Reader Case Study: Canadian Atmospheric Scientist and Family

Sidney lives in a west-coast Canadian city with her husband, Steve, and their nine-year-old son. Sidney works as an atmospheric scientist for the federal government and Steve is an analyst, also with the government. They’ve been renting out their basement suite to friends for the last three years, but those friends will be moving abroad in May. Sidney’s grappling with whether or not they need to continue renting out the basement for the income, or if they can reclaim that space for home offices and a guest room for visiting family. We’re off to Canada today to help out Sidney and Steve!

What’s a Reader Case Study?

Case Studies address financial and life dilemmas that readers of Frugalwoods send in 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 the last 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.

The Goal Of Reader Case Studies

Reader Case Studies intend to highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!

The Case Study series began in 2016 and, to date, there’ve been 73 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.

I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight, queer, bisexual and polyamorous people. I’ve featured women, non-binary folks and men. I’ve featured transgender and cisgender people. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland, Germany and France.

I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.

The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing mrs@frugalwoods.com.

Reader Case Study Guidelines

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.

There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.

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 Sidney, today’s Case Study subject, take it from here!

Sidney’s Story

Steve and their son on vacation in California

Hi there, my name is Sidney (age 39), and I live in a west-coast Canadian city with my husband, Steve (age 42), and our 9-year-old son. Steve and I spent most of our 21-year relationship as students or in low-income jobs, and only in the past year and a half have we been a full-time, two-income household.

That said, I come from a privileged background. My parents paid for my undergraduate education and part of my first masters degree. My mom has also helped out over the years with financial gifts, most of which we saved for the 20% down payment to buy our first house in 2019 (20% down is required in Canada in order to qualify for a 30-year mortgage).

I estimate that half of the down payment came from my mom’s gifts over the years. Steve comes from a more blue-collar family background, and is the first member of his family to obtain a university degree, which he got as a mature student when he was 40 years old.

Sidney’s Upbringing

I’m pretty frugal by nature, which I believe was reinforced by seeing how finances played out in my mother’s life. My fabulous, generous, loving mother raised me and my sister as a single parent. She’s a freelance professional who started her own private practice in the 1980s and is doing that to this day. Thus, my mom has a very high income, but she also spends a lot of money on items I consider luxury (lots of clothes, shoes, nice car, latest tech, jewelry, home renovations and paid-services like home cleaning, gardening, etc).

And so, while she’s a high-earner, my mom has always worried about finances, and now that she’s 73, she’s still working full-time, and afraid she doesn’t have enough to retire on. Although she has substantial retirement savings to live off of, she’s worried about having to cut back on luxuries. When I was a kid, my mom would say things like, “Oh I’d never go downhill skiing. If I broke my leg, I wouldn’t be able to work, and then we’d have no income!” This made me feel like I don’t ever want to miss out on the fun things in life because of a lack of financial security. That said, my mom was also an excellent example of loving one’s career and following your heart to get what you want in life.

Sidney & Steve’s Story

Steve and I got together in 2000 in Ontario, when he was 21 and I was 18. Steve had done one semester at the local university, but was forced to drop out because he couldn’t afford to continue. We met while both working at a fast food restaurant, which for Steve was his only source of income, since he was living independently with roommates. For me, on the other hand, it was a summer job while I still lived in my childhood home.

Camping in Goldstream

A year later, we moved in together in another city about 2 hours away from my hometown so that I could attend university. My tuition and living expenses were paid for by my parents who had an RESP (RESP=registered education savings plan in Canada) for me and my sister, for which we’re extremely grateful. Over time Steve got slightly better–but still not great–jobs. Eventually, Steve went to a private college with a student loan and a retail part-time job for one year to get trained as an audio engineer.

Over the next few years, however, we found that the music industry is competitive and exploitative – with many unpaid internships and below-minimum wage jobs. Steve struggled for a number of years in a few cities to make a living as an audio engineer, but when the opportunity to teach at a branch of his former college came, he took it for the relatively stable and higher income. He taught audio engineering for 7 years in Toronto, with hours ranging from 20-40 hours/week depending on the semester and would also get sporadic freelance gigs.

After I got my BSc with a physics major in 2005, I had no idea what to do for work, so I went to grad school in order to continue my sheltered life! That said, I had a really great time doing a 2-year masters in astronomy in another city, which thankfully paid a good stipend, which was enough for me to be financially independent from my parents, but not enough to save anything. After that, still not clear on where I could work, I moved to Toronto to be with Steve and struggled to find a job. I eventually got an IT job that I kept for about 9 months, but it was considered an internship so it didn’t pay well, and I hated the job. Steve and I got married in 2008 (wedding paid for by our parents) and thanks to generous gift money from our family, we paid off Steve’s student loan at that time. We’ve been debt free ever since!

Sidney’s Career

Camping in Goldstream

Around that time I did some information interviews, which helped me determine that I wanted to do scientific work for environmental protection as a career. I ended up going to the University of Toronto for a second masters degree and a PhD in atmospheric physics.

Thanks to untaxed scholarships and stipends, I actually made a higher net income as a grad student than Steve was getting as a college teacher. That said, our combined income was still too low to be able to save much. But being a grad student in this program allowed me to travel to wonderful places for scientific meetings and conferences. I got to travel to France, Germany, Scotland, New Zealand, Australia and the United States as a grad student, and we paid for Steve to join me on a few of those trips.

Finally, in 2014, I graduated and got my dream job as a scientist in the federal government!

Leading up to that, we decided that Steve ought to go to university in order to have better career prospects. So the same year that I finally started my career, in the fall of 2014, Steve, at age 36, started his bachelor degree in Media Production. Four years later, he became the first person in his family to get a university degree. He also got a great job at a TV studio during his last year of study, so for about 8 months in 2017, we had a good set of two incomes coming in for the first time in our lives!

Steve and Sidney’s Son

Going back to 2012, while I was still a PhD student, we had our one and only child! Thanks to living frugally, renting a cheap basement apartment, kiddie hand-me-downs, and our city’s income-based childcare subsidy, we were able to get by in a great family-friendly Toronto neighborhood, despite the city being extremely expensive. I am tremendously grateful for my scholarship, which paid 4 months of maternity leave; for our country’s Employment Insurance program, which allows for 1 year of paid parental leave (for those traditionally employed – Steve used 4 months of it to take care of our baby when I returned to my PhD program); and our city’s childcare subsidy, which sheltered us from the true cost of daycare for our son.

A Cross-Country Move

Lunch outside

Around the time Steve graduated with his BA, I got a promotion that encouraged us to move across the country to the West Coast. So in 2018 we moved across the country! Steve started a Masters of Public Administration (a 2-year program with co-op terms and an excellent scholarship for his first year) in our new city.

Now that we were in a slightly less-expensive city for home-buying, and I was making a good income, we started saving aggressively for a down payment (inspired by the Frugalwoods blog, we cut way back on our main luxury, which was eating out!). We bought our first, and likely forever, home in 2019.

Houses cost a lot in our city (though not as much as they do in Toronto!), so we rent out our basement suite to some wonderful friends in order to help pay the mortgage. At this point, Steve has gotten a great job as a policy analyst with the federal government (different department than mine), working from home. So, it’s only as of September 2020 that were are both working full time in our chosen careers (aka, no longer students or precariously employed).

What feels most pressing right now? What brings you to submit a Case Study?

1) To rent or not to rent:

Given our late start in life to having well-paying jobs, we are now looking forward and trying to figure out the best path forward financially. We’ve enjoyed having our two dear friends rent out our basement suite, but in about 3-4 months they are moving to a different country. When they move, we’ll have to make some decisions. We’ve already agreed to adopt their little old dog! But they’ll also be looking to offload their car and furniture, which means we need to decide if we want to offer to buy some furniture from them in order to keep the basement suite furnished. Then, we need to decide whether or not to continue renting it out.

We get $1,200/month in rent now, which is a friend rate. Market value is closer to $1,600/month if we offer it furnished and all-inclusive of utilities. We’re close to a university in a city where rental demand is high, so getting renters shouldn’t be a problem.

However, there are a number of factors that make me NOT want to rent it out:

  1. Space for friends and family:
    • We live very far away from our family and many of our friends. We’d like them to visit us and we’d like to be able to host them comfortably at our place when they do.
    • But this is not possible in our part of the house on the main floor. However, we could have house guests if we had the basement space available.
  2. Hiking

    Space for home offices:

    • Since September 2020, Steve’s been primarily working from home. I’m also working from home during the pandemic, and anticipate only returning to the office part-time post-pandemic.
    • Therefore, having the basement space year-round would allow us to set up nice home-office spaces for Steve and me, without cluttering up our main floor with work (like it is now).
    • But if we do this, we’d have no rental income… though in this scenario we might be able to claim some portion of our home office space and expenses on our taxes.
  3. Rent it out for part of the year:
    • I’ve considered as a compromise that perhaps we should rent it out, furnished, for 4-8 months of the year to co-op students, for example, and keep that space for ourselves during the summer months, when we expect most of our out-of-town family and friends  to visit.
    • In that scenario, we could get $1,600/month for 4-8 months of the year. But, we’d have to keep our “home offices” up in our living room (where they are now) in that scenario.
  4. Climate adaptation:
    • We didn’t have access to the basement – which is several degrees cooler than the main house – during last summer’s “heat dome.”
    • Homes in our region don’t have air conditioning, so it would be nice to have the basement to hangout and sleep in during future heat waves.

2) To car or not to car:

We have a second “good dilemma,” which is whether or not to offer to buy our friends’ 2006 Honda Civic for ~$800 when they move away in a few months.

Sidney biking with her son

Steve and I have lived as a car-free family since 2007 and we love the freedom of not having car expenses and responsibilities, as well as the environmental benefits.

We’ve always biked (with our kid in a child seat on the back of our bikes) or taken public transit for commuting and local trips. We’ve rented cars when we took longer trips. In Toronto, this system worked well for us.

Our new city is geographically smaller, but hillier. The main differences in our new city are that:

  1. The culture here is more car-centric. Most families have cars and expect everyone else to have cars, so often birthday parties and other activities (e.g. scouting) are located farther away and not easily bikeable. We’ve mainly solved this problem by asking to carpool with other parents, but I don’t want to come across as a mooch since we can’t reciprocate!
  2. Our friends/tenants have let us borrow their car whenever we’d like, which has resulted in a creep up in our car usage! Anytime I need something big from the hardware store, I borrow it. Anytime it’s raining when we need to pick-up/drop-off my son somewhere a little far, we borrow it. Any time we want to explore something outside of town, we borrow it, and so on and so on. Basically, we’ve become used to the convenience of a car, but without the responsibilities and costs of a car, and while I’m not eager to take those on, I’m also nervous about going back to zero car availability (unless we rent one) after our friends leave town.
  3. Our son is getting bigger and older and in a few more years, he’ll be too big or won’t want to be riding in a seat on the back of our bikes. I’m hoping at that point, he’ll be a good enough cyclist to bike as well as we do in order to get around. For now, he can only ride short distances on his own bike.

On the environmental front, Steve has suggested we take advantage of scraping rebate programs that provide up to $6,000 when you trade in an old gasoline-powered car (the one we could potentially buy from our friends) and buy a new electric car.

Additional government subsidies for buying an all-electric car exist too, for about $7,000 more. For example, buying a new Nissan Leaf, which costs $39,000, would actually cost about $26,000 after the subsidies. While that’s a lot of savings ($13k in subsidies), it’s still a huge outlay of money to have an, albeit new, electric car, that we won’t need to use very often. I know Mrs Frugalwoods highly recommends buying used cars, but I’m not sure we can easily find a cheap fully-electric car on the used market and the subsidies may not apply to the used market.

What’s the best part of your current lifestyle/routine?

We love our house, neighborhood and city and feel extremely lucky to live here. We also love working from home and enjoy spending the extra time together. I love finally having a yard to garden in. We like going for hikes locally and to nearby lakes and beaches, finding new playgrounds, and exploring new areas.

We enjoy having our two dear friends rent out our basement suite (it was lovely to be a “household” with them during the isolation of the pandemic), and the ability to borrow their car without the responsibility of ownership and maintenance.

We also both love our jobs and Steve is eager to advance in his. I like being able to travel as a part of my job (pre and, hopefully, post-pandemic), and would like to bring my family along more often, as well as take our own trips on vacation.

What’s the worst part of your current lifestyle/routine?

The dog Steve and Sidney plan to adopt from their friends

Because we live across country from our family and many friends, I’d like to be able to have them stay with us when they visit. But, as mentioned above, we don’t have the space for out-of-town guests in our part of the house. Now that the pandemic is slowly ending, we anticipate several families wanting to visit starting this summer. We want them to be able to stay with us instead of at a hotel, but that would only be possible if we reclaim the downstairs space in our house (after our tenants move out).

We also find our current space (750 sq ft) in the house a little constraining when our kid has friends over inside, and with Steve and I having our work desks side by side in the living room. If we had the basement available, we’d go up to 1,350 square feet of living space.

I also occasionally find my job to be too challenging, and still occasionally suffer from imposter syndrome. It’s better than it was before, and I expect the longer I’m in this role, the easier things will become. However, part of me wishes for the option to retire early if my job continues to be too challenging and stressful.

