when you take it out. Money in a TFSA doesn’t have a tax refund going in but you don’t owe any tax when it comes out.
The sewing community online is a great way to make contacts if you do decide to make some extra income with patterns etc. Instagram and twitter the name of the material that you use when you sew and you may be contacted by the people who design the material. My sister has gotten free material and contracts to sew some things from them simply by doing that.
Yes, this: You will love your pension as you get closer to when you retire! I am retiring in a year and then I can do something else if I want. People’s intentions can be that they will work until they are in their 60’s or 70’s but realty doesn’t always work that way. I work with many clients who physically and emotionally can’t work anymore and those without pensions have it rough scrambling until they get to 60 to get their CPP and 65 to get their Old Age pension.
I work for the Federal Government in Canada and I have a very good pension. When I first started, I was around Allison’s age and had more of a ”whatever” attitude towards my pension. Then, I got a little bit older and saw the amount I was accumulating and figured out that it was a much more interesting sum than whatever I could save in my RRSP despite high rates of return. Yes, it does mean your take home pay is less than as if you didn’t have a pension at work. However, you will have a nest egg when you do retire. Allison said she wanted to retire at 56 on a reduced pension. I plan on doing the same thing. It won’t be the same as working until I am 60 or 67 or 70 at the Federal Government, however, my reduced pension at 55 or 56 will allow me to live comfortably and have the freedom to take on any job I want or volunteer.Also, who you are at 29, your ideas, your interests, aspirations, etc., may not be the same as when you are 45, for example. You might still like your job, or you might not. Having the pension as well as other elements of FI (allowed by a life of frugality) gives you even more options. You can stay at the job or you can leave. Others who don’t have a pension and/or did not save or are in debt don’t.
II could not agree more. I too am close to retirement (four years away) and I LOVE my pension so much, I became a trustee of my firm’s pension scheme so I could look after it as it deserved. For most of my thirties and forties I didn’t even think about pensions, but, believe me, now I’m in my fifties, it’s a HUGE benefit, and so well worth the money I’ve paid in. I have a lot of friends who are my age who are wondering how long they will be able to work because they have no other source of income other than the State pension, whilst I am fortunate enough to be wondering how much longer I WANT to work. I’m also working part time, which has made a huge difference to my quality of life; basically, I worked out that I had enough money, but not enough time, so I traded. I’d encourage Alison to think about this; she probably won’t be able save enough outside the pension to equal the potential income from the pension, but she may well be able to get herself to a point earlier in her working life where she can work part time. Personally, even though I probably could retire now, I’m not doing it yet because I enjoy my job and the people I work for, and feel that it wouldn’t be good for me to retire too early without another purpose in life, which I am slowly working towards. Working part time is the perfect solution for me right now.
By the way, in my scheme, as in a lot of schemes in the UK, the employer matches the employee’s pension contributions. So, for saving in my firm’s pension scheme, I don’t just get the benefits of investment, I also get free money (ie money I wouldn’t otherwise get). FREE MONEY! And under UK law you get tax relief on pension contributions. So more FREE MONEY!!!! I thank god and my employer every day for my pension, and I’m so grateful to my younger self for not opting out. I’m not sure if this applies in Canada, or in Alison’s scheme, but if she does get employer pension contributions and/or tax relief on her pension contributions, I would recommend taking notice of that. It’s FREE MONEY!!! (I love that phrase 🙂 )
Also, as a single person all my life, I’d encourage Alison to remember that a single person actually in many ways lives a lot more cheaply than a couple or a family. Granted, there is only one income, but you only have to buy one plane ticket, one set of groceries, do one load of laundry, one set of clothes (and shoes!), pay one restaurant tab, etc. Over my working life I’m sure I’ve been more financially thrifty than a lot of my friends who are in families, simply because of this. Plus, while there is a downside, that you are entirely dependent on yourself, you also have complete control over your own spending. I never have to argue over whether we get cable so someone can watch the football, for instance 🙂 So being single has benefits too!
I think Allison is well ahead of the game! I would throw out a few cautions about home ownership. Her projected emergency fund would be VERY low for a home owner. I bought my house in 2012…and I’ve replaced the roof, the HVAC system, and, this summer, the hot water heater. I love having a house but if I had not had a healthy emergency fund, these things would have been a real source of debt. Before pulling the trigger on a house, she should rework her budget with the expected house payment and live like that for six months, while she searches. Remember that (at least in the US?) we have a higher insurance (I did have renter’s insurance but that is nothing compared to home owner’s insurance) and real estate taxes. I also have a home owners dues where I live. Plus payments into my emergency fund. That said, I’m a homebody and I love having my own place. Good luck!
It sounds like Allison is doing a remarkable job and is head and shoulders above starting from scratch! A few things stood out to me: she mentioned that she feels sewing for others may not help because she feels bad about charging very much. She may want to explore this further. People may be willing to pay a worthwhile amount for clothes tailor-made for them.
It also would be good to do an audit of her work skills with an eye to how they might translate to other fields. I wrote and reviews social work reports before going to court for years. I now do some free-lance transcribing and editing.
If her job can help her get any portable certifications, that would be a good opportunity as well. Look at available training with an eye to how it might look on a future resume.
Finally, I share her frustration with mandatory pensions, or I did at her age. That pension, though, helped me retire at 52. I hated that withdrawal every month but sure am grateful now.
PS: maintaining a strong healthy body will more than pay for itself in the long run. Her fitness is a good investment on its own.
Definitely continue to take advantage of the TFSA – if you haven’t already, you can login to the Can Revenue Agency website (takes some time the first time you do so, but after that it’s easy) and see exactly what your available contribution room is. Since it is cumulative from when the program started (or when you hit 18), plus the amount allowed to contribute has changed, there is way more contribution room than you may realize. Plus if you take out say $5000 that contribution room becomes available to you again right away. Plus interest earned doesn’t count towards your contribution room. Overall, my understanding of it is that unless you are making a high salary (which you aren’t) and you need the tax deduction, TFSAs tend to make more sense than RRSPs. Hit your max contribution first, and then attack your RRSPs. That’s what I’ve been told anyways 🙂
Allison already knows, but it’s good to avoid this mistake: if you withdraw from a TFSA you have to wait until the next year for contribution room to reset. I’ve used this to transfer TFSA accounts between banks with no fees by withdrawing at the end of December and depositing in January.
As for RRSP VS TFSA, Allison could deposit into the RRSP up to about 22k first, after filling her emergency fund, to get a nice tax refund. Her RRSP can then grow for a few years until she is ready to use it for the home buyers plan, which limits the amount to 25k. Anything above 25k stays in the RRSP and it’s good to keep there.
Way to go, Alison for being so organized and tacking this early – many people don’t take the time to do this sort of tracking and analysis. I’m in a similar situation to you – I work for the government in Canada (Toronto) and am single. I am a condo owner and I agree with Julie’s comment above – there is no benefit to repaying the HBP early when you do buy a house; you’re better off socking away any extra cash into your TFSA to build up an emergency fund.
The chance of losing a permanent gov’t job is low and there should be supports in place from your employer, such as surplusing payouts and bumping rights, if you do get cut in a downsizing. My advice as a 13 year public servant is to study your collective agreement! Then you’ll be ready if anything does happen. Pensions do take up a huge chunk of money but it does really free you up from worrying about retirement. Even though you are a long way from retiring, you may want to attend a pension info session to understand it more deeply – that may make you feel better about the amount of money that goes to it.
Life is for living and you’re doing great! Enjoy your Crossfit and sewing and keep saving for a house – it sounds like it would suit you perfectly! It’ll all work out.
Hi Alison! I’m also a 29-year-old Canadian woman trying to figure out my next financial steps, I see a lot of similarities in our stories.
Being able to take advantage of the RRSP HBP is great, but that $25,000 will only get you so far if you’re planning for a 25% down payment (which is a GREAT goal). You’ll need somewhere else to save the rest of your down payment, so the TFSA is a good option for the rest of it. Given your timeline for homebuying (5ish years), you could look at investing at least part of your down payment (vs the pitiful interest on a “high-interest” savings account). The sooner you start putting money into the TFSA, the more tax-free growth you can accumulate! And then after you withdraw the funds to buy your home, you’ll get all that room back to use for retirement savings (or whatever other savings goal you choose).
