Reader Case Study: Canadian Family Plans For The Future (and yes, hockey is involved)
Beth and Brad live north of Toronto, Ontario with their young daughter and old cat. With retirement 15 years away for Brad, the family wants to better prepare and get a handle on their approach to money. Brad and Beth were a money mismatch from the start, but after 14 years of marriage, they’ve been able to find a path forward together.
Unrelated Update: I’m doing a Facebook Live thing tomorrow with Brad from ChooseFI. If you’d like to join us, here are the details: Saturday, July 18, 2020 at 2pm ET; you can access this free event here. Best things about this? It’s free, it’s online, and it’s (hopefully) during my kids’ nap time (TBD on that last one).
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send to me requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.
I probably don’t need to say the following because you folks 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 condemn.
And a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.
With that I’ll let Beth, this month’s Case Study subject, take it from here!
Hello! I’m Beth, I’m 42 and I’m married to my wonderful husband, Brad, who turns 50 in September. We have one amazing kiddo, Emma, who is 9 ½ (the ½ is a big deal these days!). We live north of Toronto, Ontario–in a town called Newmarket–and we’ve been here for 11 years.
My husband works for American Greetings and celebrated 25 years at the company last month! I work for a Toronto-based HR software company – 8 years and counting. We’ve been married for 14 years and together for 16 years. We have one cat, Kiwi, who is 15 years old, and enjoys being the ‘baby’ of the house.
I am very lucky to work from home (and have done so for the last several years) so having to WFH during the pandemic was very easy for me. When my daughter is in school, her morning and afternoon schedule are my responsibility. I am very lucky to be able to walk her to school and pick her up most days. We only live 750m from her public school, so we were allowing her to walk home alone some days to help build independence. This flexibility is one of the best parts of my job!
My overall career has been interesting. I’ve been laid off 3 times in 11 years and, while I know it’s not because of my performance, as I’m awarded Top Performance awards etc., it’s also difficult to reinvent oneself each time. I used to work in downtown Toronto and the train ride was 3 hours each day, which was exhausting. My first layoff was 3 days after we bought our home – talk about out of the blue! However, I was very lucky to get a job with the ‘competitor’ one week after we were all termed (our company went out of business). My 2nd layoff was when I was 3 months into my maternity leave. It meant that after I finished my maternity leave, I had no job to go back to, but it also meant that I didn’t qualify for Employment Insurance if I didn’t find a job. To say it was stressful is an understatement. As I knew I didn’t want to take the train or work in the city, I found a job 40 minutes from my house working as a sales coordinator for a Human Capital Management company. About a year in, I moved to a new role within HR as an Onboarding program coordinator.
A couple of years ago I started working more and more from home and that has been my saving grace as it has allowed me to be more active and spend more time with my daughter and take her to her activities. My third lay-off was in February and I pondered taking the severance package my company provided but, in the end, I decided to take another job I was offered within the company. I was lucky to have another job offer within a week of my lay-off, but it was also very hard on me as I’d loved my previous role with the company. I now am a program coordinator. In some early conversations with my manager this year, I know this role will grow to be more of a program manager, but with the pandemic, things have significantly slowed down. I am so incredibly grateful to have a job when I know that many don’t.
Beth & Brad’s Money Mismatch
When I met Brad, he was $15,000 in debt (mostly consumer debt), whereas I had a savings account of nearly $50,000. Talk about oil and water mixing regarding our outlook on money! This has been the one constant issue in our marriage – how we approach money is vastly different. I was so restrictive with my spending when I first met my husband but then would go wild and spend some, followed by incredible guilt. My husband, on the other hand, just went and spent money without batting an eyelash.
I am really proud to say that we’re now on the same page about savings, spending, etc! We’ve always wanted to do an overview of our finances, but I think we were both scared to peel the onion back. I’m so happy to report that doing this Case Study brought us closer together and I feel like we’re now really and truly on the same page. It only took 16 years but, better late than never! I feel incredibly grateful to you, Mrs Frugalwoods, for this opportunity. I’ve never done a deep dive with our financials before and this was the wakeup call we needed. THANK YOU!
Side note: I never thought about money privilege until I read what Mrs. Frugalwoods wrote about what privilege looked like to her: graduating without debt, etc. I want to be clear that I have incredible privilege as I graduated from University without debt (I also worked throughout my 4-year degree but my parents paid about $5k every year for tuition [I’m sure you’re dying that tuition is only $5k!]) and my parents gave us a $50,000 ‘loan’ to buy our first house. We only have to pay it back if we get divorced! We are also able to borrow money with no interest rate, which is an incredible privilege. My parents will ‘give’ us money as my dad says that he wants to see us enjoy their money while he is still alive. Also, my parents contribute $2,500 every year to our daughter’s post-secondary education fund and the government contributes $500. My daughter is their only grandchild and it gives them great joy to fund her education as post-secondary schooling wasn’t an option for either of them when they were younger.
Getting On The Same Financial Page
I always wanted to have more visibility into our finances, but since Brad and I couldn’t agree on things, we just buried our heads in the sand (not smart!). With this Case Study, we’ve had multiple hour-long conversations about our goals, which has been truly amazing! If you knew our money conversations before this, you would be amazed too!
One goal we identified is that we want to update parts of our house. We bought our house in 2009 (literally 3 days before I got laid off due to the financial collapse) for $350,000, which is the best investment we will have ever made as our house is now worth $900,000+. It’s a fixer-upper, but as Mrs. Frugalwoods once said, “I am not my kitchen counter (or was it sink?)” and while I take pride in our house, I have realized it doesn’t need to be perfect! Our first order of business is to finish the bathroom mini-reno that we started before the pandemic (new vanity, floor, mirror, light, paint): the vanity is only 30” tall and my husband is 6’6 and we feel the height is contributing to his back issues. We’ve budged $2,000 for it and have spent $800 on a vanity so far with $330 for the faucets and another $300 for paint, lights and flooring. We have more plans for updating our house, which I note below.