Where Sidney & Steve Want to be in 10 years:

  • Finances:
    • While we’re not eager to retire in 10 years, it would be nice to have the freedom to retire a bit early if we want to.
    • As federal government employees, we’re entitled to an unreduced pension if we’ve worked at least 30 years, or reach the age of 65. For me that will be in 2044 at age 61 (30 years of work). For Steve, that will also be in 2044 at age 65 (24 years of work).
    • Our pension combined with the Canada Pension Plan (CPP) would amount to 2% × # of years worked* × our average income during the 5 consecutive highest income years.
      • *to a maximum of 70% if we work 35+ years
    • We feel very lucky to have this benefit, but we’re also confused on how much we should be saving in the meantime, given that we know we’ll have a pretty good income from our pensions. We currently have about $27k each in our RRSPs (registered retirement savings plan), and are adding $500/month each into those.
    • A recent pension estimate showed we’d get approximately $4,733(mine) + $1,950(Steve) = $6,683 per month from our pensions if we both retired in 2044.
    • If we retire any earlier, our pension is reduced by about 5% per year that we are early in taking it. (e.g., if either of us retires 5 years earlier than stated above, our pension would be 25% lower).
    • Our son will be 19 in 10 years, and we’d like to be able to pay for his tuition and living expenses for a bachelor degree. We have about $30k saved up in his RESP (registered education savings plan) now, and we contribute automatically $200/month plus occasional lump sums when he gets birthday money. We hope to have $100k in there when he’s 18 (this amount is the current advice for Canadian universities for the year 2030, I believe).
  • Lifestyle:
    1. Family: I hope that Steve and I still have a strong marriage, and that our family and friends from out of town are still visiting us occasionally and us visiting them in Ontario every couple of years or so.
    2. Travel: I also hope that in the alternate years we can go on international trips for vacation – starting post-pandemic and continuing the rest of our lives. My work still requires international travel for meetings and conferences, so we can save some money (the cost of my airfare) by adding some vacation on to those trips when desired.
    3. Social life: Pre-pandemic and in our old city, I enjoyed social activities like playing on a softball team, taking an aerial acrobatics class and going indoor rock-climbing with a friend. Steve used to play bass guitar in a band… post-pandemic and into the future (10 years and beyond), I think it would be great if Steve and I added more hobbies and social activities to our lives again. I just started an adult gymnastics class for example!
  • Career:
    • I’d still be in my career, though promoted up 1-2 levels to a more senior scientist role (and hopefully feeling more confident).
    • Steve still working for federal government, but at a higher level, more advisory-type job.

Sidney and Steve’s Expenses

I’ve been reading the Frugalwoods blog for the past 4 years or so and have learned a lot! I’ve kept meticulous track of our family’s expenses during the last two and a half years. I even enjoy doing it manually in my excel sheets. All dollar amounts below are in Canadian dollars.

Income

Item Amount Notes
Sidney’s net pay (after taxes and all other deductions) $6,734.61 Scientist in federal government. I recently topped out salary-wise for my level, but could go for promotion next year to get into the next salary scale.
Steve’s net pay (after taxes and all other deductions) $4,335.75 Analyst in federal government. Due to a pay error, he’s not actually getting paid at the proper level. He also recently got a promotion. So this amount should be about $200/month higher in the near future
Rent from basement suite $1,200.00 We love renting to our good friends, but they are planning to move out ~May 2022. Market value for renting that space furnished is likely more like $1,600/month. Or could be $0 if we reclaim that space for ourselves.
Tax credits $971.24 Canada Child Benefit ($135/month) plus our annual tax return averaged monthly
Gifts from family $80.00 Our parents are very generous, but now that they are getting older, we’d like to turn this around and start paying for their flights out to visit us, and any future care they might need from us.
Cash back from credit card spending $49.00 Average cash back from our Tangerine World Mastercard
Selling stuff online $5.00 I occasionally sell our son’s old toys and clothes that he’s outgrown if they are still in decent shape.
Monthly subtotal: $13,375.60
Annual total: $160,507.20

Mortgage Details

Item Outstanding loan balance Interest Rate Loan Period and Terms Equity (amount you’ve paid off) Purchase price and year
Mortgage $573,229 2.49% 30-year fixed-rate mortgage (with remaining amortization 23 yr, 3 months) $188,771 $762k; purchased in 2019

Debts: $0

Assets

Item Amount Notes Interest/type of securities held/Stock ticker Name of bank/brokerage Expense Ratio
Sidney’s Tax Free Saving Account (TFSA) $40,475.48 The TFSA is a savings account where you don’t have to pay tax on the amount it grows. There is a contribution limit of $6,000/year per person. I’m currently contributing $500/month automatically to this + occasional larger lump sums.

I have about $40k of contribution room currently since I didn’t max out my contributions in previous years.

Part of our TFSAs is our emergency fund.

Diversified mutual and index funds. IA securities 1.60%
Steve’s TFSA $40,206.01 Contributing $500/month automatically + occasional larger lump sums.

Part of our TFSAs is our emergency fund.

Diversified mutual and index funds. IA Securities 1.60%
Our son’s Registered Education Saving Plan (RESP) $30,565.01 The government matches contributions at 20% up to of $500/year to $7,200 total. This money can only be used for educational expenses. We contribute $200/month automatically + occasional lump sums to this account, and would like the total to be $100k by the time he’s 18 (though the contribution limit to the RESP is $50k – so we would need a separate account after that). Diversified mutual and index funds. IA Securities 1.60%
Sidney’s Registered Retirement Saving Plan (RRSP) $27,570.25 The RRSP is a retirement savings account where you can deduct your contributions from your income the year you contribute (though you pay tax when you pull from it during retirement). I have ~$7.6k of contribution room left this year. I’m currently contributing $500/month automatically to this + occasional larger lump sums. Diversified mutual and index funds. IA Securities 1.60%
Steve’s RRSP $27,116 Contributing $500/month automatically + occasional larger lump sums. He has room to contribute $31k more this year alone Diversified mutual and index funds. IA Securities 1.60%
Sidney & Steve’s chequing account $12,231.00 This is a joint account from which we pay monthly bills and part of this is our emergency fund. 0% TD
Sidney’s webbroker TFSA $6,323.97 I enjoy buying and selling stocks on my own. Stocks and ETFs TD Waterhouse webbroker $9.99 fee for every buy or sell transaction
Total: $184,487.22

Vehicles: none

Expenses

Item Amount Notes
mortgage $2,700.00 This is $2,404 that we have to pay (for 30-year amortization) + $295 extra on the principal that we started a few months ago in order to pay the house off about 5 years earlier. 
food $1,152.00 groceries, toiletries, & propane for BBQ. My goal is $1,000/month, but I have no idea how to get there. We don’t waste food and we eat mainly whole foods…
household & garden items $437.31 This includes a lot of gardening stuff and we had to replace our fridge a few months ago. This monthly avg is based on the last 2.5 years of new home-ownership
Kid’s activities $421.46 This cost included a competitive gymnastics program that our son decided to quit in Oct ’20, which saves us $396/month going forward!

He continues to do Cub Scouts and will do swim classes and other kinds of activities in the future but for significantly less $$ than this.

vacation $413.14 Costs for travel and accommodations. Last summer we took a long-awaited trip back to Ontario. Sometimes we will rent a car and a cottage to have a nice weekend get-away closer by.
eating out $392.06 This is a bit high! My goal is $100/month for mainly one nice family dinner at a restaurant, but looks like we creep over that quite a bit!
alcohol and bars $318.00 Mainly for Steve who is looking to cut back
bikes and bike maintenance $311.33 This amount is high because 1.5 years ago we bought two brand new electric bikes that we absolutely love. Maintenance is only about $10-20/year, but this number reflects the cost of the bikes over the 18 months that we’ve had them so far
electricity $247.27 Our electric bill includes heating & hot water for our house. We also have an electric mower and electric bikes! This is monthly avg. It’s higher in winter and lower in summer.
property tax $244.53 We pay in June for the whole year. This is averaged monthly.
entertainment $214.33 This amount is quite high because it includes a new computer purchase in the last year. Aside from that, this category is ~$125/month. This category mainly includes video games for Steve, and occasionally doing fun stuff like going mini-putting, bowling, to a movie, going skating, to a museum, etc. Though for the most part our weekends are spent on free activities like parks, beaches, hiking, etc. And we love our library for books!
gifts $177.63 Birthdays and Christmases. Our family generally has a “no gifts for adults” policy with the occasional exceptions. We buy gifts for ~8 kids who are family or close family friends, and we give ~$10 cash gifts to my son’s friends at birthday parties, which seems to be the culture here. Occasional teacher, student, or coach gifts too.
Misc $115.59 E.g., Steve’s tuition & text books, which won’t be an expense in the future + our son’s summer and spring break day-camps, which decrease as he’s getting older.
city utilities (e.g., water, sewage, garbage collection, etc). $109.22 paid 3x per year. This is the monthly avg
home insurance $108.27 TD insurance
clothes & accessories $86.44 Nearly all of our clothes, shoes, and many housewares come from the thrift shop. Stuff like underwear and socks are from Walmart. This is a monthly avg based on the last 2.5 years
parents’ activities $73.00 This is a new category since I just recently started an adult gymnastics class for fun.
internet $62.67 from Tech Saavy – any other recommendations?
life insurance for Sidney & Steve $58.05 Sunlife term plans
School supplies, field trips, & day camps $56.55 day camps are accidentally split between this one and the “Misc” category
Charity donations $51.00 Automatic monthly, though we occasionally contribute to other charities one as a one-off. 
cell phones $48.16 from Public Mobile. This is Canada’s equivalent to an MVNO I think. And I have Canadian members of the Frugalwoods facebook group to thank for this recommendation. We switched over to this service about a year ago, and recently reduced Steve’s data plan.
Kid’s allowance $36.00 $(his age)/week. He buys his own toys, video games, candy, and whatnot with his allowance. We only buy him those things as birthday or Christmas gifts otherwise.
cash $21.50 2.5 years ago, in order to better track expenses and get the most out of our cash back credit cards, we stopped getting cash out and used our credit cards to buy everything. However, the occasional cash is still needed (e.g. to provide our kid’s allowance or a friend’s birthday gift) and so this category still creeps in somehow, and this money is not accounted for (it’s the change leftover after allowance, etc). 
medical, dental, and therapy $1.99 We used to have a co-pay in this category, but now that Steve has an insurance plan too, all medical, dental, etc are fully covered by the combination of our plans. The remaining amount is for a “findadoc” service since we don’t have a family doctor due to a severe shortage in our city (and province apparently).
babysitter  $0.00  $0 during pandemic. Was $14.92 the year before. Will probably stay close to $0 since our son is getting older and we try to “date” while he’s busy with other things.
Monthly subtotal: $7,857.51
Annual total: $94,290.12 ghaa!!

Credit Card Strategy

Card Name Rewards Type? Bank/card company
Tangerine World Mastercard cash back (2% in 2 categories and 0.5% in all other spending categories) Tangerine

Sidney’s Questions for You:

  1. Should we continue to rent out our basement or not?
    • Once our friends move out in about 3 months, should we continue to rent it out? Rent it out for part of the year? Can we afford to not rent it at all?
  2. Sidney on a work trip to Bordeau

    Should we buy our friends’ 2006 Honda Civic for ~$800?

    • Even though we don’t really need a car and won’t use it often?
    • If we do buy it, should we keep it or trade it in for a subsidized new electric car?
    • Is there some calculation for the wisdom of car-buying if you only plan on using it ~3 times per month?
    • I’m interested to hear the opinions from carless families with children aged 9 and up on this topic.
    • Also, are there any Canadians in BC who can speak to how to get inexpensive car insurance?
  3. Should we pay off our mortgage early?
    • Since we were late in life buying our first house, I’m eager to pay the mortgage down more quickly than the original 30-year amortization.
    • We’re overpaying by about $295 every month (which would mean it would be paid off in 24 years). 
    • At this rate, we’d have it paid off at roughly the time we’re thinking to retire (in 2044).
    • Should we continue to do this? It is our only debt.
  4. Should we save more for retirement?
    • In light of our pensions, should we still be trying to save as much as possible in our RRSPs every year? (we’ve been contributing $500/month). If we retire before 2044, we’d still get a pension, but it would be significantly reduced.
    • Our retirement savings are nowhere near the 3×income suggested for 40-year-olds! However, is that formula for people without pensions? Or should we start saving like crazy for retirement to catch up?! If so, this might help us answer questions #1 and #2. I do hope/expect we’ll have our house paid off by then, which would bring our monthly expenses down considerably.
  5. Given our expenses, are there some good places where we can cut back, so that we can save more towards our goals?
  6. Credit Card strategy:
    • We have only one joint credit card between the two of us: a Tangerine World Mastercard (no fee, 0.5% cash back on all purchases, 2% cash back on purchases in two spending categories – groceries and restaurants in our case). It has one benefit that we really look for, which is rental car insurance. So this credit card account satisfies all of our credit card needs – but my question is; is ok that we only have the one credit card between the two of us? Or does that present a problem?

Thanks for your help!

Liz Frugalwoods’ Recommendations

Sidney and Steve are in great shape and have worked hard to get there! I get the sense that coming into “adult” salaries and home ownership only recently has impacted the way Sidney views their future. Past uncertainties over money are very hard to let go of and it takes awhile to settle into the realization that you’re actually doing great from a financial perspective! I hope that Sidney will utilize this Case Study to gain confidence around her finances and to recognize that she and Steve are doing well. Really well!! Ok, let’s dive right into her questions:

Sidney’s Question #1: Should we continue to rent out our basement or not?

There are two variables in this question:

  1. The financial aspect
  2. The lifestyle aspect

If this was a purely financial question, I’d say YES! Absolutely continue to rent out the basement because it’s a relatively easy way to make quite a lot of money. Renting it out at $1,600 per month is $19,200 per year, which is significant. Also, I wonder if they could charge even more given that Sidney noted they are, “close to a university in a city where rental demand is high.” I’d think you could charge more than $1,600, so that’s something to look into.