I’m so glad to hear you’re thinking about volunteering with Girl Guides! I have been a member basically all my life, and being a Guider for the last 11 years has been incredibly rewarding, but also insanely fun. Even if you don’t have time right now to volunteer on a regular basis, I’d still suggest getting in touch, as there are lots of opportunities that don’t involve a weekly commitment.
My 1st thought is… GOOD FOR YOU. You’re under 30 and seem to have taken the time to figure out a lot of your priorities and what makes you happy. Impressive! At $3k/mo current spend you are saving about 19% of your net income. You have the goal of moving to a new apartment and that is going to cut your spending by ~10%. I’d aim to cut an additional 10% ($300/mo). That magical 10% reduction in spending, combined with your lower rent, is going to almost double your savings rate to 35%! Try that for awhile and then, if it feels comfortable, maybe you go even further! I’d look to reduce in the areas of hobbies, household and travel. (Keep going on the trip but do some travel hacking.) Keep up the great work!
Hi Alison. At your age, your priorities are two. Eliminate the student debt to your parents and build two savings accounts. One is for emergency only (loss of job, illness, or home disaster) and the other is a personal savings account where in you are able to withdraw money that is occasionally required in just living. So how do you do this on your budget? Get a paid second job for the weekend and/or one or two nights per week. In my opinion you do not even have to like this job. It is short term and should pay enough to eliminate the large outstanding debt sooner. I would also strongly suggest a roommate or two if you are permitted by your lease to have them. Again your perspective should be that this is a shorter term commitment. Is is simply to generate money to reduce your current living costs and increase your ability to save.
You bought your car, now take care of it. It is my motto in life. Today people dispose of cars within very short periods of time. Find a great mechanic and keep that baby in shape. I usually keep cars in pristine shape for at least 15 years. Currently I have one nearing 20 and another at 30 years. They look brand new and run that way too. I watch mileage which is equivalent to car aging like a hawk and replace anything needed on schedule. Buying replacement cars is one of the most expensive things that you can do.
You seem to talk as if you would like to remain single. There is nothing wrong with that except that thinking that you can retire on 250K is unreasonable planning. The worst thing that can happen to an old woman is to be a poor old woman. 250K may sound like a good nest egg today but trust me by the time you retire it will not be enough. Invest every dollar you can in the stock market. Buy large valuable companies that make real money. If you find that too risky, then you should buy into a S&P 500 fund such as vanguard. Put the money in and walk away for 40 years.
I love your hobbies. However, hobbies do not pay. Your main focus today should be accumulating cash. If your hobby pays and you enjoy it, then pursue it. If it does not, then it can easily be a choice for a later year in your life when you are more secure.
Keep going. You are headed in the correct direction. Avoid debt, save like there is no tomorrow, and expand your intelligence through education. You have the advantage of time and health. Most of all, be happy.
I don’t think that you are starting from scratch, Alison! You’ve set up a great foundation for healthy finances, and you’re on your way. I’m also a Canadian with a pension plan who will retire at 56. Like you I am happy in my work (I’m a teacher), but unlike you, I’m just two years away from retirement, and I count myself lucky to have that pension (especially so because unlike you, I was NOT good with money for far too long). I agree with what Mrs. FW says about working. And I know it’s hard for 29 to believe this, but 56 is still pretty young : )
I hope that you do pursue your talent for sewing in some sort of side-business – even on a very small scale. I hope that you continue to invest in your physical health – and if it takes Cross-Fit payments to make that happen, that’s OK. (I too have a gym membership. I don’t manage to achieve the same level of physical fitness without it.) And if you do eventually marry, I hope that you have very open and honest talks about finances in advance.
All the Mrs. FW says about priorities is bang on. You are doing very well, and with all of the thought you’re putting into things, You’re on your way to a fabulous level of financial fitness, with all of the freedom it offers to allow you to pursue life on your terms. All the best!
Consider the classic side-hustle – real estate. I know you’re aiming to buy a home in 5 years, but consider a multi-family that comes with rental income. Then keep saving and move onto your dream home a few years later as the Frugalwoods did. I also encourage you to thoroughly study the real estate market in your area, starting now. Watch the neighborhoods that suddenly take off and notice what happens when they do. Canada’s housing market seems insane, and knowing how to play the gentrification game is the key to making money.
Glad to read a fellow Canadian’s story! Kudos Allison – you are way ahead of the curve for someone in their 20’s. Two things:
1. I would challenge you to shift your mindset about work. I’m over 50 and see working (and having the vitality to do so) as a gift not a chore. The key is having the financial independence to make choices about what kind of work absorbs your time – and you’re well on your way to making that happen.
2. Leverage your youth!! You already have a mandatory work pension (and eventually CPP and OAS) so focus on building wealth through your TFSA (buy low cost index funds and hang onto them for the long haul) – live your life and let compounding interest so the heavy lifting 🙂
Also impressed that you fly home for $110 – at Christmas time no less! I’m a serious travel hacker, but I’m not sure anyone could drop that any lower. Great job! Since you don’t seem to carry credit card debt (yay you!) consider a card that gives you cash back on your purchases. Paying it off every month will build your credit and get you a better mortgage when you are ready to buy. Just google “best cash back credit cards in Canada” for several suggestions.
I wish it was a flight for $110! I save $110 per month to cover my yearly travel costs. I haven’t really explored travel hacking at all since I really don’t travel much plus most of the options I hear about are only available to Americans but it’s definitely something I should look into.
Have you looked at all into rewards credit cards? If you pay them off every month they can be a great solution. Maybe you’d earn enough miles to get your flight free or deeply discounted each year?
I believe her monthly budget for her trip home is $110. Meaning, her flight is closer to $1300.
Oh, I read that way too quickly! Then definitely explore travel reward credit cards. There are a few available in Canada and worth checking out. Also, I’m not sure where you’re flying but $1300 for a plane ticket sounds exhorbitant unless you’re flying somewhere really remote. Sites like Orbitz and kayak let you subscribe to fares for specific routes. It’s an easy way to watch the prices and jump on a better deal if one shows up . are used to travel to Florida for Christmas every year and found the prices very from about two hundred dollars to over eight hundred dollars.
In Canada it’s often cheaper to fly halfway around the world than halfway around our own country. Supply and demand…
Depending how close you and your destination are to the U.S. border, drive to the states, fly within the states, and then drive north to your family. (I saw this with a Canadian group flying to Africa for a service trip– driving to Detroit would have saved them thousands over what they paid for leaving from Canada). Since you know this event is coming, you might be able to find a flight if you book very early.
The mandatory removal of retirement savings from your paycheck feels like a bummer. I’m lucky to have an employer match, but I hate losing control over that money. I totally feel you there. It will be amazing when it all pays out, though!
It doesn’t seem that anyone has mentioned this yet…have you done an Uber Frugal Month challenge? It seems like there are reductions to be had, especially in the hobbies/entertainment/eating out and household supplies categories. If you are able to reduce your rent by $300 and trim an additional $200 from these other categories, that is a $500 per month/$6K per year swing in the right direction which could definitely accelerate your timeline for your other goals.
Since you’re looking for a new place to live, maybe it’s possible to find further savings with the new place. Perhaps you could find an apartment that allows you to bike to CrossFit or work, thereby reducing gas costs and likelihood of car repairs? Or, maybe you will be able to get some utilities included or split internet with a neighbor. Is getting a roommate a possibility? Saving $300/month alone would be huge, but there may be opportunities for further savings as you are making the move anyway.
Lastly, I love this discussion of financial independence without early retirement. My husband and I both really love our fields and have no desire to retire early. We hope to be able to continue working past typical retirement age. We love working toward financial independence because it takes the pressure away from the financial aspects of our work, and we can work truly for the love of the work and not for the paycheck. Glad to hear from others who share this perspective!
I totally second the idea about looking into bartering options for a CrossFit membership. I used to do the same at my horseback riding barn, and it made what is normally a very expensive hobby much more affordable!
The first thing that strikes me is that Alison seems to feel really guilty about spending money on Crossfit. I don’t think she should! There’s no reason to feel guilty about having a great hobby, especially when it’s about exercise (when many of us spend that kind of money at a bar!). She isn’t putting it on credit, and it isn’t stopping her from saving money, so she should wholeheartedly enjoy it.