Being Intentional With Spending
One of our big issues is that we’re not deliberate or intentional with our money. Prior to the pandemic (that’s a phrase I’d never thought I’d say!) we spent money whenever we needed something. I feel terrible writing this but, one of the good parts of this pandemic is that we’ve been able to save lots of money. We just moved $1,500 to our emergency fund because it feels like NOTHING is safe right now!
Last year we were so unintentional about our money – here’s what we spent on the big things I can remember:
- New Mac computer for me: $1,800
- New washer and dryer: $1,800 (we stack our washer and dryer, so when the washer broke, we had to replace both – next time it goes down, I’m redesigning my laundry space!)
- Eavestrough + soffit replacement on the exterior of the house: $5,500 (we borrowed $2,500 from Brad’s mom to pay towards this so we didn’t have to dip into our savings!)
- Trip to Scotland for a family reunion: $5,000
- New basement door: $1,400
I think something contributing to this spending is that Brad travels to a new location for work every day, which makes it hard to have a shared daily schedule. When our daughter is in school, the morning and afternoon schedule is totally up to me. I crave structure but am terrible at self-accountability. Anyone want to be my accountability partner, lol?
Beth and Brad’s Hobbies
My husband’s hobby is playing video games! The best anniversary present I ever bought him (we don’t do presents anymore) were gaming headphones so I don’t have to hear all the noises! I know, so romantic, eh? It’s taken me a long time to feel ok with this hobby, but he spends his whole day out in public dealing with folks and he just wants to come home and do something mindless every once in a while. He’s also a big plane watcher and one of his dreams is to go to this place in the UK where you can see fighter jets do maneuvers through the hills. I remember the first time he looked up at the sky and told me, “there’s a DC10 with hush kits” – I remember thinking what in the heck is he talking about?! Now my whole family is involved in pointing out planes and quizzing him! (Not that we would know any different!).
My hobbies are a bit different. Currently I’m obsessed with making signs (see photos) and I’ve always wondered if I could turn my hobby into a small side-hustle but not sure if I have the confidence or fortitude to do so! I took my daughter’s old nursery and turned it into my craft room, so it is full of all different types of craft supplies from making cards to sewing to knitting/crocheting to whatever else I’ve bought from Michaels. I enjoy spending the time to see what I can create and I’m learning that it doesn’t have to be perfect to be great!
Brad and I enjoy the simple life. We like spending time with our friends having potlucks and BBQs. I enjoy reading and Brad likes watching movies and tv shows. We enjoy spending time at my parents’ vacation cottage doing projects and enjoying family and friends. Over the last couple of years, I have invested time and effort into creating gardens. This year I’m growing green bell peppers, tomatoes, scarlet runner beans, spaghetti squash, asparagus, cabbage, lettuce and cauliflower. I enjoy the physical work as well as the meditative actions of watering and weeding!
We are also a hockey family – I mean, can we be any more Canadian, eh?!! Lol…. Our daughter started playing ringette when she was 4 and switched to hockey at age 6. This year, she played house league and was an alternate player for the Novice girls rep team. This meant she played on two teams, but didn’t always play games for the rep team. We spent a lot of time at the rink this year cheering her on and I also volunteered as a trainer on both teams, so I had to be at practice + games to support the girls. I love being involved in my daughter’s hockey life and I really enjoy getting to know her friends, the parents, and the coaching staff. Brad and I didn’t play competitive sports outside of school, so this is a whole new world for us. It’s expensive, but we consider it an investment in so many things: friendship, teamwork, self-control, agility, diligence, and more which we feel are great life lessons. Our daughter LOVES playing hockey and she really enjoys spending time with other girls her own age. She’s an only child and she really enjoys the camaraderie.
Where Beth and Brad Want To Be in Ten Years:
- Pay off our mortgage before retirement. We’re on track to pay it off in 15 years, which would be around the age my husband retires.
- Top up TFSA + our RRSPs. We can contribute $5,500 every year to TFSA and 18% of our income to RRSP. We are nowhere near contributing either of these amounts.
- Contribute to the maintenance of my parent’s vacation cottage with the end goal of assuming responsibility for the cottage along with my sister.
- Have money set aside for trips to Scotland/England to see family (I’m ½ Scottish).
- We enjoy the simple life. I’m happy with our house – it needs some work, but I’ve realized in the last 6 months that my house doesn’t have to be perfect. It’s not as if we have top furniture (one of our couches is 40 years old: hello hand-me-downs!), but I like everything to have its place and I take pride in my home. Thanks to our conversations for this Case Study, Brad and I have listed our priorities:
- Add a front screen/glass door (to allow for cross breeze): $1,000
- Replace front siding: $1,500
- Mini kitchen reno: $2,000
- Replace windows $8,000
- I want to be able to afford these renovations without wondering how I’m going to pay for them. I refuse to get a line of credit, although we do have the privilege of being able to borrow from our parents.
- I want to be healthy. I have Type 2 diabetes and during the pandemic, my sugar levels are high so I’m trying to lower them via diet, exercise and drugs. I’m lucky that we both have drug coverage, so our prescription costs are zero for the most part. I’m too young to be on meds for it and am working towards trying to reduce my medications and to eventually stop taking them.
- I want to be doing a job that I love where I can help people. I’m not 100% sure if I want to be in management and am open to new ideas. I’m a hard worker and enjoy learning new things so I’m open to different opportunities. That’s one of the great things about my company: people have been with them for 30+ years in different roles, so I think that will be my path.