Sidney asked a few times whether or not they could afford not to rent it out, so let’s do that math now.

Here’s their income minus the rental:

Item Amount Notes
Sidney’s net pay (after taxes and all other deductions) $6,734.61 Scientist in federal government. I recently topped out salary-wise for my level, but could go for promotion next year to get into the next salary scale.
Steve’s net pay (after taxes and all other deductions) $4,335.75 Analyst in federal government. Due to a pay error, he’s not actually getting paid at the proper level. He also recently got a promotion. So this amount should be about $200/month higher in the near future
Tax credits $971.24 Canada Child Benefit ($135/month) plus our annual tax return averaged monthly
Gifts from family $80.00 Our parents are very generous, but now that they are getting older, we’d like to turn this around and start paying for their flights out to visit us, and any future care they need from us.
Cash back from credit card spending $49.00 Average cash back from our Tangerine World Mastercard
Selling stuff online $5.00 I occasionally sell off our son’s old toys and clothes that he’s outgrown if they are still in decent shape.
Monthly subtotal $12,175.60
Annual Total $146,107.20

The rental would add $19,200, for a grand total of $165,307.20.

Sidney and Steve’s garden

Sidney and Steve’s annual spending is $94,290.12, so yes, they can afford to not rent it out, in terms of being able to cover their monthly expenses.

That being said, it’s tough to turn down $19,200 in additional income, which could be deployed for retirement savings, investments, travel, etc.

Another way to look at this is to ask themselves if having the basement space is worth $19,200 per year to them? There’s not a right or wrong answer here, just a consideration of how much that extra space is worth to them.

If the main issue is their home office space, could they rent a small office space elsewhere (for less than $19,200 per year)? Could they join a co-working space? Is there a creative way–other than using the basement–for Sidney and Steve to have a better home office situation?

Could Sidney and Steve rent it out for year and see how it feels? They could then do an assessment at the end of the year to determine the cost/benefit of the extra $19,200 versus the inconvenience of not having access to that living space.

As a side note, something that’s possible in the US is deducting house maintenance as part of your rental business if you’re renting out part of your primary dwelling. Is this possible in Canada as well? Something to look into.

Liquidity?

A major question I have for Sidney and Steve relates to their liquidity, by which I mean cash available to them at a moment’s notice. Also known as an emergency fund. As I’m not Canadian, I’m not terribly familiar with TFSAs so I read the Canadian government website on TFSAs and learned this:

Depending on the type of investment held in your TFSA, you can generally withdraw any amount from the TFSA at any time.

What concerns me is the “generally.” If Sidney and Steve’s TFSAs aren’t able to be withdrawn from at any time without penalty, then I’m concerned about their liquidity. Outside of their TFSAs and all other restricted accounts (retirement, education, etc), they have $12,231 in cash. This wouldn’t be enough if, say, they needed to replace their roof and repair a water leak in the same month. As homeowners (and potentially landlords), they’d need to have more cash available. However, if they are allowed to withdraw from their TFSAs at any time without penalty, then they have $92,912.49 on hand, which is more than ample.

So, Sidney and Steve, please look into your TFSAs and confirm that you’re able to withdraw money from them without penalty and at any time.

Sidney’s Question #2: Should we buy our friends’ 2006 Honda Civic for ~$800?

Yes. I love how thoroughly Sidney is considering car ownership, but in my opinion, this is an easy yes for a number of reasons:

  1. Sidney notes several times that their new city is not as bike-friendly.
  2. Sidney notes that their son’s activities often take place at non-bikeable locations.
  3. Sidney notes that they’ve been borrowing this car, renting cars and getting rides from their son’s friends’ parents.

All of this points to: you need a car. And a Honda Civic is a great little car and $800 is a great little price.

Next Question: If we do buy it, should we trade it in for a subsidized new electric car?

A work trip to Colorado for Sidney

Absolutely not. I fully understand the desire to have an electric car (it’s what I want too!!), but Sidney’s taking an $800 car and turning it into a $26,000 car. NOPE. Will the 2006 Civic last forever? Of course not! But since Sidney’s not even sure they actually NEED a car, this is not the juncture at which to spend $26,000. Furthermore, this is a historically atrocious time to buy a car–used or new. Due to the epic supply chain issues, there are few cars to be had and those that you can have are extraordinarily expensive. 

If it were me, I would:

  1. Buy the Civic for $800 today. ASAP.
  2. Drive the Civic for a year.
  3. Re-evaluate the desire/need for car ownership in a year or two.

Sidney and Steve need data on how they function with a car before making a $26,000 expenditure. Or any car expenditure over $800.

Plus, in another year or two, there will be more electric vehicles on the market and hopefully the BANANAS supply chain situation will have sorted itself out. Waiting as long as possible to buy a car makes a lot of sense right now (written by a person who tried VERY HARD to replace her ailing 2010 Toyota Prius last summer with zero luck).  

Additionally, since Sidney and Steve are able to get by without a car, it is ok if this elderly vehicle isn’t 100% reliable. Since they’re in a city where they CAN bike or walk if they need to, the car is a nice-to-have, not an absolute necessity.

Canadian readers, please offer them advice on car insurance companies!

Sidney’s Question #3: Should we pay off our mortgage early?

Nope. In my opinion, this doesn’t make sense from a mathematical perspective (others will disagree with me, but this is my opinion). Here’s why:

  • The house is essentially their only major asset and they don’t have much in savings given their incomes (which I totally understand because these incomes are recent). Hence, from a liquidity standpoint, they’ve not got much.
  • Paying off a house early–or even just overpaying as they’re doing now–ties up a ton of money in one single, illiquid asset.
  • There’s an enormous opportunity cost to paying off a mortgage early because there are so many other things one can do with that money.
  • By funneling all of your money into your house, you’re missing out on potential gains in the stock market, etc. It’s kind of like cutting off your nose to spite your face. Yes, you’re solving one “problem”: your mortgage, but you’re hindering your ability to grow your wealth in a significant way. Of course there are risks involved with investing, but the salient point is the inherent opportunity cost.

If Sidney and Steve want to pay off their mortgage before they retire, I think that’s fine! If it were me, I would save and invest that money over the coming decades and then pay it off in one lump sum prior to retirement. In my mind, it just doesn’t make sense to tie up extra cash in a fixed-rate mortgage.

Sidney’s Question #4: Should we save more for retirement?

In Ottawa

This is a tough one. On one hand, Sidney and Steve have generous pensions to look forward to. On the other hand, pensions can be undercut and underfunded.

However, in light of the fact that they both work for the federal government, it seems unlikely their pensions would be underfunded or reduced. But then again, it feels risky to put all of your eggs in one basket–the pension basket.

If Sidney or Steve had to take an early retirement (due to health, for example), they wouldn’t be eligible for their full pension amounts. If they are able to work their full number of years and nothing happens to the pension system, then yes, they are all set. But if any one of those variables falters, they’re not in as good a position. There’s not a concrete, definite answer here since it depends on future events, but the adage I always come back to is:

No one has ever regretted having extra money saved up.

As Sidney noted, if we don’t look at their pensions, they are indeed pretty far behind on retirement savings. Sidney’s spot on that the (kinda oversimplified, but still helpful) rule of thumb is:

Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67 (source: Fidelity Investments).

At present, that equals:

  • ($6,734.61 x 12) = $80,815.32 x 3 = $242,445.96 for Sidney
  • ($4,335.75 x 12) = $52,029 x 3 = $156,087 for Steve

This is a long way off from the $27,570.25 Sidney has in her RRSP and the $27,116 Steve has in his. However, this is not inclusive of their generous pensions.

If it was me, I would start saving a lot more for retirement. If it was me, I would rent out the basement apartment, look for places to reduce my spending and fully max out every retirement account I could find. But I’m rather conservative when it comes to my own money and I fully recognize that not everyone feels that way.

One of the reasons I’m promoting this idea for Sidney and Steve is that they have the salaries to do so. They’re both making great money and definitely have enough to funnel towards retirement. Maybe Sidney and Steve both work for the same employer (the federal government) until 2044 and the government does not underfund their pensions and they retire with their full pensions. And maybe they also have a ton invested in their RRSPs. The “worst case” scenario then is that they have a very well-funded, luxurious retirement.

Sidney’s Question #5: Given our expenses, are there some good places where we can cut back?

I imagine Sidney knows where they can cut back and this is, again, going to be driven by whether or not they want to rent out the basement and how much they feel comfortable investing for retirement. The greater their income, the less they need to cut back. The more they want to invest for retirement, the easier it will be if they come at it from both ends of the equation (income and expenses).

Sidney’s Question #6: Is ok that we only have one credit card between the two of us? 

On vacation in Gabriola

Yes. The root of this question is, I imagine, about their credit scores. Having a credit card open for many years and FULLY PAID OFF every single month helps your credit score a lot. However, you don’t necessarily need to have more than one credit card.

With credit cards, the key is that you pay it off in full every month and keep it open for many years. The reason this helps your credit score is that it demonstrates to lenders that you are a responsible borrower. It demonstrates to lenders that you can handle debt and pay it off on time. That’s the whole idea. And the primary thing most people need a good credit score for is to qualify for a mortgage. Sidney and Steve have already done that, which is wonderful!

If they wanted to, they could look into opening a travel rewards card (assuming those exist in Canada?) as the points can be used to offset travel expenses (affiliate link).

Investment Expense Ratios

Something that jumped out at me are the relatively high expense ratios (1.6%) on Sidney and Steve’s investments. That’s a fair bit of money going to fees every year! I did a very deep dive on expense ratios in this Case Study, so head over there to read up on them. 

I googled “Vanguard Canada” and landed on this page, which lists a bunch of investment options with expense ratios in the range of 0.15%, which I consider to be nice and low. I encourage Sidney and Steve to do their own research to find brokerages that offer lower expense ratios, since I think they’re getting fleeced with that 1.6% rate.

Summary:

  1. Rental: do they want home offices and extra living space or do they want an extra $19,200 per year?
    • Could they rent it for a year and then do a cost/benefit analysis?
    • Is there a creative way–other than using the basement–for Sidney and Steve to have a better home office situation?
    • Could they charge even more than $1,600 given their prime location?
  2. Car: if it were me, I would buy the Honda Civic for $800 and drive it for at least a year. Then, do a review of the advantages/disadvantages of car ownership. Consider trading it in for a (hopefully slightly used) electric vehicle in the future when (a) they know they want a car for the long term; (b) the car supply chain has normalized.
  3. Mortgage: if it were me, I would stop overpaying on the mortgage. I personally would instead invest that money and then, if I wanted to, pay it off in one lump sum at the time of retirement.
  4. Retirement: determine your risk tolerance for the pensions. If you aren’t able to work for the government for the full 30 years, will you have enough in your RRSPs? Will you feel more confident if you max out your RRSPs and know that, while you might be OVER funding your retirement, you’re not UNDER funding it.
  5. Expenses: sure, cut back on luxuries. Consider again the cost/benefit of the rental income and the risk tolerance level with the retirement savings. You have the income level to do it all, as long as you’re mindful about your monthly spending.
  6. Credit card: totally fine to have just one as long as you pay it off in full every month. Look into travel rewards cards if you want to as the points could help offset travel costs in the future (affiliate link).
  7. Expense ratios: look for a brokerage that offers a much lower expense ratio on their investments.

Ok Frugalwoods nation, what advice would you give to Sidney? We’ll both reply to comments, so please feel free to ask questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.

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185 Responses

  1. Marie says:

    Just here to say I agree about buying the Civic as a great deal, and also that I LOVED my Nissan Leaf – what a fun little car! The lack of need for repairs, the just plugging it in and never fueling up – so fun. Mine was about 6 years old, battery strong/checked by a reputable dealer, and I bought it for about $14K. The rebates apply indirectly to used prices so it all works out. Definitely worth considering in the future.

    • Sidney says:

      Thanks Marie, great to hear of this example of buying a used Nissan Leaf! We will aim to do that after a year or so with the Civic

      • Big Bob says:

        Two close friends of mine have owned Nissan Leafs (leaves?) for many years. Both reported massive battery degradation (~40%+) within three years of new batteries. One found the range so limiting that he recently replaced the car with a Tesla. The other loves electric cars and has a short commute and doesn’t mind.

        The newest Leafs have much improved range but my understanding is that the battery degradation is still a big issue.

        I agree with Mrs. FW that a $800 Civic is a total steal and I would take that over a Leaf any day. Given how little you plan on driving the cost is a no-brainer and given the energy resources involved in building an EV, a used and efficient ICE car is likely better for the environment as well.

        Also I second the recommendation to invest rather than pay off the mortgage. Great case study Mrs. FW!

  2. Kate Symons says:

    As a climate and atmospheric scientist, I wonder if Sidney places different weight on aspects rather than what is jus the most immediately frugal., For example, even though the elderly car is cheaper, surely given what she knows about the climate emergency she would be interested in rapid decarbonisation. Ditto, the relative importance of gaining cash in the form of basement rent vs having a space to shelter from heat domes without using high carbon air con. I myself am really struggling with how to financially plan for the reality of what is coming, and curious to know what other FW people think. For example, its not only about cost in deciding whether to invest in low carbon heating like heat pumps or in things like electric cars. Similarly, should we all be thinking much more about where to invest (like pension funds that have divested from coal, for example), rather that just how much money we will make from different funds. I feel Sidney and Steve might have worries along similar lines given their interest in electric cars! What do others think?

  3. R Quinn says:

    You have a $573,000 mortgage on a 750 sf house? Is that right?