Working towards a lower rent is a great idea, but I’d really be looking at the household and hobby categories. I’m sure there’s a much higher cost of living in Canada, but I’d look for ways to lower those categories just the same. Are you able to buy in bulk or go out one less time per month? It would be a trade off for savings and a house, so you’d have to weigh which is most important to you.
Also consider why you want a house. More and more financial gurus are suggesting you stick to renting. Houses cost a lot in upkeep, both in time and money. But if it’s your dream, find a way to make it work. You only live once!
You’re actually doing a pretty fabulous job with your money already! Great work!
Great job, Allison! You are definitely on the right track.
I agree with Chris and Kristin above that sometimes home ownership isn’t what its cracked up to be. Sometimes renting and having someone else cover the incidentals is really key to achieving your goals.
We have spent so much time and money on fixing up our homes. (We fixed one up and sold, now in our current home). I would definitely look into a duplex or a home with a mother-in-law suite to help generate extra income, if you do decide to buy. Continue to save so that you have the option to buy if an awesome deal pops up.
Look into potlucking once a week with your cross fit friends. This could be a way to cut some food expense and learn about new healthy meal ideas.
Your sewing projects look amazing! I would seriously consider spending time in that hobby to generate extra income. There is always a need for those skills!
Most importantly “life’s a journey, not a destination.” Have fun!
I think she is doing an amazing job …as a librarian I comiserate with her on the job availability…she is fortunate to find work she loves…as for the pension…if you can..be grateful, when you are older you will appreciate having that money set aside …I know right now it seems like you could do better things with that money, but at 60 I will tell you, chance and ciricumstance and the stock market can kill that in a day. Not only that, but if your pension is like mine, you are contributing to a fund that helps people like you, who do work similar to you and who share your values…while it is not charity, you re making a financial statement that your work is valuable and you all deserve to have a comfortable old age….
I love love love the idea that I’m supporting a program for my fellow museum workers. That’s a great perspective! Thank you!
You are welcome!
Allison, you are doing so well! You are very young and have a lot of time ahead of you. You are so aware and seem to know what you enjoy. You are right on the brink of really getting wherever you decide to go and I wish you to realize that and be proud for a minute before you get back to work. And, I think it is important to remember, retirement does not have to be the goal, but the ability to retire can be. One more thing–you might set your sewing hobby up as a sort of legal business so you are able to purchase your fabric and supplies at wholesale prices and write off some of your expenses (I am making the assumption Canada is the same as America in that way). That way, you may offset some of your gifts and hobbies expenses if they are related to your business.
Wow! Thank you all so much for your encouragement and advice! And thank you Mrs. Frugalwoods for putting my story out there!
Alison, you are doing a wonderful job! As a fellow Kanuk, here are my thoughts | recommendations:
– Your pension is an incredible benefit and Canada is a wealthy country with an excellent economy and I am confident that your pension will be fully funded when you retire. My husband has a defined benefit pension plan, such as yours, which will provide him with a 45K pension (with other governmental benefits factored in) until he dies. He is super healthy and his family is known for its longevity, so his pension is worth almost a million dollars! My employer provides a contribution pension plan (4% of my salary). I was a stay at home mom for a number of years and chose to work in lower paying jobs (that were nearer to home and more convienient for work| family conciliation) for many years as well. Consequently, we did not have the funds to fund my retirement account. When we sold our house in the burbs and moved to the city, we opted to rent and invested all of the proceeds from our house sale into my retirement account (a RRSP). We invested the money over several years to fully benefit from the tax incentive. We have been catching up and investing about 25 K in my RRSP every year, so that we can enjoy a comfortable retirement. I wish I had a defined benefit pension plan!
– I support your plan to purchase a home and recommend you purchase within a 30 minute commute from your work. Ideally, within walking or biking distance. Location really is the most important feature. Since you are a homebody and have many hobbies, I think having lots of space will contribute significantly to your happiness.
– I’m not too concerned about your emergency fund and would save up three-months living expenses (Canadian government jobs are usually incredibly secure.) and then focus on the down payment for your home.
– I support your plan to invest your down payment into an RRSP. A great plan is to re-invest the tax credit right back into the RRSP.
– Charity: Give your time instead of your money.
– You seem to have a very full life: Full time job, investing your time in caring for your health by going to the gym and cooking. Enjoy it – don’t worry too much about increasing your revenue, unless those activites bring you a lot of joy. Life is short and you are already doing really well.
Great job Allison! I think you’re definitely not starting from scratch and have some great plans in place. The fact that you paid off your car in two years is commendable! I feel some of your pain because I live in BC and also pay into a government pension, and have been for the past ten years. While I appreciate the value of a pension, if you have a plan of retiring early it really doesn’t help you as the earliest I can take it out is at 55. So I need to build up a large retirement fund outside of my pension if I want financial independence before then. A pension is a great forced savings plan, but it does limit your choices if you don’t want to work until a traditional retirement age.
I think if Cross Fit gives you a lot of joy, then it is a worthwhile expense. I also have a gym membership and wouldn’t give that up for the world. Your other expenses seem to be very appropriate considering things can be a bit more expensive in Canada.
One word of caution about the RRSP home buyers program: my husband and I both did that for the purchase of our first home
back in 2009. My contribution was pretty small, but my husband took the max amount that you could back then (I think 25k). Since I already paid into pension, I didn’t have a lot of extra money for saving so I felt like I was forced to pay back my rrsp because of the home buyers program, and it delayed my contributions to my TFSA. I believe that for people with pensions, TFSA might be a better saving vehicle due to no tax implications in retirement. However, if you save enough to max out your RRSP and TFSA each year this won’t be an issue (and looking back, I really should have paid back my RRSP a lot quicker). Keep up the good work!
I have to admit I’m a little jealous imagining the life of a museum conservator living in the “Canadian prairie.” I’d say look into buying a house. There are certain areas where renting is a better option than buying, but I’m guessing that houses on the prairie are pretty cheap, so it’s probably a good idea.
For expenses, I would focus on the “entertainment, hobbies” category, which looks pretty high, even though I don’t know what’s in it. Our dining out expense hasn’t been so good the last few months, but typically if my wife and I combined our dining out, clothing and entertainment expenses, it would come out to around $250 a month.
Also, that CrossFit expense. I know it might work better to exercise around other people, but I built our home gym for basically the cost of a month or two of your CrossFit. (Used barbell and weights, dumbbells, stationary bike, free used treadmill…)
I think it is so awesome she lives in the “Canadian Prairie” also. Her job sounds fabulous also!
As another Crossfitter, I’ll say it’s really not the same! It’s just not about being with other people (though I encourage you not to underestimate how much it helps to be pushed to be better by supportive peers) but also having a coach to give feedback on your form and daily programming already planned for you to help reach goals.
I’m happy your home gym works for you– not trying to be anti-home gym.
Post a link to your etsy shop! I want to check it out 🙂
I too work for the Canadian government, and while Mrs. FW’s main concern is loss of paycheck, I wanted to point out that it’s nearly impossible for Alison to lose her job. Even if her position were to be eliminated, Alison would be moved to another position in her department. The Canadian government is strongly unionized, and in almost 10 years, I have never heard of a single person being fired or laid off. As well, I think something like 30% of our public service is near retirement age, so even if there was some massive cut, it could be handled through attrition.
In the very unlikely event Alison loses her job, I would assume there would be a very generous severance package. Not to say emergency funds still aren’t necessary for circumstances other than job loss.
I will be the bearer of *some* bad news… it is within the realm of the possible. For example, a friend had a biology based federal government role in the NWT and the whole dept was eliminated, opportunities to transfer were pretty limited, even for those willing to relocate across the country.
I love this! Gosh, it’s hard to justify that Crossfit expense, though. I know Mr. Money Mustache’s wife does Crossfit. Maybe hit up their site to get ideas on how they do it for cheap/free? I used to go to Zumba class but realized I didn’t have to spend $50 – $100 a month on it, since I can watch videos of it on YouTube for free (a little harder for Crossfit and the equipment though). Just an idea!
I don’t have anything to add to the very good financial commentary, but I’ve got to say that the yellow shirt is absolutely adorable.
Good on you for working towards the financial future that you want for yourself. There are many things that you can control yourself, so focusing on those is key.
I could go on with particular ways that you could save money (like making your own household products) and I will a bit below, however, I agree with the commentors that there are some higher level concepts that would benefit you more to get a handle on first before focusing on the details.