- Brad loves his job. He’s been with his company for 25 years – 30 if you count part-time. He was in the same job for 24 years until this past February where he went out of his comfort zone and became a Territory Sales Manager for a maternity leave. We were excited for him to get bonus but unfortunately with all the craziness, there are no financial goals this year and so no bonus for anyone. He did negotiate a raise, which he will be able to keep when he goes back to his former role (Installation Manager). He enjoys his job and travels to a new destination every day and will be happy if he can continue doing this job for the next 15 years.
Beth & Brad’s Finances
|Beth’s income||$3,794||Beth’s net salary, minus the following deductions: 1% stock purchase plan, taxes, 4% pension plan with 4% match, and $30 per directed towards my company’s charity|
|Brad’s income||$2,800||Brad’s net salary, minus the following deductions: health & dental insurance, company car usage, 4% pension plan contributions + 4% match, and taxes|
|Child benefit||$133||Taxable income, automatically given by the Canadian Government|
|Mortgage||$1,200||We pay an extra $100 a month towards the principal.|
|Groceries||$800||Includes household supplies (such as toilet paper, laundry detergent – basically trips to Costco!). We have been spending more due to pandemic!!|
|Property Taxes||$385||Current monthly price, we pay in 10 month installments and will be re-adjusted in July for 2nd half of year|
|Rogers bill||$158||Includes high speed wireless, phone and tv.|
|Dinners out||$150||We typically go out for dinner once per month and get take-out once per month.|
|Hydro Bill||$130||We converted to low flush toilets a couple of years ago and it made a difference. Now I wash our dishes on ‘fast wash’ 30 mins compared to 2 hours on normal/sanitize.|
|Brad’s monthly fun money||$120|
|Beth’s monthly fun money||$120|
|House Insurance||$117||With TD Insurance. Every year I call and negotiate the rate for both house and auto.|
|Car Insurance||$112||With TD Insurance. I tried to negotiate this year and even got a new provider but my husband has a speeding ticket on his account that is affecting his rating!|
|Gas||$100||Varies depending on how much heat we use plus we have gas stove + fireplace|
|Christmas gifts||$100||We don’t give presents to my brother-in-law or his wife except baking + wine. We give about $100 each to my sister, parents, and each other… and we go totally overkill on our daughter. Probably around $400 each Christmas! I KNOW!!!!!! I’m dying with the realization that we spend A LOT of money on our child.|
|Vacation||$100||We typically go to Outer Banks, NC for 1 week in March with my extended family. My parents pay for the rental and we pay for food/drinks. We drive down and pay for gas/hotel stay on the way down. We would like to have a dedicated vacation fund.|
|Beth & Brad’s Life Insurance||$84||With Empire Insurance. I have a pre-existing medical condition so I had to locked in extra coverage before it went sky high|
|Cat food + litter||$60|
|Gas for my car||$50||Small tank and I don’t do a lot of driving except to hockey rinks! Lol….but I’m still on a tank of gas right now from March!|
|Emma’s birthday||$50||I typically host a bday party for Emma and I have brought it in for $250 including loot bags for 10 kids but this year we decided to do an adventure and went to Great Wolf Lodge. It was expensive but so glad we did it in light of the pandemic. She still talks about it all the time.|
|Miscellaneous||$50||This is a catch-all because I’m sure there’s areas that I haven’t covered. The past 3 months haven’t been normal spending so I tried to go back and look but it’s difficult. According to my credit card app, from May 2019 to May 2020 I’ve spent $21,318! OMG! There were flights on there but still!|
|Web TV||$40||Our Rogers TV only gives us basic cable so it’s cheaper to go with this web TV. I don’t watch TV that often but my husband enjoys it.|
|Beth’s Life Insurance||$35||With Empire Insurance. I have a pre-existing medical condition so I had to lock in extra coverage before it went sky high|
|Clothing||$30||Clothing for all 3 of us. I use my PC points to buy clothing from Joe Fresh for both Emma & I.|
|Haircuts||$30||My husband gets a haircut every month and Emma gets cheap haircuts 2-3 times per year. I gave up on dying my hair cause 1) too expensive and b) I’m enjoying my grey 😉|
|Birthday gifts||$25||We don’t really give presents to each other anymore and try instead to do experiences. Although I still give to my sister, Brad’s parents, my parents, our niece and nephew. Plus any birthday parties Emma is invited to. Going rate is $25 – $30 for a present!|
|Car expenses||$20||License renewal + saving for repairs.|
|David Suzuki Foundation charitable donation||$12||We got married on earth day so this is an important charity for us!|
|DietDoctor.com||$11||I try to eat low carb and follow dietdoctor.com website for recipe + health info.|
|Sirius Sat. radio||$11||My husband’s territory has places with no radio (or worse, EZrock!)|
|PC Express||$10||$125 per year – allows me to do online ordering and pick up. Non-negotiable as I hate grocery shopping! I also spend less because no impulse purchasing!|
|Charitable giving||$10||In addition to the 2 monthly charities I donate to, we also like to give to other charities in an ad-hoc manner. We just gave money to the food bank in light of covid.|
|Fit4Less||$10||Gym membership for my husband|
|Amazon Prime||$8||$90 per year|
|PS4 online access||$7||In order to game online with friends for both my husband and daughter|
|Winter gear||$7||Winter gear for Emma|
|Disney+||$7||We pay for Disney+, my sister pays for NetFlix and friends pay for BritBox and we all share passwords|
Notes: I’m looking over our expenses and whoa! Some of those columns are incredibly uncomfortable to look at! There’s a lot of room for opportunity to change things! I want to list out the following for some context:
- Brad and I both have company cell phones – very thankful!
- We don’t drink coffee and therefore don’t go to coffee shops or grab a Timmies very often.