  4. C. Hopwood says:

    Re: the expense ratios — I’ve been very happy with Questrade in Canada, using Vanguard ETFs. My investments are in USD (we recently moved to Canada from the US) but they have commission-free buying on ETFs, which is great, and I believe that applies to their CAD ETFs too. Qtrade (I know, the similar names are very confusing) also has a bunch of commission free ETFs, but I haven’t used them as they aren’t as USD friendly.

    And re: factoring in a pension — the way I would approach it is to reduce your expected expenses by your expected pension amount. I tend to (for a quick and dirty estimate) use the 4% rule. So if you figured at age 50 you’d need $70,000 per year, and your pensions would provide $30,000 per year at age 50, then you’d need $40,000 x 25 (or $1 million) to retire at age 50.

    For myself, we don’t have any pensions, so we’re just targeting our expenses x25. And, as a buffer, I don’t include social security or CPP, or any potential inheritances. Fundamentally, though, it’s just an estimating tool, and folks use it in different ways.

    Finally, re: renting, I think it really comes down to how you feel about sharing the space. Personally, I don’t really enjoy having house guests, and I absolutely would not like to have a house “customer”. I find that, for my mental wellbeing, I really like to know that I have a space I can go to that is mine. I also work from home, and I love having a dedicated home office. If you don’t mind sharing your space, though, it seems like a relatively easy way to make money. My point is just that I don’t think it’s a purely financial decision.

    And I also agree that buying the $800 car is a no-brainer. Even if you decide you don’t want it, the stakes are very low. And we like the idea of getting an electric car, too, but (so far) we haven’t been able to justify the extra cost.

    Thanks for sharing!

    • Sidney says:

      Thanks for this advice that helps us figure out how much to save in addition to the pensions!

    • Kat says:

      Fellow Canadian here. I can second that Questrade is excellent. I have a mix of ETFs that I invest in myself within a TFSA with very low fees. If hands on investing isn’t your style they have some managed portfolios that I haven’t used but they seem to have much lower fees than traditional banks. Fees are very high in Canada compared to the US. The big banks usually have 1.5-2%+ fees commonly. So check out Questrade if you’d like something with much lower fees. I’ve also found them to have great customer service whenever I contact them. I also have my children’s RESP through them with the same great low fees.

  5. Chelsea says:

    $800 for that Civic seems like an amazing deal (assuming your friends have maintained it, etc)! Especially with how expensive used cars are right now. We drive a 2006 Accord, and it’s still trucking along, just as reliable as ever. I would also love to get an electric car once it finally dies (or possibly when our 9-year-old gets to driving age – just because there are so many advances in safety features), but OTOH, I feel like continuing to drive an existing car as long as possible is also an environmentally friendly decision.

    • Sidney says:

      Thanks Chelsea, great point. I do recognize all those materials that are needed to manufacture the new cars. And we can keep emissions down by not driving it that often.

      • Kirsty says:

        There’s also the human cost of mining materials for batteries. I’m all for saving the environment (I’m an engineer my job is literally to find ways of saving energy) but I don’t want to contribute to the damage inflicted on children in DR Congo. Personally I don’t want an electric car until there are massive improvements in the way cobalt is mined and traded. So don’t feel bad about owning a non-electric car.

  6. Jordana says:

    I’m surprised Mrs. Frugalwoods didn’t dive deeper into the “rent the basement during the school year” option, which to me seems to be the ideal solution (especially when combined with her creative/coworking space suggestions for the home office). Since students are the target rental demographic, renting September to May shouldn’t be a blocker to finding good tenants, and it allows Sidney and Steve to use the basement in summer for hosting family and escaping the heat – two of their three goals for not renting.

    It seems like the perfect compromise to me!

    • Robert says:

      Agree with this. Find out what student housing costs on campus and offer the basement apt for 20% less Sept. to May. June – August the basement apt is yours guests, sleeping, and WFH.

    • Sidney says:

      Yeah, I thought it could be a good compromise 🙂
      Since our friends move out in the beginning of summer, we can try out having that space for the 4 months and then think about renting it just during the school year if we feel we are missing the income.

    • Ada says:

      I like this idea as well.

    • Colleen says:

      Yes, I would agree renting the basement during the university year – that’s only 8 months here in Canada, so Sidney and Stephen would have it for the 4 warmest months of the year. I have heard of other people doing that here on the West Coast.

    • Maria says:

      Yes or just rent it on airbnb when they want and when they want it free, they don’t. The per diem rate is a lot higher and she can probably even make more $$ than the $19K a year, all while still being able to have it accessible when they need it.

  7. Jess says:

    One thing I see missing from future expenses is anything related to the cute dog they are adopting. I have dogs on the brain since we recently adopted one. Since it is a small dog food costs may not be high, but there will be additional costs like annual vet care, heart worm medicine and other items to consider. Also, you may want to out something aside for an emergency vet visit.

    • A says:

      I agree! My sweet older dog had extremely high vet costs the last year of her life, as well as pricier meds and prescription food. Definitely set aside some money for pet expenses. Also, great job with all of your saving and planning and making it work in a smaller home! And that car seems like a fabulous deal! 😊

    • Sidney says:

      Yeah, for sure. I should ask my friends about how much they spend on him currently, thought I’m not sure they’d know since they don’t track their expenses. 😛
      I could at least ask how much the vet visits and food is..

      • Lia says:

        I’ll echo what Kaitlin said — that’s about how much our 13lb, 8 year old mutt cost us. We just found out she has bladder stones, which will require an $1100 surgery. Boarding for when we both need to go in to work (I usually WFH), $30/day. It’s been about $1500-2000 for the last 4 years that we’ve had her.

    • Kaitlin says:

      I own a large, active dog who’s about to turn 7. No health problems that require special food, vetting, or medication. Last year he cost me about $1200 for normal expenses: food, vet, a new bed, a couple of toys, treats. I also pay for him to go to daycare once a week (an additional cost, not in the $1200) because that’s good for both our sanity – you probably don’t need it, but factor in boarding costs if you’ll need to board your dog when you travel.

      For the sake of adding a line item to your budget, I’d say you can expect to pay about $1k a year in dog maintenance and love…more if he has special health needs.

  8. Melissa says:

    Love this case study, as we have lots of similarities (Canadian PhD, one son, also felt behind on retirement savings, I now work at U of T) and I can suggest some things. 1) Look at alumni discounts on insurance, as I’ve never found a better deal than when using mine and I’ve looked a lot. And because you folks, like us, have a ton of degrees from a bunch of places so you have options! 2) Your Investment and trade fees are HIGH. Look at moving to Wealthsimple or Questrade. I use WS Trade for my self-directed RRSP and TFSA (and you can buy/sell all you want for free!) and Invest for our son’s RESP and a LIRA from an old employer. Both are great and the MERs/fees are super low (and get lower the more you have invested). 3) Depending on where you shop, a PC World Elite MC or a travel card might get you better value; because we shop exclusively at No Frills I get close to $2,000 a year in free groceries and gifts (we bought a Switch for $150 during a bonus redemption thing at Shoppers) every year. And it has rental insurance, extended warranty etc.

    Loved your case study and can’t wait for an update!

    • Sandra Richardson says:

      Totally agree about the PC World Elite Mastercard. We’re able to put work expenses on ours and we get close to $3000 a year in free groceries! We use Questrade to save on fees. Easy to manage yourself online.

    • Laura A. says:

      I totally agree about Wealthsimple. When I first began investing, I checked out the Vanguard ETFs that so many in the frugal community have, and discovered that in Canada, you can’t buy directly from Vanguard. And your bank will charge you ridiculous fees for trades. Wealthsimple is a far better option, and TFSAs are a fantastic wealth-building tool.

    • Sidney says:

      Thanks Melissa! These are great tips! I used to use the PC optimum points, but out west there is only shoppers where they can be redeemed, sadly.
      I will definitely look into Wealth simple and Questrade! And yeah, I did use an alumni discount for our home insurance. I will see if I can do that for the car too!
      Thanks again!

      • Lisa says:

        Side note: pc optimum should be able to redeem them at Superstore or an Independent Grocery store as well. If they have any near you

  9. Marie-Josée says:

    Thanks for sharing your Case Study Sydney. I confirm that money can be drawn at any time from a TFSA. Canadians can invest $6000 per yer year in this tax-free savings account and the lifetime contribution limit is now $81,500. This limit is on the contribution and not on the interest generated by investing in this account. To avoid penalties, you can’t draw and reinvest your money in your TFSA above the contribution limit in a current year. For example, I recently withdrew all of my savings in a TFSA account ($75 500) in December 2021 and waited until January 2022 to reinvest the money in another TFSA account. I couldn’t simply transfer that amount from one account to the other in the same year. So savings in a TFSA are accessible as emergency funds.

    I would not rent out the basement appartment. Sydney and Steeve have lived a frugal/student life for most of their adult lives and I feel they should enjoy the comfort of their home with enjoyable work space and room for their son and friends and hosting family. As an introvert and a homebody, being comfortable in my home is really important for my mental and physical health. At the beginning of the pandemic, I had my home office installed on my kitchen table. Although I did have a spare room to set up an office, we didn’t know at the time that the pandemic would last so long, and I didn’t want to buy furniture and re-engineer our spare room for a temporary situation. We moved in the interim, and I set up a home office in our new home and it has made such a difference in my quality of life. I hated the clutter generated by my kitchen office set-up. In a 750 sf first floor, I can imagine that Sydney and Steeve’s desks take up a lot of space in their living room.

    I have conflicting thoughts on paying the mortgage early. Sydney and Steeve have such a fortunate situation with respect to their government pensions and such secure employment. I would suggest fully funding their TFSA’s each year and fully funding their RRSPs and using the RRSP tax refunds to make lump-sum mortgage payments, but with a caveat. I would fully fund their RRSPs only if they still have some wiggle room in their budget for activities that bring them joy (hobbies/travel). If not, I would scale that back a bit. Life is so short!

    • Sidney says:

      Thank you Marie-Josée, your comments really moved me. What your write about the TFSA is my understanding too. It might take 2 business days, but we’d have access to that money quickly enough in an emergency.
      I love your idea about fully investing in retirement but then using the tax return to pay down the mortgage!
      Thanks so much for sharing your experience too <3

      • Sidney says:

        Oh and one other thing is that I am a bit nervous to rent the space to people we don’t know. Even students is tricky with not great sound proofing between upstairs and downstairs.
        With our friends it’s been really easy but with someone new, who knows…

        • Sally A Mangan says:

          This was my thought exactly. Having close friends living in your home and someone you don’t have that relationship with can be vastly different. Especially college students. I have been on this situation over the years and would NEVER do it again. I have also worked for property management companies and believe me, it is getting harder to remove a tenant , even for good cause, and can cost thousand of dollars in legal fees. It really sounds to me as if you do not want to rent this space. Money is not the only thing that makes for a good life.

          • C. Hopwood says:

            Reading this definitely makes me lean towards the “don’t rent” side. I was kind of leaning that way anyways (because 750 sqft seems quite small to me for a work from home set up) but the idea of not being able to evict a problem tenant from my own house would be a dealbreaker. At the same time, I acknowledge that we’re at the point in our savings journey where we’re more comfortable letting quality of life trump maxing out our savings.

    • Iris says:

      Because Canada is smarter than the USA on a lot of things, the comment here about moving the TFSA funds surprised me. What you CAN do, is a custodian-to-custodian transfer with no tax consequences. We can do this in the USA for retirement accounts, and I was surprised that Canada would not permit it, so I looked it up. The transfer as described here (withdraw and deposit) would have tax consequences and affect future contributions, I believe.

      https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/transfers/example-qualifying-transfers-between-tfsas-same-individual.html

      • Sam says:

        Correct. You *can* transfer a TFSA from custodian to custodian.

        What you *can’t* do is withdraw it from one custodian and contribute it at another custodian yourself in a single calendar year, unless you have the room.

        The room is reset on Jan 1 of every year (so you can recontribute anything you’ve taken out in the previous year(s)).

        The formula is:

        Your total lifetime contribution room
        – contributions made in previous years
        + withdrawals from your TFSA in previous years
        = your total TFSA contribution limit

        Not being able to withdraw and contribute in the same year (if you’ve reached the limit), is particularly stupid. It’s also particularly stupid that CRA’s own records aren’t authoritative. If the available room showing in your CRA account is 10k$, you can still be dinged if you contribute 10k, and CRA discovers months or years down the line that they miscalculated and you only had 8k room.

  10. Kate Semple says:

    What I would do is stop renting the basement for now. You have lived without the space for long enough to know you can, and while it’s hard to look at the number and give up that extra income, it also sounds like you’re at a place in your lives where you can afford it and the space it would give you might be worth more. It would be to me. I would also buy the cheap car. You don’t use it much so there is no point in investing in something brand new, and it’s such a low cost it’s a better way to test out if it’s worth it to have a car. I am an LPN who moved from Ontario to New Brunswick last year. I also will have a generous pension to look forward to, but I can also see the advantage to continuing to save on your own to be able to have the option to take an earlier retirement with a reduced pension. Advice I got from retired friends is to not rely on RRSPs entirely because they’re a pain to take out even when you’re retired at the regular age. I signed up with Wealthsimple (I feel like it’s essentially the same to go Wealthsimple or Questrade) and contribute to both investment and RRSP. With the investment you can withdraw whenever you want, whether you retire at the traditional age or not. The RRSP has some tax advantages I guess so I didn’t write it off altogether. I know the money would grow faster as one lump but to me this felt safe. I’m so far from being expert so I would recommend more research, but consider investing rather than just RRSPs for retirement. You can always reevaluate your decision to rent or not, but for this stage in your life take the breathing room and enjoy it for a but.