When you have a monthly expense/savings rate that you are happy with, consider educating yourself on the tax and savings implications in Canada. I really enjoyed the “For Canadians – For Dummies” line of books, however there are a lot out there.
One commentor mentioned considering investing in your TFSA first instead of your RRSP. While this goes against most investing advice, I agree that it should be something that you look at before you start investing. Even with the deferred tax and tax sheltered growth, you might find (like I have) that you’re paying more tax when it comes time to withdraw your money.
Speaking of investing, check out all the big banks (Royal Bank, Scotiabank, CIBC, BMO and TD) and see if any of their brokerage accounts work for you. Not sure if any of the smaller ones have them. All of my banking and investing accounts (as well as my kids) are with TD Waterhouse.
Another sometimes hidden expense is banking fees. I’m not sure who you bank with but there are a bunch of banks out there with no fees or minimum balances like PC Financial and Tangerine (Tangerine also has a deal on right now where you can get $50 cash back for opening an account).
I know how much information there is to process and it can seem quite scary and overwhelming but once you get into a routine, your budget/expenses/savings will run itself and you can focus on living and doing the things you love.
I could go on. I love talking about money, more the saving than spending part 😉 Let me know if you need a “Financial Friend” to talk money with.
All the best on your journey, Sarah, Fellow Canadian.
I love how you are so self reliant with your single life w/your hobbies and crossfit. I am envious as I would like to include more of my self interests into my life (instead of spending so much time browsing the internet). Rent is the biggest cut I can see helping. You don’t make a car payment – that helps. Car insurance: I have been with Wawanesa forever – great rates and customer service. And I just looked, they are available in Canada. You should check it out.
Best of luck finding reduced a reduced rental. For just starting you have your priorities straight. Love it! Great job Alison!
A Canadian case study! Yay!
A rough and dirty rule of thumb is if your income is less than $50k, you are better off to contribute to a TFSA over an RRSP. As of this year, there is a total of $52k in contribution room. You haven’t mentioned how your Emergency Fund is held, but once you hit your $7500 target, you should be dumping money into an ETF held inside a TFSA. The reason to prioritize the TFSA, especially if you anticipate being in more or less the same salary classification for your whole career, is that any withdrawals from an RRSP are taxable. Given that you have a government (gold!) pension, plus RRSPs, plus CPP and OAS, you could very, very easily end up with a higher income in retirement than you have now and will be paying a higher tax rate. If you put the same funds into the RRSP, you will pay the tax now (your estimated effective rate of 21%), however in retirement you might be paying 30% (for example). If it is in a TFSA, the rate will only be the 21% you originally paid. Additionally, in the interim, the TFSA provides a LOT more withdrawal flexibility. A caveat to this is for those who need the money to become inaccessible in an RRSP, to prevent themselves from spending it out of a TFSA.
Props to you for only spending $200 on groceries and finding internet for $35 – what a steal!!! Regarding cell phones, Freedom is the best I’ve heard of, aside from the insane deals from SaskTel. I’m told there are some slightly shady ways to acquire a SaskTel plan despite living out of province, but I’ve never looked into it myself. Your hobbies cost is really the only place I see where there might be some opportunity, depending on your priorities.
Not knowing exactly where you are, I’d encourage you to investigate the housing market where you live and see how it compares to renting. Not all of the prairies have super-affordable housing, but if your location does, it may make sense to get CMHC and buy sooner rather than later. Rough math: 5% down on a $125k purchase ($6250), with $1200/yr in taxes and $200/month in heating costs leaves you with housing costs of $925 per month. Add in a bit more for insurance than you pay currently, plus a provision for maintenance and you could end up paying roughly what you do now to own. Obviously if houses are $350k where you live, it won’t make sense. Also, as others have suggested, consider roommates, but always be able to afford the house without them and use rental income as “nice to put into my savings.”
If you’re happy, don’t beat yourself up. If you want more flexibility, finding a way to increase your income is the way to go.
Someone further up mentioned incorporation in order to buy wholesale, etc. I’ve looked into it repeatedly and the professional advice I’ve received is it’s not even worth considering AT ALL until you’re around $50k in gross revenues. (Don’t forget that you have to register for and remit GST if you cross the $30k/year revenues mark). If you pursue your Etsy type businesses further, you can continue to act with a Trade Name for a long, long time yet.
Best of luck getting your money to do your bidding and give you the life you want 🙂
Hey there! Thanks for the detailed comment. The decision between TFSA and RRSP is a tough one! Does that 50k rule of thumb apply to before taxes or after tax income? Before taxes and deductions I’m well over 50K and after deductions I’m well under. I’ve done the rough math including OAS and CPP and I still seem to end up in the same tax bracket that I am now at about 56.
One thing to note is that my pension contributions reduce the room I’m given to contribute to an RRSP. The CRA has a funny little calculation where the yearly RRSP contribution room is reduced using a Pension Adjustment which is equal to nine times the yearly benefit of the contributions made that year (why nine???). So essentially I gain about 5% of my gross salary in contribution room every year as opposed to the normal 18%. I expect to be able to fill up my RRSP contribution room in a few years and then I will be forced into a TFSA in any case. It really doesn’t seem possible that I could save enough in these vehicles to end up paying “too much” in taxes come retirement age.
I appreciate the note on the cost of housing. I’m in an urban centre unfortunately and houses are definitely more in the 350k range. I’ll try and keep my options open though!
Oh, doh, I totally didn’t do math on your income. The $50k rule of thumb is for gross income, so you’re firmly into RRSP territory/selecting the one that works best for your personal goals. It feels like you don’t get any RRSP space due to the pension adjustment, but that’s because your government pension is so valuable, so I wouldn’t sweat it too much 🙂 If you get to filling your RRSP, you’re golden either way!
If you do purchase a house, investments in a TFSA can be a good secondary emergency fund because there’s no tax implication if you have to make a sale and get some cash.
I agree that Alison is doing a great job overall… and just wanted to chime in on the “single” part. I lived the first part of my life as if I was going to be single, and saved and even bought and renovated my own condo- then met my love at 38 and now have two kids and a totally different plan. Life changes so much sometimes, you can’t even plan for it. I’m not saying that to say “don’t plan”, but just to say that sometimes you work with what you have now, as facts, and do the best you can, then you revise it in the future. Now I’m suddenly saving for college rather than just for retirement, but because I married someone with the same money compass as I have, we’re in great shape together and are still looking at early retirement as an option, and have been able to weather some major financial storms and still have a great life with lots of travel (important to us). That’s one of the major benefits to frugality to me- it gives you lots of options when things don’t go as planned!
I’m in the museum field, too. I worked for a textile conservator who had a highly coveted position with her own lab inside a major U.S. museum, but she got burnt out and decided to pursue her Ph.D. in something else. While in grad school, she had a great side hustle doing contract conservation for area museums. I think she enjoyed keeping her hand in by performing conservation treatments–though not enough to go back to running her own lab. This would work best in a major metropolitan area, with multiple institutions needing contract conservators. You wouldn’t have to live in the main city, but y close enough to make commuting to a contract job worth it. She worked on their premises, so she didn’t need her own lab space. I know a paper conservator in the same metropolitan area who rents space in a larger lab so she has access to a fume hood when she needs it, and she does a mix of museum and private jobs. It takes time to build up a mixed practice like that, but she seems to enjoy the variety and flexibility. Good luck finding the balance that works for you!
Insurance is another big barrier to starting up a side business in conservation. I love the idea of working in other labs. There’s a possibility I could do that here. I’ll have to do a little networking and see what comes up!
I’m not sure how it works in Canada, but in the U.S., you can write off what you have to pay for insurance as a business expense on your taxes. Also, you can transparently build the insurance cost into your rates. I contract with conservators for a government agency and a nonprofit. The government agency requires much higher insurance coverage, because they have a wide-ranging requirement that is supposed to cover everything from construction workers with bulldozers to the person who services the vending machines. So on those contracts, I expect to pay more, because it costs the conservator more. But the nonprofit doesn’t require such high levels of coverage, particularly if staff can serve as couriers if the work needs to be done offsite. And it pays to shop around for insurance; like insurance for cars, homes or anything else, rates and service vary. Depending on your local regulations, you many be able to carry a basic policy, and then buy supplementary short term ones if you need more coverage to meet a particular client’s requirements.