- I hang dry all our clothes, so we reduce our hydro bill and reduce our carbon footprint
- We keep the heat at 19 and AC at 25. Grab a sweater or a popsicle depending on the season if you’re cold or hot!
- Conserving our hydro and gas is important to me from an environmental + frugal perspective.
|Item||Outstanding loan balance||Interest Rate||Equity (amount you’ve paid off)||Purchase price and year|
|Mortgage on primary residence||$158,562||2.49%, 5-year fixed rate, due in October 2020. I used to work at a mortgage company and still get staff rates! Woot!||$191,438||$350k; purchased in 2009|
|Item||Outstanding loan balance||Interest Rate||Loan Period/Payoff Terms/Your monthly required payment|
|Loan from Brad’s parents||$2,500||0% interest||There are no terms and my MIL is not requesting payment any time soon|
|Item||Amount||Notes||Interest/Bank/Type of securities held|
|Brad’s Pension Plan||$94,546||As of 12/31/2019||It has a 6% return rate since his first contribution in 2006. Via Manulife|
|Beth’s Pension Plan||$66,602||As of 6/10/2020||I have a Pension Plan (rate of return 7%) plus RRSP plan (rate of return 6.99%). Via Great West Life (Canada Life now)|
|Emma’s post-secondary fund||$27,332||My parents contribute $2,500 every year and the government contributes $500. It’s lost 10% due to Covid||It is handled by my parents|
|Brad’s RRSP||$20,710||$100 monthly contribution||Granite Growth fund with SunLife Financial|
|Beth’s RRSP||$18,054||$50 bi-weekly contribution||Granite balanced growth with SunLife Financial|
|Emergency Fund||$9,591||Needs to be more!||TFSA account (tax free) with 0.25% interest with Tangerine|
|Beth’s saving account||$6,430||This is my savings account from my bonus, Christmas & birthday money. I’m probably will use this to buy a new-to-me car. It doesn’t have to be fancy, just has to get me around town 🙂||Earns 0.25% interest (OMG) with Tangerine|
|Stock Equity Award||$4,000||This is in US dollars and I was just awarded it last week so I have no idea how it works! They expire in 10 years.||Stock Equity plus|
|Emma’s savings account||$3,968||We contribute $25 every 2 weeks to a savings account for her.||Savings account with 0.35% interest from Tangerine|
|Joint no-fee chequing account||$3,950||Our daily chequing account||Simplii Financial|
|Emma’s camp fund||$3,347||We contribute $100 every 2 weeks so we can pay for summer camps and hockey and it’s still not enough! If she makes rep hockey next year, we’re looking at $2,500 – $4,000. This account has a $2k gift from my parents who gave us money this year for her to go to overnight camp (it’s $2,500 for 2 weeks) but camp is cancelled. Plus we need about 5 weeks of day camp each year which is about $1,500. This year is a gift because we will save money with no camps but the mental stress is not worth the extra money some days!||Savings account with 0.25% interest from Tangerine|
|Brad’s no-fee chequing account||$1,975||Brad’s savings account||Simplii Financial|
|Brad’s TFSA||$882||$100 monthly contribution||Earns 0.25% interest with Tangerine|
|Beth’s no-fee chequing account||$630||This account receives any payments from the government (tax rebates, child benefit)||Simplii Financial|
|Vehicle make, model, year||Valued at||Mileage||Paid off?|
|Toyota Corolla 2005||$1,500||165,000 KMs 🙂||Yes. My husband has a company car for which he ‘pays’ $100 a month and it’s also a taxable benefit.|
|Card Name||Rewards Type?||Bank/card company|
|Tangerine World Mastercard||Cash back||Tangerine|
|PC Financial World Elite MasterCard||PC Points||MasterCard / PC Financial|
|Scene Visa||Scene Points (to be used for free movies at Cineplex movie theatres)||Scotiabank|
|Airmiles MasterCard||Airmiles program||BMO Bank of Montreal|
|Costco Mastercard||Costco cashback! We live 1km from Costco – can be dangerous!||Capital One|
Beth’s Questions For You:
1) What credit card should I be using?
- I’m using PC Financial World MasterCard Elite which gives me great PC points (and allows me to buy clothes for free using my points) but they don’t allow you to import your data into Mint. I use their app, but it’s hard to use as I can’t drill down to see details. I also have a Tangerine MasterCard.
- My husband uses Scotiabank Scene Visa, AMEX, Bank of Montreal Airmiles Mastercard and Capital One Costco MasterCard.
- I think we need to stick to two cards and use them exclusively.
- I fully expect – and my husband agrees – that he will work until he is 65 (or older) and hopefully I can retire by 60/62 as he’s 8 years older than me. Our retirement plans consist of travelling to New Zealand, the UK and through Canada and the US.
- My parents have a cottage and we have expressed an interest in using/managing/buying when we’re older – it would be a co-share agreement with my sister – and we would like to spend time at the cottage as our best friends have the cottage right beside us.
3) What financial management software should I be using?
- Personal Capital doesn’t work here in Canada so I’m using Mint, but find it difficult. Should I move to Quicken? Or YNAB? I don’t want to get obsessed with my money, but I think a weekly check-in would help us be more intentional. When I get obsessed with money, I don’t want to spend ANY OF IT and then when I do spend it, I go a little crazy!
- I don’t think either of us are going to make big bucks in the future, so it’s a matter of wealth protection for us. How do we use what we have in a responsible, intentional manner and spend and save wisely?
4) Currently Brad and I give each other $120 per month as ‘play money’. Is this the right approach? Should we increase or decrease the amount?
- This money can be spent on anything we want, and we don’t have to provide commentary or even ask the other for approval to spend it all. In some ways it’s an allowance because it allows us the freedom to have spending money with no constraints.