  11. Rachel says:

    If I were in their shoes, I would definitely buy the car since it sounds like a great deal and insurance/repairs wouldn’t add up to a ton on their monthly expenses. From a family hosting perspective look up local airbnbs weekly or monthly rates. If you’re able to find one for a month that is less than the cost of rental income, there’s your answer. Renting in line with the university schedule could also solve for the hosting & climate aspects. Given your son’s age, that extra space will be valuable during the teen years. So I would aim to have rental income until he’s 13, then use the space to give him or you more room to breathe. Then when he goes ro University it could be a private space if he stays local or you can rent it out again.

    • Sidney says:

      This seems like great advice! Thanks so much! I will check out local airbnbs and cost/compare 🙂
      We have indeed thought about our son living in the suite if he attends the local university.

  12. Elise says:

    Just wanna send some sympathy for the impostor syndrome, it’s so real, particularly as a woman with a degree in physics (at least, I personally share that experience). If that would be the main/only reason to quit an amazing job early and loose out significantly on the pension, I’d consider doing some therapy / job coaching to help with the imposter syndrome. Or, I dunno, start a ‘women in sciences’ or other affinity professional development group at your workplace or something, where you support each other and discuss topics like mentoring, negotiations, etc.

    Also, how kick-ass awesome is it that you had your son & did your PhD at the same time!

    • Sidney says:

      Thanks so much, Elise! I agree, I don’t want that feeling to stop me! I will definitely consider therapy if it becomes a bigger problem. For now it’s generally getting less and less. A friend of mine recommended “the Confidence Code”, it was a great read and really helped me for the final push on a paper I was writing, and with confidence in general.

      • Vee says:

        Fellow federal research scientist here! Loved reading about your journey as it is very similar to my own!

        Myself and a lot of my female colleagues struggle with imposter syndrome issues so I will definitely check out that book!

  13. Vicki says:

    Saying Hi as another Canadian federal scientist 👋! Loved reading such relatable content (errrr imposter syndrome). Considering our employer will probably never force us back full-time (unless you’re a lab based scientist) I would use the basement for an office. Having a dedicated office space has made such a positive difference in my mental health and ability to ‘check out of work’ in the evenings to spend time with my family.

    • Sidney says:

      Thanks Vicky, yeah, I kind of fantasize about setting up down there and i think it would really help to better enjoy work time and family time.

  14. Luc says:

    As another Canadian chiming in here, your tax bracket on the rental income would be high. The income would be split equally between spouses and taxed at your highest rate. Is it still worth it once your rental income automatically sends 30-40% to CRA? You would earn a similar amount from doing Airbnb out of merely one bedroom in your west coast city home and limiting it to say, travelling professionals or someone boring and safe like that.

    As for the TFSA, you can withdraw ANYTIME. It’s the contributions that get tricky.

    • Sidney says:

      Good point Luc. Fortunately alot of the house expenses can be deducted from the rental income, but you’re right about the tax bracket issue. Especially if we’re charging more rent and our work incomes grow over time too.

  15. Joanne Nardi says:

    As a fellow Canadian, I have some thoughts
    Which might be helpful. I hope!

    For car insurance In BC, I believe you must be insured by the government insurer – ICBC. It is what it is. Perhaps you could insure just for collision/third party and not worry about your own vehicle given it’s low price point. That may save you some money!

    Would it be possible to put in a “she shed” in your backyard? If you insulated it and ran electrical, you could move your home office outside of your main living space. Or possibly convert your garage if you have one. This would allow you to continue renting the basement and give you a bit of extra space. Of course there is a cost to this, but it would be more than made up for by your basement rental. In Ontario where we live, you can put in a 10×10 shed without having to get zoning permits. That would be adequate for a home office for both of you!

    You should be able To take cash out of your TFSA when you need to. There are no restrictions on that, unless there are some restrictions on the actual investments they are in (I.e if you sell before a certain time you have to pay trailing commissions or something like that). You just have to wait until the next year to put money back in.

    We paid off our mortgage early, but we had a slightly earlier start, and so more time to make up savings after. Given your low interest rate, I agree with Mrs. Frugalwoods. I’d invest more as you are likely going to be earning more on your investments than your mortgage interest rate, depending on your investments risk profile.

    • Sidney says:

      Thanks for this idea and these tips, Joanne!

      • Jayne says:

        The she shed is something I thought about for my unit here in Australia as I found it really hard to switch off from work when my home office was in my living room. My solution, which may not suit your home, was to relocate my laundry (from a small dedicated room) into my bathroom during a bathroom reno, and I converted my old laundry into a small office. To make it less closed in I had my builder change out the solid external door with one that was mostly glazed, so my new home office has a nice garden view and I can close the door on it when I’m not working. I live alone so noise isn’t an issue, but if you have background noise being able to close the door is a bonus.

  16. Anne says:

    I bought a similar car for $900 last year after being car-free for just about all of my adult life. I love it so so much and I also use it only about once a week. Since you have been using the car, you should know whether it is fairly reliable. The carrying costs could easily be less than you are spending on rentals, and having it as an option will expand what you can do and where you can go to recreate.

    Re: the basement, would it be possible to split off a part of the space so that you have room for a small office with Murphy bed? If you are having visitors or coop students renting they won’t need as much space as a couple renting it long-term. Otherwise, how about keeping it open over this summer after your friends move out and then renting it out starting in the fall? If your market doesn’t have a single time of year when all the leases turn over it could work well for this year and then you see how it goes. Post-covid, it could be an option to Airbnb it when you don’t have visitors if you want to keep it available when needed.

    • Sidney says:

      Thanks Anne! Unfortunately the lay out doesn’t work for partitioning the basement so it’s all or nothing, but I agree that we can at least keep it this summer and think about renting starting this fall or even January.
      I need to double check the Airbnb rules in my city. At first I thought that would be a fun idea to make income but keep it flexible, but then I heard a rumour that I might not be allowed here. I’ll look into it!

      • Victoria says:

        Remember short term rentals will require extra work and extra costs. You’ll be cleaning it often, repairing and replacing damaged items, managing keys handover and any issues during someone’s stay, at 3am if they’re selfish or desperate…

  17. Kate says:

    Reporting in from a city in bc as well, a few local comments.

    Car insurance: you don’t have a choice, you have to go with ICBC (the provincial insurance provider). The bad news is that it’s expensive for people with a long/good driving history, the good news is that it’s a no fault system automatically and you’ll get reasonable rates even though you haven’t had a car before! Recommend checking in with them to see precisely how much you’ll need to pay.

    Housing income: I don’t think it’s worth it, because I don’t think you’re looking at your marginal tax rate or our extremely tenant-friendly laws in bc. Your marginal tax rate to have that after-tax income is likely something in the 40% range, so you’re really only looking at $11,500 in post-tax income. When you combine that with the headaches of tenants, repairs, and everything else, it’s going to be such a pain because you generally can’t just kick them out after a year. (Many of these protections are a good thing for tenants, but they make being a small-time landlord extremely difficult.)

    What you could do is get the place furnished for guests as a rental suite and rent it out on Airbnb. If you’re close to a university, focus on the conference market. That way you can still write off any renovation fees and furniture etc (it’ll be a capital cost to amortize) , use it whenever you want to, and make some additional money whenever you want to put it up.

    It also looks like you’re way over-funding the RESP. I don’t have kids but if you’re not maxing out your own RESP and TFSAs, you should be putting in the max to get the government match to the RESP (5k?) and then put the rest in your own accounts. You can always give the kid money for university at a later date from there, but you’re locking that money into him needing to go to university and do so by a specific time.

    For internet, check out novus if they’re available where you are. So much cheaper and better.

  18. Turia says:

    Hi Sidney and Steve!

    I loved this Case Study – fellow Canadian here. Totally agree with Mrs. FW on the car issue. We live in a big urban centre and avoided having a car until we had our second kid (first was 5). We don’t use it often (especially in the pandemic) but it is incredibly useful when we do. Your kid is old enough too that carting around friends is much easier because you’re not dealing with huge car seats, and when the pandemic gets better there will be lots of carting around of friends! Getting to birthday parties, etc. is much easier. Buy the car and don’t look back!

    I think most people outside Canada (and a lot of Canadians) do not understand just how amazing the TFSAs are, as evidenced by the fact that Mrs. FW didn’t include their totals in her calculations of your current retirement savings (outside of the pension). They are badly named, in my view, and should have been called Tax-Free Investment Accounts so that people understood from the beginning just how versatile they are. We use ours exclusively for retirement savings and use the TD e-series index funds (I also have an RRSP with Questrade if you want to go the low-cost ETF route). I would be inclined to store your emergency fund somewhere else and keep all the valuable TFSA room for retirement savings, especially since you are both going to be limited in your RRSP room because you have pensions. Ours are maxed out and are both at around $150k (from a max contribution of $81,500 since 2009).

    For non-Canadians, you can contribute an annual amount to your TFSAs (right now it’s $6,000). This is after-tax contributions, but the growth on the investment is tax-free. When you withdraw the money it does not count as income, which means in retirement it would not count towards the threshold at which Old Age Security (OAS) starts being clawed back. You can take money out at any time, but you can’t put the money back in until the following year. Any unused contribution room rolls over to future years.

    I would prioritize maxing out the TFSA right now over paying down the mortgage faster. Once you have cleared all the extra contribution room, then look at the RRSPs, and then look at the mortgage. The RRSPs are a bit more complicated because they are taxable income in retirement and if you both have good pensions, you won’t have much flexibility with pension splitting to get your tax brackets lowered. (But also if you have good pensions you’re not going to have much contribution room going forward with RRSPs). Pensions are problematic because they restrict your options for independent tax-sheltered retirement savings, and there’s the risk, as Mrs FW said, of things going wrong. That said, the federal government should be as good as it gets in terms of security and I think there are new regulations in place in Canada to prevent things like Nortel happening again in private companies.

    You should be able to get annual pension statements which show you your predicted benefit at retirement, list your (and your employer’s) contributions to the plan, and provide the total current value of your pension. You should be including this in your net worth calculations. You should also figure out the options if you leave the plan before retirement (i.e. change jobs).

    The basement is tricky. On the one hand, it’s a lot of money that would allow you to meet all of your savings goals that much faster. On the other hand, there’s a lot to be said for more space. No one (I think) has yet mentioned the potential issues with tenants who aren’t as great as your friends were. It can be hard to get people out. As your kid gets older he might really appreciate a space where he can hang out with his friends away from his parents. The study in our basement saved us during the pandemic – we are both academics who have been teaching from home on Zoom since March 2020 and we’ve had both kids at home for huge amounts of time as well. My husband built a fold-down desk in our bedroom to create a second work space that wasn’t on the main floor, but without the space in the study we would have completely fallen apart. Maybe costing out alternative work spaces and/or AirBnBs for when friends/family come to visit to compare with what you could charge as rent? Renting to a student during the academic year (and not the summer) is maybe a good option, but are eight-month leases common in your town? I don’t think there’s an obvious yes/no answer here – so much depends on your priorities.

    • Sidney says:

      Thanks Turia, love this idea of first TFSAs, then RRSPs, then mortgage. The TFSAs are so flexible! I’ll give more thought to your other comments too. Very helpful!

    • Kat says:

      I would second putting emergency fund outside of TFSA. Our family just keeps our emergency fund in a high interest savings account (with Simplii Financial) at 1%. And my TFSA is only used as a retirement fund with ETFs through Questrade. TFSAs are amazing for Canadians!

  19. Kathryn says:

    What a great study! Small thing but since I believe that they likely live in British Columbia, meaning their car insurance will go through ICBC. Maybe you even live in my hometown of Victoria? 🙂

    This isn’t 100% accurate but for US/CAD translation, an RRSP is somewhat similar to a traditional IRA and a TFSA is somewhat similar to a Roth IRA.

    • Sidney says:

      Hi Kathryn, yes! I heard about car insurance going through ICBC… so does that mean there’s no wiggle room to lower that cost? Is it firmly set?

  20. Ann says:

    One other thing to consider with the rental space…right now the renters are friends and it sounds like everyone gets along and enjoys each other’s proximity. It is probably very fun to have friends as tenants and presumably they are all compatible with each other.

    However, new tenants will not be established friends. There may be various conflicts such as noise, etc. Our neighbors have a similar situation…for a long time, they rented to younger family member (I think a distant cousin) and it was delightful for all involved. Now, that young woman has moved out and the new renter is just not as easy to get along with. So, that is worth considering…

    • Sidney says:

      Thanks Ann, yes I’m nervous about this aspect for sure. The sound proofing in this house is not great. And there are other things that can go wrong in addition to sound.

      • Jamie says:

        Loved reading a reader case study so close to home for me. I also recognize lots of the locations in the photos. I live in your province as well (over in the big – expensive – city), and lived in a similar set-up for my first place. If you do decide to rent out the basement to new tenants, please be very up front (even in the rental ad) about the sound proofing challenges of the house. I was the ideal tenant (young, single working woman) and the place I lived was very nice with a great landlord but I just couldn’t handle the constant noise from the young kids upstairs and left after a year. (Not saying this is your situation, but maybe it could be.) I was a bit naive of course getting my first place but it would be kindest to future tenants to be honest about the set-up and that it might not work for everyone.

    • Lisa says:

      You would get your basic from ICBC, no option on that. You can then get your optional insurance (3rd party liability etc elsewhere). That being said, you may not save much on a older car. I went into BCAA last year as I am a member to see and I have a 2012 Corolla. She checked but couldn’t really get me a better deal but do check!