Hi Allison, your goals are very similar to mine but you are ahead of me so I agree that you should congratulate yourself. Thanks for sharing your story as it is helping to motivate and inspire me. I work in the public art field, and wanted to add that we contract with conservators all of the time to review and consult on artwork materials that artists are proposing to use for new commissions. We also contract for conservation treatments. We’re in the Northwest of the US and mostly use regional conservators, but getting dialed in to your regional public art programs may be one avenue to help build your side hustle. Many of the conservators we work with have their own practice or are employed full time elsewhere.
Alison, you’re doing a great job already! Your story is inspiring. It sounds like you love your job, and I’m happy for you because that makes an enormous impact in terms of quality of life. I can relate re: pension. Starting next month, my employer will automatically deduct 3% of my salary and put it into a state pension. Apparently, it’s required. I am not convinced these pensions will survive, and I wish I could just take that 3% and save it the way *I* want to save it. Also, I second what Mrs. Frugalwoods said about using your time for things you feel passionate about. I’ve found that I just can’t maintain projects that I’m not excited about, even if they look really, really good on paper.
I’m not going to have much practical advice for you Allison, but I want to say kudos on how well you’re doing already. I’m a decade older and finally getting to a place where I am pretty comfortable with my financial situation though there are a few more changes to make.
Anyway, I wanted to touch on two things, being single and Crossfit. I’m also single and often find it a bit challenging to not have the “but you have a partner” reaction to some frugality comments/posts/blogs. There are many things that I think would be easier if I had a partner and as Mrs. Frugalwoods said it would likely add to my net worth, but I wanted to mention since you asked about accepting your current situation that it isn’t necessarily the case. A good friend of mine, who has practiced frugality for a long time finally found the love of her life at nearly age 40. They married and she not only got a husband, but two wonderful stepchildren and…a load of debt. Her new partner was NOT financially savvy or frugal in the least so they had to come up with a plan to pay off his debt even though she carried none. Point being, having a partner isn’t necessarily a guarantee of a better financial situation. At least us single folks get to make our decisions without any conflict!
Also, I was really into Crossfit until I got injured. I loved it for so many reasons and there really is no replacement for it, nor is it cheap. If that’s something you truly love as much as it sounds like you do, I don’t think there’s anything wrong with continuing with it. If you can barter or work to bring the cost down or eliminate it, great! If not, stick with it. That’s my humble opinion.
Good luck with your next steps!
I think she’s doing pretty well also. Her bills aren’t outlandish and her car is paid off. She’s working and building up savings.
The crossfit expenses should be a lot less. $150 a month for 1 person seems crazy to me. Id negotiate that down to $75 a month.
I’d also consider a cheaper apartment or perhaps a place that comes with a gym. Or what about getting a roommate and reducing the expenes further?
I also think that with her sewing skills she coukd be making a side income selling some pieces that are high-profit, low-investment. How about selling them in tourist shops in addition to etsy?
The travel seems pricey too. Can you drive to relatives? Could you use a travel rewards credit card, and get a free flight every other year using points? I’d look into it.
HTH and good luck!
Good afternoon Alison. Firstly, being single isn’t a hindrance to achieving financial security. I retired at 33 all by my lonesome, and my relationship status was neither an obstacle nor a mandate. I had enough willpower to achieve my dreams and I get the impression you do as well. That being said, if your status does change, make sure you continue toward your path and that your partner understands your priorities.
I want to start by asking why you’ve decided on purchasing a house. Is owning a home an investment choice, a rite of passage to adulthood, a place to call home, or a step toward starting a family? The answers (I’m sure there will be multiple) to this question will guide you to the kind of home you are looking for, and we’ll likely give you an approximate range regarding price and size. Your priorities well undoubtedly change as you approach 34, but it’s good to think the matter over on occasion.
I think $700/month ($3,700 in salary – $3K in expenses) in savings is perfectly sufficient to achieve your goals. That’s $8,400 a year and $84,000 for your “down payment” at 34, assuming the money it’s just tucked under your mattress. If you move, that jumps to $120K. And if that money is invested conservatively in stocks, you could be awash with $200K+, enough to purchase outright in many areas. Keep in mind that those savings well go higher once mum and dad are paid off. It’ll go higher still if your crossfit costs go down.
My conclusion is that you’re doing much better than fine for the singular goal of purchasing a house. I would encourage you to have a longer term plan (like retirement) and begin scratching out other goals.
Hi Alison! I coach at a CrossFit gym in exchange for free membership but the main reason I do it is because I love coaching. When I work out how many hours I work per month divided by my gym’s monthly fees (which are higher than yours, even) it works out to about $15/hr which probably wouldn’t be worth it for me, given other side hustle possibilities. Just be sure to do the math to make sure the hours you trade per month are worth the free membership (or that you love the work you do in exchange enough for it not to pay super well). Good luck!
Great job! And a few thoughts:
-if you can’t figure out how to barter the crossfit, still keep it! Having an inshape body pays dividends down the road!!
-Can you axe rental insurance? Insurance is only for catastrophes. If it’s not in the rental agreement, get rid of it.
-I know you are urban but can you consider a smaller house? Look at S. Susanka’s book “The not so big house” for ideas. We have a house half the size of our peers and we use every.single.square.inch and it’s a high quality house b/c it is small. There was an episode of Tiny Houses based in ?Portland and the couple bought a tiny house and built a shed for the woman’s metal working.
-But I agree with a lot of the people above: home ownership is overrated. (I thought it was something we HAD to do in our early thirties. Bought a huge house and hated it-realized why after I read Susanka’s book. Now VERY happy in a house 1/3 the size of the previous one!)
-And IF you decide to get married: marry the nicest possible person you can find (yes, decide this ahead of time) b/c when the going gets tough, it’s not nice to be married to a selfish/mean person.
-Best of luck! You got this!
Rental insurance is like any insurance; when you need it, you really need it. Otherwise, it feels like money wasted. I tend toward keeping it, or at least shopping around for prices. Perhaps she has craft equipment – sewing machines – that would be hard to replace.
Hi Alison,I think you are doing really well in a lot of areas but I am quite keen to cut to the bone in order to achieve thing quickly so I would allow $190 for hobbies etc,$100 for household cleaning etc as much of this can be done with vinegar and baking soda etc,I would cut out paying for cross fit and see if I could exchange labour for the membership or it would have to be paid for out of side hustles,I would only contribute $50 to the sinking fund for the car as it should last you 15 years and I would offer labour for charity rather than money.I would also talk to yor parents re a 2 year moratorium on your loan payments.This would enable you to save roughly$22000 per year,therefore $44000 in 2 years.If you can buy a house or property for $350000-$44000 then you will have a mortgage of aroub $306000,I don’t know what Canadian interest rates are as I;m Australian but if you paid 4% interest only to start withthat would be around$1020 per month.If you share the house you can probably halve thatto around $600 per month at which point you could resume payments to your parents if you have reached an agreement with them.This is a pretty brutal approach but it does result in a home within 2 years,it’s the way I pulled out of a financial struggle years ago & I have to say I don’t regret it but everyone has to work out what makes them happy.
lots oof best wishes Barbara
Awesome progress to be so young.
I was single female for 44 years purchased a fixer upper 20 years ago on also a USA state job with limited raises. Realize the pay scale does increase over the years you are there, also when you feel overwhelmed take a day off (you have great benefits and time off which will increase quicker than in a regular job) and sew all day and you will feel better. I’ve been a state worker for 19 years and don’t take the annual leave given. Once you start taking Some of that time off and dedicating that time off to a side hustle (including the days you get off for holidays) it will help you realize you got more opportunities than you think. Pay raises are slow and in this economy you are lucky if they cover the raise in insurance costs. Keep up the good work. Realize in a few years income does come, just slower in the public sector than the private one. But your (health and pension benefits in the long run will save you money).