5) How can we streamline our banking?
- It seems very complicated with our multiple savings accounts and chequing accounts.
- Before the pandemic, we were always in and out of overdraft which costs $5 a month. We have the money, but we’re just not organized enough.
Mrs. Frugalwoods’ Recommendations
Beth and Brad are going a great job!! Before we dive into Beth’s questions, I want to highlight a few things Beth wrote that underscore why it’s important to know where you stand financially, to have a grasp on all of your accounts and–if you have a partner–to do this work together:
I’m so happy to report that doing this Case Study brought us closer together and I feel like we’re now really and truly on the same page. It only took 16 years but, better late than never! I’ve never done a deep dive with our financials before and this was the wakeup call we needed.
I love that Beth and Brad were able to overcome their longstanding discomfort and conflict around money to have this open, honest conversation.
When you approach money conversations from the standpoint of curiosity and gathering information, it allows both partners to feel validated and able to ask questions and share concerns. If you crave this type of money deep-dive, whether on your own or with a partner, you can copy the steps of the Case Studies, follow my free Uber Frugal Week series, or take my full-on Uber Frugal Month program (which is also free).
Ok back to Beth and Brad!
I’m going to start by stating the obvious: Beth and Brad are Canadian. I am not Canadian. Thankfully, I know that many, many, many readers are…. so today is your day! Attention all Canadians: Please offer Beth and Brad Canada-specific advice in the comments today!!!!
Beth’s Question #1: What credit card should I be using?
Since we’ve established that Beth is Canadian and I am not, I can’t suggest specific cards because I’m not familiar with what’s best in Canada. However, I can offer her some general credit card principles to consider:
- Pay off your credit cards in full every month: Check! Beth and Brad are already doing this.
Have cards without annual fees UNLESS you reap significant value from an annual fee (usually only travel cards offer enough benefit to offset the fees): Check! Beth and Brad are already doing this.
- Make sure you’re actually using the rewards/cash back offered by your credit cards: Check! It appears that Beth and Brad are already doing this.
- Keep credit cards open for a long time (and paid off in full every month) because this helps your credit score.
- Don’t have too many cards to keep track of because this can lead to underutilizing the points/rewards offered by each card and, more crucially, you might lose track of payments.
- Ensure that your credit utilization is appropriate and that you’re not bumping up against your line of credit limit.
The only moderately red flag (a pink flag, maybe) with Beth and Brad’s credit card strategy is that they have a lot of cards. However, if they use the points from all of these cards and if they’re all fee-free and if they pay them all off every month, there’s not really a downside. It sounds like Beth would prefer to simplify and so I suggest they analyze their spending patterns, see which cards are used most often, and assess which points/rewards are consistently used. I’m a big fan of cash back cards because cash is the one reward you are guaranteed to redeem–pandemic or no pandemic!
More about my credit card strategy, and general tips on responsible credit card usage, below:
- The Frugalwoods Guide to a Simple, Yet Rewarding, Credit Card Experience
- Credit Cards: Use Them To Your Advantage
Beth’s Question #2: Are we on track for retirement? (I know we’re not, but I want to know what we need to do to get up-to-speed).
From my (meagre) understanding of Canadian retirement systems, Beth and Brad should expect to receive income in retirement from the following sources:
- Canada’s Old Age Security Program (OAS)
- Their pensions
- Their RRSPs (Registered Retirement Savings Plans)
- Brad’s TSFA (Tax-Free Savings Account)
The first part of my answer is to send Beth and Brad back to do more research on their respective pension plans. I don’t know the viability or health of Canadian pension plans, but I do know that some pension plans in the US have defaulted in recent years. I encourage Beth and Brad to find out all they can about their pensions and the likelihood that they’ll pay out.
Determine Their Anticipated Monthly OAS Amounts
From what I can tell, OAS is available after age 65 and the monthly amount is based on how long you’ve lived in Canada, your marital status, and your income. Beth and Brad can consult this chart and read more about OAS here (source: The Canadian Government).
Once they factor in their anticipated OAS payments, and the specifics of their pension plans, they can determine how much they’ll need to save in their RRSPs. The Canadian Government has this super helpful site, which provides a breakdown on how to plan for retirement. I also found this nifty Canadian Retirement Income Calculator, courtesy again of the Canadian Government. I highly recommend Beth and Brad check this out and plug in their own numbers.
Once Beth and Brad have a good handle on what to except from OAS and their pensions, they can calibrate how much they should be contributing to their RRSPs and TFSA. Beth noted that their max contribution amount is $5,500 per person annually to TFSAs (although, based on my research, I’m pretty sure it’s now $6K in 2020) and 18% of their income to RRSPs.
TFSA versus RRSP?
Canadians, for the love of hockey, PLEASE chime in on this debate in the comments. Here’s my bumbling American attempt at deciphering these two types of accounts. Thankfully, the Ontario Securities Commission has this wonderfully helpful chart comparing the two accounts. The key differences, as I understand them, are as follows:
- RRSPs are specifically for retirement savings; TFSAs can be used for any type of savings.
- Contributions to RRSPs are tax-deductible; contributions to TFSAs are not.
- Given that, you pay taxes on RRSP withdrawals, but you don’t on TFSA withdrawals.
- You can’t contribute to an RRSP past the age of 71; there’s no age limit on contributions to TFSAs.
These accounts are the inverse of each other in terms of when they’re taxed (similar to American IRAs and Roth IRAs). Given that, their efficacy will be unique to your individual circumstances and–crucially–your tax situation. If you think your tax rate will be HIGHER in retirement, a TFSA will be better; if you think your tax rate will be LOWER in retirement, an RRSP makes more sense. But again, you can use a TFSA for savings other than retirement, so it sounds like a lot of people go ahead and have both.