      And I thought I was doing pretty good witching from Telus to Koodo for my phone, and Shaw to Lightspeed for internet but yours are lower so may check. That being said I could have gone with lower plans so maybe that’s it but I will definitely check your providers out.

  21. Quincy says:

    As per usual, an excellent case study. Thank you for sharing with us!

    About renting out the basement–could you do AirBnb? That way you could decide when you want to rent it, but also block out times for vacations/family visits/etc. You would still bring in money but wouldn’t be committed to a lease or contract, and you could quit anytime you decide you don’t want to do it anymore.

    • Sidney says:

      Yes, I love this idea. I just need to check the Airbnb rules for my city. I heard a rumour that this kind of suite rental might no longer be allowed. I will confirm, bc it seems like a great compromise 🙂

      • Anne says:

        There might be a loophole, like you could rent it officially as a room in your house but then make it clear that there is a separate bathroom, kitchenette, entrance etc. in a lot of cases the Airbnb restrictions are about making sure independent, stand-alone rentals aren’t taken off the market and used for commercial short term rentals, vs restricting people from renting space in their home otherwise for personal use.

    • Rosalie says:

      This was my thought too. I rented out my spare bedroom on AirBnB for a while, and we were able to block off any time when we wanted to have friends and family visit or when we wanted our home to be more quiet. We had wonderful experiences, and it can be a really good amount of income too.

  22. Claudia says:

    I wonder if it would be possible to use the basement space as office space during the week and rent it out on AirBnB or similar during the weekend. Might be the best of both worlds!

  23. Amber says:

    Just wanted to say as a Canadian west coaster I’m happy to see our numbers reported. It’s expensive here. Townhomes are now a million dollars. Property is incredibly high.
    I aim to spend 1k a mo on my family of four for food/household items. It is very difficult often we come in at about $1200 and don’t eat out often. High cost of food here (especially produce and meats).
    I would spend a few months enjoying that extra space once your tenants move out. See if it makes a difference with having extra office/play space etc then reevaluate.

  24. Peter says:

    As a BC resident, you only have one option for car insurance: ICBC (a government-owned insurance company). They have pretty large discounts of you’re not using the car to committee to work, but you won’t be able to comparison shop.

    Have you considered car shares at all? I’m not sure about your city, but in Vancouver we have Modo and Evo; you pay a sign up fee of a couple hundred dollars, and then can rent cars by the hour for decent rates and no hassle. They’re located all over the city, especially in areas with low car ownership (like near universities). It’s not as convenient as owning your own car, but a lot cheaper, and more convenient than going into a traditional rental office and signing paperwork every time you need a car.

    One last thought on cars – considering the amount you currently drive, a used gas car is probably more environmentally friendly than a new electric car, since it doesn’t require all the materials for building a new car. If you start using the car more, that calculation will change, but for now, buying your friends car seems like a great way to try out car ownership!

    For Internet, Teksavvy is an excellent choice. Canada has notoriously high internet prices, but Teksavvy is one of the cheapest options.

    • Sidney says:

      Thanks for this info Peter! And yeah, I guess you’re right that since we won’t be driving that much, it would be environmentally wasteful to get a new electric car that just sits there most of the time. Thanks for this perspective!

  25. Meira Bear says:

    Yay! I love seeing fellow Canadians around. I have some thoughts on the rental. While only renting it for 8 months as a furnished apartment (to get highest rent) and then keeping it open to visitors in the summer sounds magical, consider how that shrinks your tenant pool. If you only rent an apartment for 8 months you do get a lot of students, but mostly undergraduate students. Undergrads generally have less money for high rent, so you may find yourself renting to a group of people who want to share the space, rather than a young family or a single student.

    Now, I was always the mouse-quietest tenant of every landlord’s dream (didn’t drink, didn’t smoke, no parties, no pets, and dislike loud noises) but not everyone is–and that said, I certainly knew some hard partying medical students! I’m not suggesting that all undergrads throw wild parties and all graduate students are quiet. It’s worth considering though, that if you’re most comfortable renting to people similar to your current tenants, you may benefit from either offering the place year-round, or searching for people through your personal networks, or actively trying to get graduate students.

  26. Laura A. says:

    Congratulations to Sidney and Steve on managing to buy a house in BC! That’s quite the accomplishment. I got my BA in your home city (I recognize many of the locations in your photos) and have many fond memories of it.

    So here’s the thing about car insurance in BC. For many years, ICBC was the only option you had, full stop. Now, however, you can get your base package through ICBC, but then acquire any supplementary insurance through another provider. If you decide to get a BCAA membership after buying your new-to-you car, which may be a good ‘peace of mind’ decision for you, I’d get BCAA to quote. In other provinces I’ve lived in, BCAA (or provincial equivalent) had the best insurance prices. In general, you’ll need to comparison-shop. Just be a bit cautious – any insurance company will take your money, but getting it back out when you need it can be trickier. ICBC and BCAA are reputable providers, at least in my experience.

    One word of caution: I truly hope that you and Steve can keep your government jobs for as many years as you wish, but I’ve been around enough decades to know that sometimes the federal government does do layoffs. What’s worse, when they do layoffs, they likely will also cut funding to the provinces, which means provincial government layoffs. I’ve tried looking for work at such times in your home city, and it’s nearly impossible to find something. I highly suggest you have enough rainy day savings to weather at least a year of unemployment for both of you. That will buy you time to figure out Plan B, or wait it out while the flood of job-seekers either become employed or leave the city.

    Fun frugal tip, though possibly many years outdated: Chinatown is a great place to find bargains like inexpensive soap and kitchen tools if you go into the authentic shops, not the tourist ones.

    I hope you have a wonderful time out there for many years to come!

    • Sidney says:

      Thanks so much for this car insurance advice and other tips, Laura!
      Yeah, I sure hope we can keep our government jobs. Steve is more versatile but I’m highly specialized :-/

  27. Jackie says:

    Awesome job on all fronts, I don’t know the rules in your city but could you continue to rent the basement and build/buy a bunkie (shed) and fix it up into an office. That way you can also shut your office door when you are finished. Here in Manitoba there are a myriad of options for buying these buildings in an array of sizes. I would definitely check your city codes but it isn’t a rental so shouldn’t be a problem to put I your back yard. You could also consider putting a Murphy bed in there for visitors, adding a bathroom might be logistical but it’s worth a look into. My feeling is that it wouldn’t cost any more than a years rent but can be used until retirement.

    • Sidney says:

      Hi Jackie, I think alot of people in town do this idea. I hadn’t considered it… I guess because it seems like a major project and we aren’t handy and we’ve never even hired a handy person before! 🙂

  28. IM-PCP says:

    Congratulations to Sydney and Steve–it’s been a long road to get to 2 good salaries and home ownership.

    The question of renting out the basement or claiming extra space is tough; my sister’s family, living in a very HCOL area, was only recently able to afford living without paying roommates. She loves it, especially since she can work from home now.

    Re: question #6. I would absolutely recommend getting one additional card. Not for credit score purposes, but as a safety move. If anything happens to your one and only card (fraud, business glitch on the card company side), you could have a difficult time financially until things are cleared up. In fact, I would suggest your second card be part of a different network, in case of issues on the company’s side.

  29. GratefulSaver says:

    I just want to say, Thank you for agreeing to adopt their dog.

  30. caryatis says:

    Forgot to add–do you really WANT that dog, and all the hassle and expense that comes with it, or are you just letting your friends pressure you into taking it? Have the friends investigated getting someone else to adopt the dog? Run the numbers and consider the cost of food, vet expenses, dogsitting, etc.

    • Kaitlin says:

      I think it is wonderful of them to let an old dog, who’s about to lose his family, live out his last years in the same house, with people he knows. I’m sure it was a difficult decision for his people to leave him behind, but they found an amazing option, and it would be awfully callous to go back on that decision now in order to save a couple thousand bucks. As you pointed out, there are lots of places they could make up that money – and maybe the friends would be willing to pay a bit of “child support” to ofsfet the cost of this good deed?

      • Sidney says:

        Thanks Kaitlin, I agree, this will be an easier transition for the dog, and he’s really quite an easy one to take care of since he’s not very active and just likes to chill out 🙂
        Our friends did indeed offer to help pay for any big vet costs after they move. We will see, since if we can afford it, I don’t necessarily want to take their money.

    • Sidney says:

      Thanks Caryatis, you’re right that we can definitely cut back. The alcohol was from Steve mainly but for health reasons he’s now been sober for over a month. I’m super happy to see that expense go!
      I will give our expense report another go over. Definitely nice to hear that we can offset that rental income by some smart cutting back.

  31. Andrea says:

    I agree with the poster above that renting the basement out a portion of the year seems ideal for your wants and needs. I wouldn’t base the rent / not rent decision on being able to host visitors. You could use the proceeds of the rented basement to generously pay for all or some of an air bnb when you have summertime visitors, and there’s no way that would cost the entire $19,500 that the basement would bring in annually. You can also rent it out on a yearly basis and just re-evaluate whenever lease renewal time is up. You may find that what works for you one year doesn’t work the next. Want to take a big family trip? Rent it out that year. (Also nice to have someone there when you’re gone.) Kid and his friends getting physically large enough to edge you out of the living room? Maybe don’t renew the lease so you can pop them in the basement 🙂

    • Sidney says:

      Haha yes. And I like this idea of deciding year to hear what to do with that space. Maybe renting some years and not others.

  32. Olya says:

    So nice to see a a case study from this part of the world! My partner and I also moved to a small West Coast city from Toronto and are loving all the benefits the city has to offer. One way we cut food expenses, which may not be feasible for everyone, is cutting down on meat/seafood consumption. That said, we also struggle with the takeout budget creeping up!

    I suggest looking into meet-ups/local groups for professional women/women in STEM for some support around work. We use Meetup.com to explore some of our interests and meet local people and have found it helpful.

    • Sidney says:

      Thanks Olya, I used meetup in Toronto when my son was a baby to meet other parents with babies. It was so great!
      On the meat issue, I was vegetarian for 14 years, then slowly added it back to my diet and strangely enough since living in BC I eat more meat than ever! It’s definitely worth cutting back for both financial and environmental reasons! Thanks for that suggestion.

  33. Shelley says:

    Hi from Kamloops, BC Canada! We bought a 2021 Nissan Leaf last year. We love it. Unfortunately the scrap it program is done so no $6,000 rebate. The price of the new Nissan Leaf has gone down for this year. You would have to put your name on the list to buy one and they are hard to find. Could be months. We had a choice of 1 last year and we were lucky. Don’t forgot there is tax on the purchase price from the dealershipplus a transfer tax paid to ICBC for the purchase.

    • Sidney says:

      Thanks for these Nissan Leaf tips Shelley! We did want to look into it sooner than later if there’s a long waitlist as you’ve mentioned!

  34. ZW says:

    $19k is a lot to give up on the potential that friends *might* come visit, and a lot to “pay” for having home offices. If it were me I would rent out the bottom year-round and tuck away that money. But, based on your needs, renting nine months of the year to a student could work on several fronts: it cuts out the worry of dealing with an ill-fitting tenant long term *and* you can tell ppl to visit you during the summer months. Another alternative would be to keep it as home offices but keep at least one room impersonable enough to rent it on airbnb for the weekends only, when you won’t be working. If you have files etc get a rolling file cabinet that you can roll into the other office/a lockable closet etc. You likely won’t be working on the weekends so you get the best of both (granted you’ll have the hassle of running an airbnb, but if you price it right it might be worth it to you to have the ability to work in your own space and host friends when needed).

    Secondly, I agree w the previous poster that I’m not seeing the frugality. Biking is frugal, yes, but it seems like it is enabling you to overlook spending in other areas.

    I would also get another credit card in case the first one gets locked for fraud etc. I keep a second car that I have all my monthly recurring bills on for two reasons: it slowly stacks up travel miles and I can easily see if anything is amiss on charges that should be static. Everything else I put on a cash rewards credit card.

    Good luck!

  35. Rachel says:

    I agree with buying the Honda at such a low price. BUT, another option to consider is joining a car share. I suspect we live in the same city, and the Modo car coop is fantastic. It’s about $4 an hour plus kilometers, and you do have to pay to join but you get the money back when you leave. No maintenance, gas or insurance hassles. There are cars located all over the city, and also in Vancouver if you go there on holiday!
    Just another idea!

  36. Aaron says:

    There is no right answer but with your incomes I would not rent out the basement. I would use it as the kids living/sleeping area and use his current room as your office. Or the other way around. You can afford it but it seems like you spend a pretty crazy amount on food. Around double what I would expect for 3 people. Should be able to cut hundreds off your monthly budget by reducing food and alcohol. Buy the $800 car because that is super cheap but hold off on a new car until you see how you like having a car for a year or more. Best of luck

    • Sidney says:

      Thanks Aaron, yeah, the booze has stopped in the past month since Steve has stopped drinking for health reasons. I’m happy to see that cost go. We can also cut back on eating out and save a few hundred there! Groceries are trickier… I feel like food is more expensive here than, say, in the US.

  37. cmd says:

    I would definitely not keep renting the space. It seems like you actually really need that space to have a better work-from-home environment. Plus future tenants may not be as pleasant to live with as your close friends. You could easily cut back some expenses- not even drastically- and make up for the reduced income. Even at your current spending, you really don’t “need” that extra income. Sure – it’s nice to have, but renting to close friends who you enjoy living with is a unique situation that may not be replicated with strangers after they move. Enjoying the privacy and space of your own home is very valuable to quality of life.
    100% buy the car! $800 dollars is nothing and you clearly expressed a need for it.
    You are in great shape! Build up a cash emergency fund a bit more and shovel anything extra into retirement accounts. You’re golden!