As usual the Frugalwoods Community has stepped up with some great suggestions. Congratulations Alison for being so self-aware and questioning your goals and path. That’s half the battle. I have a thought about the sewing side-hustle. I was impressed by the way you wrote about your love of sewing and the photos of your work are very compelling—you are talented and creative! One similarly talented member of my family built a business sewing unique designs and did everything right (website, marketing, selling through boutiques, etc.) and after two decades, still found the business meeting expenses but not wildly profitable; let’s face it, there is competition from actual sweatshop labor and building a market for unique designs is really difficult. But along the way, she discovered a LOT of people (adults and children including boys) want to learn to sew! So she has now set up a Sewing Teaching Studio and is giving group lessons. The class works on a project each week. She also teaches mother/daughters and does private lessons to help with big projects. The work is gratifying and remunerative. If you are interested in sharing your skills in sewing, think about teaching it. Could be a good side-hustle to help you save for your home. And very very best of luck to you!
I’m an Aussie, so don’t have knowledge of all the ins and outs of North American financial stuff. However, I’ve done the single, getting myself a house and satisfying work thing in a non-traditional way. There may be some pointers in my story for you.
1. After spending my 20s travelling, I enrolled at Uni at age 30. I had accumulated a decent lump of money from various sources and wanted to buy a house. The bank wouldn’t lend to me for a house, so instead I bought land with a very small loan, paid it off as quickly as I could by working every hour of the day and night. Then I found a builder to build me a very small house.
2. In Australia we have many kit home suppliers, which can be much cheaper than building your own design from scratch, but my builder was willing to work with me to design a teeny house at a low budget. I learned a few lessons from this, though. I am a practical person (a sewer, like yourself) but had little to no experience in DIY. It’s harder than it looks, but blokes in hardware stores can be very helpful, no matter how dumb the question 🙂 BUT make sure that the builder really finishes what they’re supposed to do. Mine didn’t close in under the eaves (and I later realised that he’d warned me of this in the contract, but as I didn’t get another expert to check it, I didn’t realise the consequences until the possums moved into my roof and started peeing through the ceiling!) Because it was a small job, but high off the ground, it was difficult to find someone to fix this later.
Because I am single (originally by chance, but as I get older, resolutely so!) I can get away with the tiniest house ever – love the lack of housework and mortgage!
3. If you have a job you love, you’ll never work a day in your life. Be open to all the possibilities – making your side-hustles your main income source, finding freelance work in your area of specialty. Frugal living will enable you to explore these – when you’re ready. I started a bookkeeping business alongside my fulltime job at age 38; by age 44 I was ready to go out on my own fulltime. Last year, at age 56, I decided for a range of reasons that I needed a change, so I sold my business for a price that enables me to live a couple of (frugal) years while I set up my next venture. I could access my superannuation, but as I have so little, I couldn’t survive on it. I hope that my next business will be as rewarding as my previous one, as I don’t want to have to “work” for the rest of my life!
4. In Australia, only employers are obliged to pay superannuation for their staff (ie into a pension plan). As in Canada, once it’s in, you can’t touch it until you retire or reach a certain age. As a self-employed person, I had the discretion about whether I contributed or not. But as the others have said, the more that is contributed early, the longer it has to grow for your benefit. Maybe you’d have more control over it if you did end up self-employed?
What struck me most about your current cost was the super high entertainment/hobbies/dining out category. If you could cut just this you’d be saving an extra $4000 per year!
I don’t know what the breakdown of this is, but I’d look at the different parts of it and see why they’re as high as they are; for example when you dine out is it because you’ve gotten home late/tired and simply can’t be bothered cooking (in which case you could use your awesome cooking skills to put together some meals ahead of time and freeze them, or rely on cheap premade meals like the Frugalwoods frozen pizza), or is it because you are going out with friends/a boyfriend (in which case I would go with making them a home cooked meal/having a potluck or taking the focus off food with a board games night or the like)?
Cooking and gardening are 2 of my own hobbies and I know from experience they can be good money savers or incredibly expensive depending on how you approach them. I would absolutely recommend growing what you like to eat, starting with herbs if space is limited (parsley, spring onions and rocket are winners for me) and saving seed/making your own compost if possible. With cooking, I like to challenge myself to make tasty meals by using up stuff I already have as much as possible, especially either things which might otherwise be left to go off or things which have lurked in the back of the cupboard for several months – it’s become a bit of a game at this point. If I do need to buy extra ingredients I try to limit them and make sure they are “social” ingredients so they won’t become my next cupboard/fridge lurker.
I haven’t really got any experience with sewing as a hobby but maybe you could try out some upcycling there if material etc is a significant cost? I see quite a few clothes at op shops that could be really cool with a few alterations.
Anyway that’s my 2 cents worth, the only other thing I noticed was the comment that you weren’t sure you were willing to give up what you currently do with your spare time, and I thought this article by MMM could be worth considering http://www.mrmoneymustache.com/2016/07/13/making-space-for-badassity/
Thanks for your time, hope some of that helps! You’re doing good!
Nicely done Alison! You’re off to an incredible start in all aspects of your life, and I’m sure it will continue because you’re learning, planning and adjusting. My recommendation would be for you to consider earning extra income from some side jobs related to your museum profession. Most small museums are totally volunteer managed and would really like to invest in occasionally hiring someone with advanced learning to come and train or consult with them. There are so many possibilities of topics that they could be interested in…training of docents, recordkeeping, accessioning, rotation of exhibits, etc. And they would be so appreciative of having a professional conservator to mentor them.
You’ll do well in the future Alison…I have no doubt!
Hi Alison, you’ve received so much great feedback and support I can’t offer anything new for your financial situation. However, being a bicycle guru, I can offer some advice for your current bike….
**Please take your bike to a mechanic** or a very trusted bike expert! The fork is installed backwards and it is very DANGEROUS to ride like that! I would hate for you to get in an accident because of it.
After you get it fixed, I hope you bring cycling into your life because it’s amazing on so many different levels 🙂
I was waiting for this comment hah I actually have. There’s an awesome local bike shop that I took it too and took a short course about bike maintenance at. It’s all tuned up and properly put together now, I promise!
As a Canadian personal finance expert, let me tell you that although the 14% pension deduction may seem like a lot, that’s invaluable. Canadian government mentions are literally like gold. There’s almost no chance of it ever dissolving and you could potentially retire on that income alone. You stated that you should ask about your take home pay, but you’re looking at it the wrong way. That pension could add THOUSANDS of dollars in overall value per year. You just won’t see it until you retire. If you leave the company, convert it into a LIRA which you can then manage yourself.
Love that this is a Canadian reader case study! I work in municipal government and am so thankful to have a pension, which is guaranteed income during retirement. So many people don’t have a pension and have to work so much harder to save or just live off of the government pensions which isn’t a lot.
What direct investing/ brokerage firms are other Canadians using? I am starting to research this to transfer my RRSP and TFSA mutual funds out of a big bank that charge such high MER’s but feel so lost on where to go…
I would keep the Kia-it’s paid for and has an amazing warranty left on it. You’ll never be able to buy a pos, fix it up to where yours is now and keep it maintained like the shape your kia is in now. We have a 2006 rio 5 we bought new and it’s still running great. Our Kia dealer was always checking if parts that needed replacing were covered under warranty-and most were.
Re-side jobs-some years my side job income is almost as much as my real job income.
Re-pension & rrsps. My CF&CW pension was badly underfunded-so I took the cash out option (not very much, but at least I got something) and put it in my rrsp. The only other problem now it that my mandatory rrsp withdrawals when I turn 71 combined with my oas/cpp and other income will probably put me in a high tax bracket. Sure-you save tax now by putting $ in an rrsp-but they will probably get more back when you cashout. TFSA might be the way to go since you have a good pension? Most banks can set you up with a brokerage tfsa that you can buy low fee mutual funds through.
Seems to me like what you’re really after is simply MORE TIME. You have so many fantastic hobbies that are also great at saving you money, it’s easy to see what led you to the FI community despite loving your job. I love your case study, because we have almost the exact same take-home-pay, same age, and more interests than we know what to do with. For me, trimming my spending came down to a keen focus on priorities. I looked back over my first two years of working, with hardly anything in the bank to show for it, and tried to remember where it all went. I decided from that moment on, if I couldn’t remember it a week later, it was absolutely not worth spending a dime on.
Forgive me for the super long post!
So, going through your budget with the idea of maximizing the time you have for the things you enjoy and your future goals, these are my suggestions:
Rent: Definitely look at splitting a place super close to your work with a roommate. Locking in a low cost fixed expense is one of the best and easiest ways I’ve found to reduce expenses, because it doesn’t require everyday thought. You make the decision once and it’s done. If you could get this number even to 600 it would have a huge impact on your savings. Every minute you save on your commute is extra time you can spend on your hobbies or volunteering. Roommates are great for built-in entertainment, and you can split costs of utilities, internet, cleaning supplies, etc.