Bottom Line (please stop talking about Canadian retirement systems, Mrs. Frugalwoods… )
The good news, the easy news, is that this question boils down to a pretty simple solution: if Beth and Brad want to ensure they have more in retirement savings, all they need to do is spend less and save more. Easier said than done, but Beth noted she thinks they have room to reduce their spending. It’s easy to get tangled up in different accounts and strategies and plans and–while it’s imperative to understand the most tax-advantaged ways to save–at the end of the day, it’s just a question of saving more money. Spend less, save more, and invest the difference–that’s about it. Ok, let’s take a look at their expenses!
Beth and Brad’s Expenses
In every Case Study, I like to point out that what you choose to save or not save is a very personal decision. Cutting every last expense is NOT the right answer for everyone and I am NOT an advocate for making yourself miserable in the process of achieving financial stability. I am an advocate for values-based, goal-oriented spending. I think it’s important to assess whether all of your expenses bring you fulfillment and a good return on your investment.
In order to effectively review your expenses, you need to know what you’re spending. You can write your expenses down in a notebook, you can create your own spending spreadsheets, you can use an online program–whatever you do, keep track of what you spend every month. The reason it’s important to track your expenses every month of every year is that it’s not realistic to assume that what you spent in, say, December 2019 is what you’ll spend every single month of the year.
While some expenses are fixed from month to month (such as rent/mortgage payments), most of us experience fluctuations in lots of other categories, such as: travel, dining out, groceries, healthcare, gifts, entertainment, pets, utilities…. you get the picture. This is why longterm expense tracking is such a crucial element of longterm financial health and planning.
Beth and Brad’s spending isn’t at all unreasonable and it fall well within their means; however, if they want to boost their savings, the quickest way to do that is by spending less money. The other way to do this is, of course, to earn more, but Beth noted that they’re both happy in their jobs (can’t put a price on that!!!) and don’t plan to change careers. Given that, we’ll focus our efforts on finding ways to reduce their spending. Beth also noted that cash flowing their desired home renovations/repairs is a big goal for them.
Here are some ideas for how they can save more money for home renovations and their retirement accounts:
|Item||Amount||Beth’s Notes||Mrs. FW’s Notes||Proposed New Amount||Amount Saved|
|Mortgage||$1,200||We pay an extra $100 a month towards the principal.||Since their interest rate is so low, they might consider not bothering with this $100 extra/month payment.||$1,100||$100|
|Groceries||$800||Includes household supplies (such as toilet paper, laundry detergent – basically trips to Costco!). We have been spending more due to pandemic!!||Could probably be reduced a bit, but this isn’t unreasonable considering it includes household supplies too.||$700||$100|
|Property Taxes||$385||Current monthly price, we pay in 10 month installments and will be re-adjusted in July for 2nd half of year||Fixed expense; no change||$385||$0|
|Rogers bill||$158||Includes high speed wireless, phone and tv.||That seems really expensive, but maybe this is standard for Canada? Please advise, Canadian readers.
Combined with their two other TV line items, they’re spending a grand total of $205 per month on TV subscriptions (and phone and internet). That seems like a lot to me, so I wonder if there’s any chance one (or more) of these could be dropped to reduce the overall total? Although I’m also cognizant of the fact that–due to the pandemic–the TV is a pretty great and safe source of entertainment these days.
|Dinners out||$150||We typically go out for dinner once per month and get take-out once per month.||This could be put on hold (or reduced) while they build up their savings.||$0||$150|
|Hydro Bill||$130||We converted to low flush toilets a couple of years ago and it made a difference. Now I wash our dishes on ‘fast wash’ 30 mins compared to 2 hours on normal/sanitize.||This seems really high, but again, is perhaps standard for their region? Please advise, Canadian readers.||$130||$0|
|Brad’s monthly fun money||$120||This is a question of longterm goals. If Beth and Brad want to commit to saving more for their retirement (and shorter-term travel and home renovation goals), this category could be put on hold or reduced||$0||$120|
|Beth’s monthly fun money||$120||This is a question of longterm goals. If Beth and Brad want to commit to saving more for their retirement (and shorter-term travel and home renovation goals), this category could be put on hold or reduced||$0||$120|
|House Insurance||$117||With TD Insurance. Every year I call and negotiate the rate for both house and auto.||This seems really high, but again, is perhaps standard for their region? Please advise, Canadian readers.||$117||$0|
|Car Insurance||$112||With TD Insurance. I tried to negotiate this year and even got a new provider but my husband has a speeding ticket on his account that is affecting his rating!||This seems really high, but again, is perhaps standard for their region? Please advise, Canadian readers.||$112||$0|
|Gas||$100||Varies depending on how much heat we use plus we have gas stove + fireplace||This seems kinda high, but again, is perhaps standard for their region? Please advise, Canadian readers.||$100||$0|
|Christmas gifts||$100||We don’t give presents to my brother-in-law or his wife except baking + wine. We give about $100 each to my sister, parents, and each other… and we go totally overkill on our daughter. Probably around $400 each Christmas! I KNOW!!!!!! I’m dying with the realization that we spend A LOT of money on our child.||This is a question of longterm goals and is a totally personal choice. This adds up to $1,200 per Christmas and it’ll just be a question for Brad and Beth to grapple with.