    • Sidney says:

      Thanks! Yeah, I’m nervous about new tenants. With the car, I’m also nervous about insurance and gas expenses adding to our monthly budget, but I’m definitely taking the point that there are a lot of places to cut back that can make up for these things! 🙂

  38. Laura says:

    Yes, my sister used the little back house Airbnb in her yard as a pandemic school house, a family and friends hosting spot on holidays throughout the year, and a regular Airbnb rental (especially on weekends when not doing school)… depending on the week/month and their needs over the past couple of years.

  39. Iris says:

    The car sounds like a very good deal.

    Someone else suggested renting the apartment during the school year. That also sounds wise. If you’ve got a good tenant, and they want to return for the next year, work that out in advance, so you don’t have to be looking for tenants repeatedly.

    I don’t care how good your relationship is, side-by-side desks may be going too far. The person who most works during the traditional workday and works the least outside of it, should move their desk somewhere else, perhaps into the bedroom if at all possible. This much of a break might be all you need to continue renting the apartment out.

  40. KnoxPatch says:

    Older Honda Civics are wonderful cars. I just bought my daughter’s 2015 Honda Fit and love it but I’m having the hardest time letting go of my 2009 Honda Civic EX. Buy the Civic. At $800 it’s a steal! And yeah, I’d rent the basement. I wish we could rent ours but it doesn’t have a full bath or kitchen.

  41. Rebecca says:

    To me, 20k annually to almost double your space is absolutely worth it!!!! Paying for a coworking space makes no sense to me because you lose the benefits of being at home and greatly increase your covid risk.

    I might be biased since I also live in an expensive area, but when I read that your weren’t sure if you could afford your mortgage without it, I was expecting much higher!!! Based on your income, what you are paying for your home is very reasonable, especially considering where you live.

    Two people working from home is brutal if you don’t have separate spaces. My wife and I are both in meetings A LOT and our work would suffer from it.

    • Sidney says:

      Thanks Rebecca! Yeah, I wouldn’t pay for separate from home office space, because in that case, I’d just ask to work at my regular office more often. But I really like working from home 🙂
      We’re so glad we bought our house in 2019 because prices have continued to sky rocket since then!

  42. Just one caveat about RRSPs that I don’t think anyone else mentioned. RRSPs are a great deal for those whose income is fairly low upon retirement. But, if you’re still making a good income–say, from a large pension–the taxes generally aren’t worth it. A friend’s husband was a VP at a communications company, and because of his pension, the tax they have to pay when they withdraw from their RRSPs was quite a shock! Also, you have to start withdrawing them once you reach a certain age–you can’t wait in case your income lowers (my friend was still working). She said that if they could do it all over again, they’d forgo the RRSPs and put as much income as possible in TFSAs instead.

    Traditional finance bloggers/authors/investors always preach maxing out your retirement savings, but that’s not the best option for everyone, especially when it comes to the Canadian RRSP. Our government also heavily promotes the RRSP, as does practically every financial institution in the country, so we’re groomed to believe it’s always the best option.

  43. Ang says:

    Hi Sidney! Loved reading this. I’m a recent Masters graduate and my partner is doing their undergrad. We’re both in our mid-twenties, live on the west coast (and it seems like, perhaps in the same city!) and I work in the environmental field as well, so reading your post was really exciting to think about the type of future my partner and I might be thriving towards!

    I don’t usually comment on these sorts of post, but really felt complied to after reading about your rental situation and the advice that Mrs. FW gave. Her recommendation to ask above $1600 because you live in a desirable, low-vacancy area with a high demand from university really frustrates me as a renter. obviously, this is passive income that you are entitled to as a homeowner and being a landlord is no easy task! However, looking at the details in your budget it’s also clear that while it’s a nice bonus to your monthly income, it’s not a necessity. I came straight to the comments to urge you to recall the frugal little graduate student you were back in the day and I hope that if you decide to keep renting your basement suite, that you will consider keeping it at market or even below market rate for the right tenant.

    As a graduate student, I was fortunate to find a great basement suite that I signed onto for 8 months at a time. The suite was furnished, which was great for me as a student because I wasn’t sure if I was going to be sticking around after my degree, so not having to make major purchase decisions (bed, furniture, etc.) was super convenient. I rented from September to April/May-ish which lined up great with my field season and paid about $900 for a bachelor suite (this was a few years ago, but it was still a rare find at the time – similar bachelors now seem to go for $1200+ often without furnishing or utilities). I knew I was super fortunate to have found this deal and continued to rent there for multiple 8-month periods before moving in with my partner. My landlord was also primarily a cyclist and did not own a vehicle, because I had a good relationship with her I would occasionally run errands for her in my car – perhaps something to consider!

    With your house being in a desirable area for students, and if you do live where I think you live, I have no doubts you will find an abundance of both undergrad and grad students that are interested in an 8-month lease, providing you with a continued stream of passive income and still allowing you to have a space for your families to visit and stay or a cool place to hunker down during the next heat wave, while still providing housing for a student or two that are desperate to find housing in a very difficult city for renters.

    • Sidney says:

      Thanks so much for your comment, Ang. You are like a younger me 🙂
      I also benefited from kind landlords at my 2 rented apartments in Toronto and our first when we moved out here, who all charged below market rate because they valued a good relationship with their renters. If we rent it, we would pay it forward and do the same 🙂

    • Rachel says:

      I came here to say similar, Ang! I was a mostly first-gen student who benefited from market rate rents in a desirable city.

      Airbnb has its charms, but in the aggregate it has really contributed to housing shortages and is one of the factors in widening social inequalities. Imagine if everyone does Airbnb, what happens to community and to housing stock? Students can be great tenants, especially nontraditional or graduate students. Often their codes of conduct apply to offcampus behaviour as well. And it seems like they can get on well with market rate. As a researcher they could even connect with local graduate programs or networks and specifically seek out tenants that way. A reasonable term time rental seems lucrative, flexible, and still aligned with this family s values.

  44. Anonymous says:

    Hello from a city nearby! I think a lot of folks here are commenting without understanding food costs in our area. For context, my household of two spends about $650-$700 each month on groceries and household items. Your goal of $1000/month seems achievable for the 3 of you, but I wouldn’t listen to people saying you can cut it by half…

    On another note, if you live near the university, renting out the place to students September-April seems like a perfect compromise. In the city I went to as a student, it was common to be locked into year-long leases even though most people only lived there for 8 months. I would have gladly paid an extra $100 a month to avoid having to pay summer rent. One thing to note – Students are often looking for housing for September in the March-May window of the same year. It may be worth your while to make the decision sooner rather than later so that you can find a good tenant for September.

    I also think it’s all about balance, with your high salaries and pensions you can certainly afford to not rent out the basement and keep all your current spending if it makes you happy and your goals don’t include retiring early, which is ok! But if you want to rent it out to either increase savings or increase spending on travelling or kid activities, etc., it’s nice that you have the option.

  45. Eduardo Hallal says:

    Hello from a fellow Canadian!
    I will reply below to what is within my expertise and what caught my eyes more, but I am sure other people will have great recommendations and answers about the other questions! Sorry for being lazy but I didn’t read other people’s comments (at least not yet).

    so there it goes:

    2: I am also in BC and unfortunately it is IMPOSSIBLE to get cheaper insurance since it is a government monopoly (ICBC). The only thing I can think of is if you insure your car and drive less than 5,000 KM per year, they give you a 10% discount, and by the sounds of it this MAY apply to you. They ask you to take a picture of the odometer when renewing your insurance. I believe that worst case scenario you don’t get the discount? this does not apply to me so I never tried and don’t know exact details, but definitely look into this if you think it will be useful to you.

    3-I wouldn’t pay the mortgage earlier, I would direct all excess to low cost index funds that should definitely return much more than the 2.49% interest you currently pay on your mortgage, specially if you are using up your TFSA contribution room, since returns will be tax free. But of course this is a personal decision, and I know I am comfortable with the “risk”, and you know yourself better than anyone else in order to make this decision. I would definitely at least use up both of your TFSA contribution rooms before paying extra on the mortgage, if that’s the route you decide to go.

    5-the first place I would recommend cutting back is an INVISIBLE expense: mutual fund fees. It seems like you’re currently paying 1.6% and that is very expensive. There’s no reason why you couldn’t go with cheaper and better options such as wealthsimple (would cost somewhere in the 0.6% range) or questrade buying VEQT or equivalent ETF paying 0.20% fee. Same applies to your brokerage account: Questrade has MUCH lower fees than what you’re currently paying with TD Waterhouse.
    Alcohol can be a much lower expense, even if your husband buys one six pack a week (not sure how much he drinks) and drink it at home. For the social aspect he can invite one or a few friends over and enjoy your balcony/garden!

    Your home insurance expense also caught my eye. My insurance is currently with Square one and I pay less than what you do. But with that being said, I am in a strata that has it’s own insurance and mine is only a “top up” until the strata deductible, so if you own a detached, it may really be higher, but it doesn’t cost anything to shop around!

    These remarks I made seem to be almost minor, with the exception of the mutual funds fees you are currently paying. Apart from this, you seem to be doing great! keep it up!

    • Olya says:

      I second Square One Insurance! We have this for the place we are renting in BC, as well as when I lived in Toronto, and found the rates are very reasonable. Fortunately, I haven’t had to go through the claims process, so not sure what that would be like, but in general I’ve found their customer service quick and helpful. You can also insure your bikes through them.

    • Sidney says:

      Thanks Eduardo, this is very helpful advice. I will look into all of these!

  46. Matt says:

    Question for @MrsFrugalwoods or others on here. The Fidelity retirement rule of thumb of 3x your salary (by 40). In Liz’s example above, she uses net salary (minus taxes and all deductions). I thought the rule of thumb was based on gross salary (before taxes and deductions)? According to the calculation above, Sidney’s net salary is $80,815.32. So, Liz says Sidney should have 3x $80,815.32 in retirement by 40 = $242,445. I don’t know Sidney’s tax rate and other deductions, but presumably her gross income is >$100,000/yr. So the fidelity rule of thumb would be $300,000 in retirement savings by 40. Which one is it?

  47. Amy says:

    Fun to see a fellow BC resident on here!! One really important consideration American readers might miss when discussing whether to pay a Canadian mortgage early, is that in Canada the interest rates are *not* locked in for the entire length of the mortgage. The mortage is renewed (when we had one it was every five years) and at that point the interest rate is renegotiated with the lender. In five years the interest rate could be quite different from what it is now.

    • Sidney says:

      Amy, yes that’s right. We got a 5 year term and will shop around with the help of a broker when it’s time to renew.
      In the states do they lock in for the full 30 years?!

      • Amy says:

        Hi Sidney, if I’m remembering this correctly (fairly sure I am) there is no term when you have to renew and negotiate interest rates. They are locked in for the length of the mortgage in the US. Must be nice in a low interest rate situation!!

        I forgot to mention in my first comment (above) the amount of hand-wringing currently happening in Canada regarding interest rates rising. When buyer’s mortgage terms end and renewal time comes, people will be facing larger monthly payments that could be hard to afford when you consider how large these mortgages are.

  48. totoro says:

    Awesome to see a fellow Canadian. I’m in Victoria BC so expect we are nearby. And your house is probably worth 1.3 now given the price appreciation recently!!!

    The TFSA can be withdrawn at any time, there are just some rules about putting the money back you have to be careful of so it is a perfect emergency fund. Agree with not paying off the mortgage and investing more in the TFSA and then the RSP if there is room and, finally, outside of both.

    We rent our suite during the school year. No problem finding tenants here. Keep the summer open for your use and those that want to visit.

    One thing you might consider is building a freestanding s/he shed in the backyard. If it is under a certain square footage you don’t need permission and you can wire it and set it up with desks to work from, and have space for someone to sleep in a pinch (with access to the house bathroom). Well worth the investment in your situation I’d think and then the operating expenses are tax deductible on a square footage basis.

    You might want to look into installing a heat pump at some point so you can have AC in the home. We will be getting hotter I think in the summer going forward…. and lots of rebates right now for this.

    Also agree with buying the car.

  49. Becca says:

    Electric cars can be pretty affordable based on incentives fyi. I sold a 8 year old Subaru Impreza on Craigslist for about 10k and walked into a Nissan dealership at the end of the year and bought a new 2019 Nissan leaf for 5k net. We live in Colorado so we had the federal incentive, local xcel incentive, and there was a Nissan incentive if you look out a loan( only did this for 4 months based upon the minimum…saved close to 2.5 k for about 20 bucks in interest). I know times are different but I think it might have worked out to close to 15 k in incentives.

    As far as little guys riding bikes I would recommend a tow strap. Can find them on Amazon. Definitely helps when they are tired and they are getting too heavy to carry.

  50. Amy says:

    Renting in general can be exhausting. The upkeep, finding a good renter, sharing your space, etc. I would factor in the fact that your last renters were friends, that I assume you knew before they moved in. Plus college students are not created equal. Some are very good renters and some are not. Just a couple of things to ponder.

  51. Sam says:

    The general advice for folks with pensions is to focus on their TFSAs (withdrawals are tax- and penalty-free at any time and are never counted as income. After TFSAs are fully funded, switch to regular taxable accounts.

    The trouble with RRSPs is that you’re required to draw them down starting at age 71 — and the required withdrawals increase every year — so if you’re collecting a healthy pension at the same time, you can find yourself paying more and more tax every single year, possibly even jumping into new brackets. *Additionally*, unlike withdrawals from a TFSA, withdrawals from an RRSP are counted as income and would affect your eligibility for various other old-age programs like OAS.