Hobbies, Entertainment, Dining Out, Clothes: This seems extremely high to me, and an easy place to cut. With so many great and low cost hobbies to be spending time on, and a love of cooking, this is the area I would look hardest at in terms of priorities. Try to cut this to 100.
Household: This seems like another one that is taking up time AND money. A lot of people are focusing on the Crossfit expense, but that’s super important to you, and probably pays dividends in lower health costs over time. I would cut this expense instead, and you’ll probably find cleaning less opens up more time in your schedule. Stock up on low cost laundry detergent, baking soda and vinegar, get some durable cleaning rags and be done with this spending for months. Maybe 20 per month
Crossfit: Explore ways to barter, but I would definitely keep doing this.
Travel: I think you’re spending is high enough that you could easily meet the rewards requirements for a travel hacking credit card to get some cheaper flights. Sounds like the trip might be pretty far based on that price, but perhaps look at driving instead? Cut to 50
Car Stuff: Right off the bat, I would sell your Kia Rio, and get a similar one for half the price. If you wouldn’t buy the kia rio today, don’t hold on to it. I just bought a used 2015 Toyota Yaris with pretty great gas mileage for $7000. Take a look at MMM’s top cars for smart people article, and get that extra couple thousand in the bank working toward your ultimate house goal! 95 for gas and insurance +8000 for selling the car.
Older cars might have reduced insurance rates and you could probably get away with no collision insurance, shortening your commute and biking to work/crossfit would reduce these categories considerably as well. As for the car sinking fund, I’d just keep the money in the same bucket as the rest of the savings after replacing it with a cheaper vehicle, then just hold your nose and spend it when you need to.
Electricity and Internet and rental insurance: Split these with your awesome new roommate! 46 total
I’m coming up with $1543.45 in spending per month, which means 2144.90 in saving + maybe 8000 not tied up in a car anymore to jumpstart that emergency fund. Not counting the car windfall and rounding the saving number down to 2000 so you can give more to charity, that kind of saving could result in almost $330,000 in 10 years!
Alison, thank you for sharing your story! Like you, I very rarely find posts and case studies for single women planning their financial futures. I am in my mid 30s and interested in buying a condo or house in a couple of years. I really appreciate reading your goals and all the advice you have received. Keep up the good work.
Look for opportunities for free/low cost fabric. Or used clothing that you could up-cycle using your sewing skills.
Garage sales, freecycle, buy-nothing groups, and thrift stores are all good for both fabric and used clothing.
I thought someone (not me! not my field!) would write in about valuing your time as a creator – shop-owner – seamstress. You said you struggle with charging for your work. Do you like the imagining/designing? the actual work? the giving it away? Focus in on the part of the process you like best and see if you can do the most of that. Talk with other people in the sewing community about what they do.
If you just want to increase your cash flow, check with a dry cleaner and do alterations and buttons for them. Perhaps you did that routine stuff at some point in your life. You wouldn’t have to deal with the money angle if the shop did.
Would it be inappropriate to place your items in the museum gift shop? Or come up with a line of small items to make (fabric Christmas ornaments or gift bags) that match one of your exhibits? Or do a museum line at a store near your museum?
I should clarify that you are an artist far beyond a button-sewing-on person, yet if you needed cash, you could probably get handsewing work done about five times as fast as most people. Think through what your goals are, what you like and want, and how to get to that point. And keep the cross-fit. Maybe in a few months or years, you will want something else, but it is community and motion for you now!
Getting here late but the TFSA is really useful for folks with pensions. Because a pension will (hopefully) mean you have a similar income in retirement huch negates the tax savings as withdrawals are still taxed. The TFSA basically has no tax on returns. It also at least for the moment isnt counted clawed back against some government benefits like OAS.
That being said I wholehearted agree with the advice about investment fees which are notoriously high in Canada. Check out this site ( http://canadiancouchpotato.com/) for guidance on index investing in Canada. For a beginner with a smallish portfolio the Couch Potato comes recommended. You can find out about it through Moneysense magazine ( http://www.moneysense.ca/save/investing/index-funds/ultimate-guide-couch-potato-portfolio/)
My husband and I roll our eyes every year at his pension payments (he also works for Canadian Government) but as I am self-employed and we get closer to retirement and even though we are saving a lot as well, we now appreciate this forced savings. it brings us comfort with our plan.
What is with Canada’s crazy Telecom prices. They are among the highest in the world. I have no suggestions there.
Wishing you luck
I agree that you have places that you can trim. You seem to have two quite expensive hobbies. I understand that sewing is important to you, but can you frugalise it a bit? Make smaller things that use less fabric? Use less expensive fabric? Shop from your stash? I knit, and it is possible to choose cheaper projects without any loss in enjoyment. I’ve also bought too much yarn over the years, and am now trying to use some of it up instead of buying more.
Given that you are already strapped for time, make sure you don’t buy too much house with too large a garden. You say that you want to garden, but it doesn’t really sound like you have time to look after it with your current lifestyle, and gardens have a habit of growing even if you don’t have time to tend them. Both house renovations and gardens require huge time commitments. Are you willing to cut back on your other hobbies to make space for housework?
Having a housemate is a good way to save money on bills and rent, and to help pay off a mortgage faster.
It sounds to me like she may not actually be that interested in retiring early but has gotten excited about the prospect because she’s learned it’s a possibility. I agree that the question really is how important is Crossfit (etc) now versus full retirement later? My suggestion would be to look at how she expects to spend her early retirement – does it look much different than her lifestyle now?
One comment on the larger emergency fund – it might be different in Canada, but in the US, once you land a government job, you’re pretty much guaranteed to keep it unless you royally screw up or the position is cut all together, in which case you generally have quite a bit of notice. If that’s the case, I would be comfortable with a smaller emergency fund.
What is the name of Alison’s Etsy store? Great job Alison. You might look for yard goods and sewing supplies at flea markets and charity shops etc. You could save money there.
Alison, I don’t know what Canadian policy is — but here in the U.S., if you have a pension from state government, you promptly get penalized when you’re eligible for Social Security. The Brick (age 62) spent 25 years in engineering before he began working for the public school system as a bus driver/trainer/IT person. His SS will be drastically cut when he decided to take it — he would have had to work in engineering 30 years, for this inequity to right itself! Grrrr…..
I would think that the gym would love a swap of some kind, which would save that amount spent on Crossfit. (Not to mention taking any bit of guilt away about it.) That amount alone would fatten up your emergency fund. I would also consider shaving a little off your groceries — and holding back on the times you go out to eat. That actually is more easily doable than some savings ideas.
Plus — cut back on utility costs as much as you can. (I read another blogger who gripes a LOT about phone and internet usage in Canada, so that may just be something you have to deal with.) Why not consider becoming a restorer, as well as a conservator? There are a lot of people out there who would love to see their treasured quilts repaired, and done sensitively. And you can choose when you want to pick up work like this. I’m sure it would be better pay, hourly-wise, than your Etsy shop. I’ve done a good bit of quilt restoration, taught it, even, and could possibly be of help.
Final thought: you’re a good writer. Why not write articles about history or your experiences?
Alison, the forks on your bike are on backwards. Please take it to a proper bike shop who will set them properly for you, it’s no good worrying about your financial future if you are running the risk of injury or worse when frugally travelling on your bike!
I share Alison’s love for sewing. She may have “side gig” success teaching classes on popular techniques, like making T-shirt Quilts.
Great work Allison! Have you thought about outsourcing parts of the PDF pattern making?
I know CAD (and many other people do too), am a novice sower, and I’d be happy to electronically draw up your sketches. That would be one less barrier to entry in the passive income generating stream.
Alison, a lot of your story really resonated with me. A few points really stuck out.