One thought I had: Would it be possible to lump in some of their daughter’s hockey equipment and expenses as gifts?
|Vacation||$100||We typically go to Outer Banks, NC for 1 week in March with my extended family. My parents pay for the rental and we pay for food/drinks. We drive down and pay for gas/hotel stay on the way down. We would like to have a dedicated vacation fund.||Is this on hold due to the pandemic? If so, could this money be saved instead?||$0||$100|
|Beth & Brad’s Life Insurance||$84||With Empire Insurance. I have a pre-existing medical condition so I had to locked in extra coverage before it went sky high||Fixed expense; no change||$84||$0|
|Cat food + litter||$60||I haven’t owned a cat in a looooong time, so I’m not sure if this is reasonable or not? Cat owners, please advise.||$60||$0|
|Gas for my car||$50||Small tank and I don’t do a lot of driving except to hockey rinks! Lol….but I’m still on a tank of gas right now from March!||Nice!||$50||$0|
|Emmy’s birthday||$50||I typically host a bday party for Emmy and I have brought it in for $250 including loot bags for 10 kids but this year we decided to do an adventure and went to Great Wolf Lodge. It was expensive but so glad we did it in light of the pandemic. She still talks about it all the time.||It’s my secret desire to take my kids to Great Wolf Lodge, so I can’t really tell them to cut this… 😉||$50||$0|
|miscellaneous||$50||This is a catch-all because I’m sure there’s areas that I haven’t covered. The past 3 months haven’t been normal spending so I tried to go back and look but it’s difficult. According to my credit card app, from May 2019 to May 2020 I’ve spent $21,318! OMG! There were flights on there but still!||I suggest Beth dig in and see what all this is going towards, just to illuminate it for her so she can decide if they’re priorities or not.||$50||$0|
|Web TV||$40||Our Rogers TV only gives us basic cable so it’s cheaper to go with this web TV. I don’t watch TV that often but my husband enjoys it.||Combined with their two other TV line items, they’re spending a grand total of $205 per month on TV subscriptions (and phone and internet). That seems like a lot to me, so I wonder if there’s any chance one (or more) of these could be dropped to reduce the overall total? Although I’m also cognizant of the fact that–due to the pandemic–the TV is a pretty great and safe source of entertainment these days.||$0||$40|
|Beth’s Life Insurance||$35||With Empire Insurance. I have a pre-existing medical condition so I had to lock in extra coverage before it went sky high||Is this a second policy for Beth? There’s another one listed above. If so, what’s the rationale for having two?||$35||$0|
|Clothing||$30||Clothing for all 3 of us. I use my PC points to buy clothing from Joe Fresh for both Emmy & I.||Pretty reasonable in my book. If they want to save more, this could be a space to do so (especially for Beth and Brad since I totally get that kids have this annoying habit of growing… )||$20||$10|
|Haircuts||$30||My husband gets a haircut every month and Emmy gets cheap haircuts 2-3 times per year. I gave up on dying my hair cause 1) too expensive and b) I’m enjoying my grey 😉||Is this something that could be in-sourced? It’s not a ton of money, but could it be an easy way to save an extra $360 per year?||$0||$30|
|Birthday gifts||$25||We don’t really give presents to each other anymore and try instead to do experiences. Although I still give to my sister, Brad’s parents, my parents, our niece and nephew. Plus any birthday parties Emmy is invited to. Going rate is $25 – $30 for a present!||I wonder if it would be possible to enact the re-gifting/buying new items from garage sales approach for Emmy’s friend’s parties?
Anytime I see a new toy/book/puzzle/craft supply/etc at a garage sale, I snap it up and use it for another kid’s party. I also re-gift new toys that my kids have received and that they already own or aren’t interested in.
|Car expenses||$20||License renewal + saving for repairs.||Fixed expense; no change||$20||$0|
|Craft supplies||$20||It sounds like this is an important hobby to Beth and so I wouldn’t advise reducing it. This is where the question of values-based spending comes in. Makes no sense to save all your money if you can’t spend it on the stuff you love! Look to reduce in other less meaningful categories.||$20||$0|
|David Suzuki Foundation charitable donation||$12||We got married on earth day so this is an important charity for us!||Love this and the personal connection for Beth and Brad||$12||$0|
|DietDoctor.com||$11||I try to eat low carb and follow dietdoctor.com website for recipe + health info.||If this is working for Beth, then I’d say keep it!||$11||$0|
|Sirius Sat. radio||$11||My husband’s territory has places with no radio (or worse, ezrock!)||I’m going to push back on this one. I too drive in an area with no cell reception and no radio reception, so what I do is download podcasts ahead of time and listen to them through the bluetooth speaker in my car. This is free with a one-time bluetooth purchase (or his car might already have one!). Is this a possibility for Brad?||$0||$11|
|PC Express||$10||$125 per year – allows me to do online ordering and pick up. Non-negotiable as I hate grocery shopping! I also spend less because no impulse purchasing!||I hate shopping too. If this was available where I live, I would totally do this!!!||$10||$0|
|Charitable giving||$10||In addition to the 2 monthly charities I donate to, we also like to give to other charities in an ad-hoc manner. We just gave money to the food bank in light of covid.||Fixed expense; no change||$10||$0|
|Fit4Less||$10||Gym membership for my husband||That is one cheap gym membership! Nice!!!||$10||$0|
|Amazon Prime||$8||$90 per year||I feel like Amazon Prime has become a necessity during the pandemic…. 😉||$8||$0|
|PS4 online access||$7||In order to game online with friends for both my husband and daughter||Another question of values-based spending. It sounds like this is an important hobby for Brad and their daughter, so I’d vote to keep it and look to reduce spending in other, less meaningful areas.||$7||$0|
|Winter gear for Emmy||$7||Winter gear for Emmy||As a fellow tundra-dwelling parent, I want to commend Beth and Brad for getting away with spending so little on winter gear!!!! The struggle is real.||$7||$0|
|Disney+||$7||We pay for Disney+, my sister pays for NetFlix and friends pay for BritBox and we all share passwords||Combined with their two other TV line items, they’re spending a grand total of $205 per month on TV subscriptions (and phone and internet). That seems like a lot to me, so I wonder if there’s any chance one (or more) of these could be dropped to reduce the overall total? Although I’m also cognizant of the fact that–due to the pandemic–the TV is a pretty great and safe source of entertainment these days.||$7||$0|
|Monthly subtotal:||$4,178||Proposed new monthly subtotal:||$3,338||$841|
|Annual total:||$50,136.00||Proposed new annual total:||$40,052||$10,092|
This spreadsheet gives Beth and Brad a format to work with to see where and how they could save more every month. I’ve made my suggestions above, but they’re the ones who know best where and how they can save. I’ll email this to Beth so that they can tinker with the numbers. If they followed my above ideas, they’d be on track to save an additional $10,092 per year.