1. Housebuying: It’s a good priority to have. I bought my house at 36, a couple of years older than you plan to as a single person. Something to keep in mind — you might not buy at the time you think. Housing markets tend to fluctuate. I lucked out on my house, for example, buying it for about $20,000 less than its original listing price. I bought it toward the end of the post-recession slump; my realtor happens to live across the street from me, and I chatted with her one day when we were both outside about a couple of months after I bought my house; she’d completely sold out of her inventory. So kicked off a buying boom and a housing shortage. I chopped about $4,000 off my price in my offer (the $20k was the first listing, which prompted the seller to take it off the market and choose another realtor); we’re I to buy that house today I would likely have to tack on $4k to the price, just to compete with all the other buyers. Long story short: It might be a good idea to think in terms of ranges.
2. Single frugal: I encountered this too. I asked Mrs. Frugalwoods during her AMA about whether she and her husband were frugal before they met or grew into it, because I am also single frugal and dating often seems the opposite of that — at least in the opening stages. I am also planning my future as if I will be single and if that changes, well, then I guess at some point I call an audible. But first I have to find someone who is OK with me being a frugal, bike-riding weirdo yogi, so we’ll see about that.
3. Crossfit classes: I 100 percent agree with MSF on this: I pay monthly for yoga classes. I resisted for a long time and just dropped in occasionally to supplement a home practice, but I love my community of yogis and teachers, they’re all such wonderful people. It’s almost social as much as exercise. The final kicker for me was getting new health insurance, which gives a $30 kickback for fitness memberships. My membership costs $63.50 per month, and I get $30 back in the mail as long as I check in 10 times (got up super early for the Ashtanga class to get my 10th class before I head out for vacation!). The $30 goes in my savings and I haven’t failed to hit it in a month, except the first partial month.
Good luck Alison! I agree with MSF, you’re way beyond starting from scratch! If you’re starting from scratch, then I have friends who can’t even see the start line!
Alison, I am an ancient(?!) 54 year old singleton!! When you only have one income, it is indeed hard to save & invest when all the costs of living have to be met out of one source. In my view prioritising is the way forward – as a one-income-household you are in the fortunate position of having the freedom to make your own choices; so decide your priorities first and cut your expenses to suit. Yes, i think you do have to be a bit more ruthless with income because you don’t have any 2nd-income ‘buffer’ – so you must ensure longterm security for yourself, (pension is crucial) and a fund for emergencies is crucial. However on the whole, it makes no difference whether single or in a couple, we all have a limited budget and must cut our cloth accordingly.
The thing that I find difficult about being a single income household is that there is noone to share the finance-decisions with; so good friends are essential as a sounding-board if needed, and don’t be embarrassed to discuss money matters!
Allison! You are doing a great job, working in a field you love and doing a side hustle that can ultimately become profitable. Two comments: first the side gig, sewing. I know someone like you who started a home business of buying pretty used dresses, and then in her spare time, tearing them apart adding new sleeves, lower neckline, new skirt, new sash and selling them online. Not sure about Etsy’s fees but it’s a good place to start. Her buyers are high school and college girls who want pretty dresses for fun occasions…big into proms and formals. Word of mouth and Facebook and she was a success! Secondly, explore where you want to end up. Sounds like you might want to hold off on buying the home while you explore other positions near your hometown…within 50 miles might be perfect. Make more money and buy THERE. Research, it will either make financial sense or it won’t. Stay away from annuities if you can or get independent advice. see if the pension transfers over…aren’t many museums and university museums private? Explore the Social Security that Canada offers and check out different loans…I understand in Canada you can’t deduct your loan? Perhaps your parents (the generous, 0% folks!) can convert your student loan into a HO down payment loan, research. I pay $20 every time my seamstress does alterations for me, and that sometimes works out to $80 an hour for her, yay! Good luck!
Before you purchase a house I suggest you read the wealthy renter. It is Canadian and will help you evaluate the numbers.
Hi Allison! Thank you for sharing your story. You and I have a lot in common other than our age difference (I’m 52) and I live in the U.S. I am impressed that you are so focused on getting your financial house in order at your age! I live in a very expensive area (the Bay Area in California) and it is very hard to live here for a small amount of money. A home here that will sell somewhere else in this country for 200K goes for over a million dollars! It is very hard for us who were born and raised here to own a home in our own area. I understand why you want to own your own detached home. I have owned a townhome for 20 years and it is great cost wise as we purchased it quite a while ago, but I have always dreamed of a home that did not have neighbors on top of you, no homeowners association and a bit of land. I am also a fellow Crossfitter. The camaraderie and coaching that I receive there is worth every dime that I pay for my membership. I have made friends there that brought this shy, sit in the back of the classroom girl out of her shell. I also have an Etsy shop where I sell found vintage and antique items. As far as my retirement, I have an employer match IRA (my employer matches a certain percentage of what I contribute) plus another IRA that is self funded. We have here in the U.S. Social Security which gets taken out of our checks every pay period, but we have been told for years that this will destruct at some point, so most folks my age are not counting on that money. If it is still here when I retire…bonus. I love that you contribute to charity as that is something that I also do as well as volunteer my time. We are also the folks that hold on to our vehicle as long as possible and haven’t paid a car payment in years. I don’t understand only holding on to a new car for a few years. To me that is just throwing away money as cars depreciate so fast. The vehicles that we have now were both purchased used. As far as side gigs, I like Chris’ suggestion that you sew headbands for the gym. How about wrist wraps? I bought some from a shop on Etsy that have cute material and love them! Good luck to you!
I recommend buying a house ASAP, even if it means paying cmhc. But buy a home with a suite in it. Live in the suite rent out top floor. Aim to pay no more than 850 a month on your portion of housing costs, since that is what u are planning to pat anyway. The upper unit should make up the lions share of expenses.
If you left your house down payment savings fund in a liquid investment (in the U.S. a Money Market Fund account, for example) you’ll still have the funds available if you have a financial emergency. It’s not always the best idea to put savings into stocks and bonds if you know you’ll be needing your cash within five years because you can never accurately predict when the stock market will rise or fall (rampant inflation or deep recession, for example). Stocks are best for long term investments. If you have the option–but who knows with Canada!–I’d recommend you invest 100% in stocks in your retirement fund because you have enough years to ride out market extremes. This is what we’ve done with my husband’s 401K and have reaped the rewards of bold investing. When you get closer to retirement you can be more conservative if you want to be.
We’ll be doing what I recommended above to pay off the $87K mortgage early on our disabled son’s small house that we bought for him. Since my husband will be retiring in 2018 we want to keep the money liquid in case an emergency arises. When we have enough to pay off the mortgage in one lump sum we’ll do it. It’s “six of one or half a dozen of the other” when it comes to how much interest you’ll pay on your mortgage if you pay it off early in one lump sum payment or pay extra principle every month. There are online mortgage amortization calculators that prove this. On these sites you can also calculate what your principle and interest payments will be at different interest rates. I like this one: http://www.amortization-calc.com/
If you keep control of the “extra principle” in your own saving’s account you’ll earn interest which will offset the interest you’ll pay to the mortgage company. (“Them that are smart earns it; them that are not pays it.”)
When you do get a mortgage don’t fall for your mortgage company’s rip-off program of paying off your mortgage early by setting up bi-weekly payments. You can do it on your own and not pay the fees the company will charge you to set it up. Read the small print at the bottom of the mortgage company’s offer and it says the same thing I just did.
The best of luck to you. You sound like a person who thinks ahead–something that’s sorely lacking in many people your age.
Another Canadian here! My best recommendation would be to utilize the resources you are already paying for. Make sure you understand how to prep;are an income tax return as a small/home based business. Many of the things, such as rent, utilities etc. can factor into your tax return as deductions. The other thing I have experience doing is utilizing real estate for your best interest, whether you are renting or buying, try to include a provision for a space to rent out. Years ago when I purchased my home in downtown Toronto (and knew nothing about real estate) I told my realtor the purchase had to have “income potential of some sort, either a basement apartment, or rooms to rent out. The house I eventually chose was a “fixer upper extraordinaire:” The basement was a disaster and the cost of building it out would not be realized in the rents I could charge, so I rented out the three bedrooms upstairs and lived in the basement! I purchased the house in 1983, two years after losing a leg to cancer. I am now planning to sell my house and it is valued at 1.5 million dollars. Along the way, I did finish the basement and run it as an AirBnB for 7 years which has added almost 1K to my TFSA. I am lucky enough now to live on my own, but the renters over the years certainly helped my net worth. Also plan a budget for your retirement years. I am very frugal p;erson and live quite comfortably on just my CPP and OAS, any additional income goes into my TFSA.