Beth’s Question #3: What financial management software should I be using?
Uh, I don’t know. I use and recommend Personal Capital (because it’s free and I like it), but alas, it’s not available in Canada. I’m not a huge fan of paying for financial software, but if Beth feels it would make a marked difference in her life, she should go for it. I know that a lot of people use and love YNAB.
One idea: since Beth and Brad use credit cards for most (all?) of their spending, they could just download those statements to review.
Beth should also check out what the interface is like for their various banks. Some banks do a great job of aggregating your data and providing nice little charts and graphs.
Beth’s Question #4: Currently Brad and I give each other $120 per month as ‘play money’. Is this the right approach? Should we increase or decrease the amount?
The real answer here is that if this works for Brad and Beth, it’s the right approach and the right amount! Finding a way to compromise and agree on money as a couple is crucial. However, this does come to $2,880 per year, which is kind of a lot considering that their hobbies, gifts, dining out, haircuts, and clothes are not included. Reducing (or eliminating) this would obviously save more money, but it’ll be important for Beth and Brad to dig into the reasons why they each value this play money. It might very well be that a smaller amount could serve the same purpose. Or, it might be that $2,880 per year is a very inexpensive way to keep their marriage strong and their finances on track! Sounds like it’s worth another Beth and Brad conversation.
Beth’s Question #5: How can we streamline our banking?
I’m so glad Beth asked this because I was going to say something anyway! Girlfriend, what is going on with all these accounts?! Seven of Beth and Brad’s accounts can’t be combined because they’re specific retirement/savings account programs. Here’s that list:
|Brad’s Pension Plan||$94,546||Pension|
|Beth’s Pension Plan||$66,602||Pension|
|Emmy’s post secondary fund||$27,332||College Savings|
|Brad’s monthly RRSP contribution||$20,710||Retirement|
|Beth’s monthly RRSP contribution||$18,054||Retirement|
|Stock Equity Award||$4,000||Stock|
Setting those un-combinable accounts aside, Beth and Brad have seven more savings and checking accounts, as follows:
|Beth’s saving account||$6,430||Savings|
|Emmy’s savings account||$3,968||Savings|
|Joint no-fee chequing account||$3,950||Checking|
|Emmy’s camp fund||$3,347||Savings|
|Brad’s no-fee chequing account||$1,975||Checking|
|Beth’s no-fee chequing account||$630||Checking|
I commend Beth for carefully setting aside money for different goals and purposes. However, I question if they need seven different accounts to do so? Beth noted that they frequently overdraft one account or the other and then have to pay an overdraft fee. As she mentioned, there’s no reason for her to be doing this since they have enough money to cover their expenses. So, a few ideas:
- At the very least, have all of these accounts with the same bank. That way, they could view them through one online interface and transfer money between accounts easily. Maintaining these seven accounts would enable them to keep their savings goals separated, but wouldn’t address the overdraft/confusion issues.
- Do the whole “all the same bank” thing AND combine all like accounts. So, all the savings accounts would combine to one and all of the checking accounts would combine to one. With that approach, Beth and Brad would only have nine accounts total–their seven un-combinable accounts, one savings account, and one checking account.
I, personally, am a fan of simplicity and would probably opt to combine all like accounts. However, if Beth feels like that might thwart their savings goals, she should keep separate accounts and find a way to manage them more smoothly. At the very least, I personally prefer to use one financial institution for ALL of our accounts (retirement, 529s, savings, investments, DAF, etc). I use Fidelity for absolutely everything, which allows me to see all of my accounts and my entire net worth in one place. It also makes it supremely easy to transfer money between accounts and to have automated bill pay and automated investments. Fidelity is not paying me to say this, although I really wish they were.
- Analyze credit card utilization and see if it makes sense to pare down the number of cards they have. Hopefully Canadian readers will offer specific card advice in the comments!
- Research retirement accounts: pension, OAS anticipated payments, and determine the most tax-advantaged way to save (referring to the info above on RRSPs vs. TFSAs). Determine how much more they should be saving each month and adjust their spending accordingly (utilizing the spreadsheet format I outlined above).
- Have an open, honest conversation about the play money totals and determine the root reason for their need. Discuss if a reduced amount would meet this need.
- Work to streamline and simplify accounts. Consider combining like accounts and definitely consider consolidating everything to the same financial institution (if possible). My guess is that combining and simplifying would eliminate the need for any additional financial software. If everything is in the same place, Beth and Brad could probably utilize the bank’s online interface to check-in about their money regularly.
- Keep these amazing conversations going! I’m delighted and humbled that this Case Study brought Beth and Brad closer together on their finances. Keep this momentum going by scheduling a regular, repeated money check-in (a lot of couples like weekly or monthly meetings). Keep bringing your open, non-judgmental, loving approach to these conversations and you two will set yourselves–and your daughter–up for a fabulous, well-funded future.
Ok Frugalwoods nation, what advice would you give to Beth? We’ll 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.
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