    People with secure pensions should rather look at RRSPs as tax-shifting vehicle to use during their working lives — for example, you might consider withdrawing from it if you take a sabbatical to stay home with the kids or write a book or travel. Withdrawals are taxed whenever they’re taken, but you’re allowed to withdraw the money whenever you’d like, and at any age you’d like. So if you do it in a year where you have no other income (or heavily reduced income), then you’d pay much less tax than whatever you’d likely pay at age 75, when it’d be *added* to your pension income and taxed at the full marginal rate.

    TFSAs should be fully funded on Jan 1 of every year and invested in high-growth portfolios — as “growthy” as you’re comfortable with — and left to do their magic. To be honest, their power to create and preserve wealth is such that it’s very hard to imagine that they’ll still be as amazing in the years and decades to come. Contributions will likely end up capped, and/or withdrawals will start being counted. But right now, they should be the focus of every Canadian’s financial portfolio.

  52. Sam says:

    Credit cards: The Tang card actually offers *three* 2% categories if you have your cashback deposited in a Tang savings account. There are always bonuses for opening their chequing/savings accounts, and those accounts are free, so that’s definitely a worthy first step.

    That being said, the Tang card is a pretty awful card outside its bonus categories. There are so many free cards in Canada that offer at least 1% CB as their base return that nobody should be earning less than that for any payments at all. There are also free cards that offer up to 3% on boosted categories, not to mention cards with annual fees (often waived for keeping a minimum balance in a — free — chequing account) that offer even more.

    Finally, and importantly, if you only have 1 card for the both of you, then one of you isn’t actually building any credit. This is something that people get mixed up with, because there are far more US blogs and articles to read than Canadian ones, but in CA, authorized users aren’t reported to the credit bureaus. You can quite literally get supplementary cards for your dog, cat, goldfish, newborn baby, deceased grandmother, etc. All the bank does is issue a new card to that name, but it doesn’t even check that said person exists (or is a person!) and it does nothing for their credit file.

    I would suggest getting 2-3 cards to ensure you’re covering as many boosted categories as possible and are collecting the type of rewards that suit your lifestyle and plans (e.g., a card collecting WJD (Westjet) or Aeroplan (Air Canada) would be useful for future flights east).

    ***
    A final word about Tangerine, since you already have a CC, and might add a chequing/savings account (see above): You could look into their ready-made investment portfolios. They have several to choose from based on your risk tolerance, and the fee is only 0.5% inclusive of MER.

  53. An says:

    I noticed some comments about credit cards, and as an avid credit card churner, I would strongly recommend the PC WE, which you did mention above. I know other PC stores are far and few in BC (Superstore, No Frills, Independent, etc.) but I do find a lot of utility in going to Shoppers. Seeing as you don’t have a car, I am guessing that major hauls from Costco are probably not common. In that case, I find Shoppers to be a great place to pick up home essentials (laundry detergent, paper towels, etc.). I only go there during 20x points events and find that I collect a lot of points which I use to buy video games during Bonus Redemptions. The biggest Bonus Redemption day is typically around Black Friday where you can redeem 250 000 points (typically valued at $250) for $400 worth of merchandise, which is a great time to pick up Christmas gifts.

    Another card which might be good to consider is the American Express Cobalt. It has a monthly fee of $12.99 but you get free supplementary cards (so you and your husband can both have cards) and you get 5x points on food and drinks (eating out and groceries) as well as 3x points on streaming services (Spotify, Netflix, etc.) and 2x on travel. Besides PC stores and Costco, I’ve found pretty much all groceries stores I visit in BC take Amex (Thrifty’s, Save On, Fairway). I also very seldom have issues with Amex being accepted in restaurants, plus Ubereats, Skip the Dishes and other delivery places also all take Amex. So, you’d get 5 points per $1 spent dining out and on groceries, which at your current spending would net you nearly 8k points/month, not including any points you’d get from the new sign-up bonus (usually 35-50k points). These points can be transferred 1:1 to Aeroplan which makes them really desirable for travel.

  54. Wendy says:

    A comment about early retirement: don’t forget that if you leave your job early, you can most like defer getting your pension until you are 65, which means it will not be dinged the 5% per year. Most people think that they need to start collecting their pension as soon as they leave their job, but deferral is often available as long as you have been putting money into the pension plan for at least two years. Here is some information about deferring your federal pension plan : https://www.canada.ca/en/treasury-board-secretariat/services/pension-plan/plan-information/deferred-annuity.html (I hope that this is the correct link for your situation).
    If you had enough money saved up in your RRSPs and TFSAs and you wanted to stop working earlier, you could quit your job and live off of your saved money until you reach the age of 65, and at that point, you could start getting your work pension and CPP money without having to reduce those amounts.

    • Sidney says:

      Thanks so much Wendy. I didn’t know this. Sounds like a very good option if we want to retire earlier. Makes a ton of sense.

    • Brian says:

      Late to the party but couldn’t agree more with Wendy’s suggestion if you wish to retire early–you could position yourselves to be 1-2 tax brackets lower than if you waited to start RRSP/RRIF withdrawals after you began collecting your pensions. I think I might also consider keeping the larger defined benefit pension (yours) and taking/investing the commuted value of the smaller one which I believe you can do before age 55 (if you started service after 2013). Also check on any implications for continuing public service health and dental plan benefits as a retiree. Congratulations and continued good fortunes!

  55. Alex says:

    Hi! I think that I live in the same city as Sidney, and liked seeing this post!

    I wanted to point out that the family’s groceries are not extraordinarily expensive for our location, they could be reduced somewhat, but truly a budget of 1k/month for 3 is very reasonable if you are eating meat and dairy. Also – just to keep in mind, as a landlord in BC it is VERY difficult to evict tenants, even if you have a short term (ex. 9 month lease) if could be very hard to have the tenant move out, despite lease terms if they want to stay. I would seriously consider this if you do decide to rent out your basement. Additionally, the provincial and federal pensions in Canada are incredibly stable/reliable, so if you keep your job, you will have some form of pension. ALSO – I feel you guys are in a GREAT position for your ages – you own a home in one of Canada’s most expensive regions, you have started all your retirements savings, and RESPs. If I was going to prioritize one category more, it would be the RESP, given that your son may go to university in 9 years, and may follow in your footsteps with advanced degrees.

  56. Alysta says:

    Definitely buy the car. You have “enough” to not have renters, but I think I’d make it a challenge to lower your expenses by that amount. If you can’t, rent to a student for 6-8 months. And also see if you do get as many visitors as you expect. I’d buy the furniture if you like it since you’ll need it for visitors.

  57. Genevieve says:

    Mrs. Frugalwoods you mentioned trying to replace your ailing 2010 Prius. We have a 2013 Prius that had its inverter fail. It was going to be a $4200 repair but we found out that Prius cars from 2010 to 2014 have an extended 15 year/150000 mile warranty due to multiple recalls. Just wanted to let you know in case that helps you. Good luck!

  58. Kate says:

    I have a 2006 Honda Civic and it’s going strong! It gets really good gas mileage. In the US, the newer/nicer your car, the more expensive your insurance is. Buying your friend’s Civic sounds like an awesome opportunity.

  59. Rob says:

    Try having your home to yourselves for a while, see how you feel about it after some time has passed. Nothing is set in concrete, i.e. you can still rent it out in the future if you decide the money is more important, but strangers sharing your house may not be as amenable as friends. Enjoy your home : you’ve earned it!

  60. monica says:

    Have not read all the other comments.

    By the car this is really a no-brainer.

    Not sure if anyone has pointed out that you can use the basement for office and guest space and then rent it (AirB&B or other) whenever the best time of year for this is, if you find you need extra income. Seems like you could use it for guest space when you want, as well as office space, and then every now and then rent it out – as long as you can make your office stuff fairly transportable back to upstairs. Since you live in a university city – maybe this is during during graduation or fall student drop off time? Parent weekend? That way, you could get some income (and probably charge more per night than a regular rental would bring per night, during big need or popular times in your area) but not have to give up the space for guests of extra office space.

    You can definitely cut back on dinners out, alcohol and bars and other areas, as you probably are aware.

  61. Sam says:

    Sharing a perspective of someone who watched my mom with a seemingly stable pension lose her career before she was financially ready.

    My mom *thought* she was going to work until her full pension (similar age as you both), and by the time she was in her early 50’s, the academia environment had changed and an outside “peer market group” decided she was being paid too much and offered her a beginning salary position or to be let go. While my mom was generally healthy, her work was the same as it was when she was in her 30’s and 40’s, and the day to day took its toll on her. She tried to negotiate different positions of higher pay, but… the liberal environment she was in wanted to bring in some “new talent” (cheaper talent) and she ended up taking a small severance, partial pension, and “voluntary” quit. Had it not been for my grandparents gifting her and my dad a house – she would not be able to age in dignity with enough resources to have a couple luxuries (ie: meals out when she wants, fancy art classes in private studios, etc). This showed me and my partner what not to do, primarily – to not put all your eggs in one basket, even if it seems like a sure thing.

    My partner and I are taking a both/and approach, even though we believe we will receive a pension, some social security (here in America), and we also work for the government. *But* if something changes, if we need something to change (ie: illness / death / burnout / hatred of careers), we don’t have to start over financially then.

    We’re following the Coast Fire path (heavily investing upfront for some years, to be able to invest less after you reach a certain number, while your foundation compounds until retirement age). This way, worse case scenario (pension is gone, social security is mostly gone) – we’ll have a low FIRE retirement portfolio that covers our needs and then some, *with at least a decade* to start investing again if need be.

    A question our fiduciary financial advisor asked us when we asked them how to figure out how much to invest, how much to save now and also enjoy this time… they said, “What allows you to sleep well at night because you’ve taken care of this part of your life.”

    What might that number be?

  62. Nancy G says:

    I’m super impressed with the amount of thought you have put into building your life and securing financial security. I have two suggestions based on my own road to financial independence and life experiences:
    *Paying extra on mortgage – Since you mention you would like to retire early, having your mortgage paid off is a big step that way. I know some opinions are that you are missing the opportunity to invest that money. However, investments are a risk.
    Paying off your mortgage has no risk – just more money in your bank account each month since you don’t have to pay a mortgage. We have no regrets that we paid off our 30 year mortgage in 15 years.
    * Credit Card – I would suggest getting a second credit card issued with the first name on the account being the spouse that is not listed first on the credit card you currently have. This may be different in Canada, but in California I’ve had a few friends who when one parent passed away the other parent no long had a credit card because the first name on the account was the person that passed away, so the account was automatically closed. Our estate attorney told us every husband and wife should each have a credit card with their name listed first. In addition, we were on vacation in Mexico when the credit card in my name got hacked and we were really glad we had a second credit card to finish out our trip. If you pay off credit cards every month, having two would have no negative results

    • Sidney says:

      Thanks. Yes, we will definitely buckle down and get Steve a card too, so that we’ll have two in the family, one with each of us as the primary.

  63. Jessica says:

    If it were me, I definitely wouldn’t rent out the basement. My partner and I work from home in 600 SQ ft, and would definitely not be able to live and work in a similar sized space with a kid! Plus being a landlord of non-friends can be very challenging. It seems that you really don’t want to rent, you just are worried about giving up the income, so I’d like to emphasize the math here. Your savings rate if you don’t rent is 35% of your post-tax income, or around $50000. That is awesome! I did the math out with your current net worth, income, and spending, and even ignoring the pensions entirely you are on track to have 100K/year to spend in retirement (assuming a conservative 5% inflation-adjusted annual earnings). Plus your salaries will likely increase so you will be able to save even more. Plus you will have lower expenses soon after retiring by paying off the mortgage (which mathematically you should not pay off early -2.5% is very low and you can easily make more investing in total market index funds). So you would be on track for retirement even without the pensions (which seem pretty secure) without renting out the place. You can definitely afford this!
    (I know your expenses will increase some with things like the dog and potential car, but you also have room to decrease alcohol and restaurant spending, so I am ignoring that and assuming it balances out or is minimal).

  64. Rebecca says:

    You could have a break from renting the basement. You might use it for a few years and then decide to rent again to boost your income.
    You might need the home office space less in the future.
    You could rent it out to boost income when you retire.
    Can you manage a small extension to get the office space/spare room? This might allow you to keep the rental happily.

  65. Brendan Classon says:

    This is an inspiring story, thank you Sidney. Sometimes, just hearing how folks work through their plans is incredibly illuminating. And then Mrs FW’s advice just adds to the learning. A budgeting tip: please consider accommodating for vet bills and possibly pet insurance with your new family member. All the best of luck to you and your family.

    • Sidney says:

      Thanks Brendan, I have learned so much too! Oh, I hadn’t heard of pet insurance before. He’s an old little guy, so that’d probably be expensive for him.

  66. Erin says:

    Yahoo! Great to see Canadians on here and read all the good advice from Mrs. Frugalwoods and the community. I live in Ontario and work for the provincial government so have a similar situation. One thing that caught my eye was your extra insurance through SunLife – is that through your employer or a separate policy? As a federal employee you should be able to buy additional coverage through your work insurance provider for much less than $58 a month. Maybe I’m missing something there but that would be good to look into if you haven’t already.
    I agree with everyone about buying the car and either renting the basement for the school year and reassess. Nice to have more space and it’s nothing to feel guilty about! Same with owning a car, going out for food, etc. The point of life is not to live bare bones all the time!
    TD Insurance is very good, good choice there.
    A final thought about investing when you have a solid pension – I invest in a “growth” TFSA and RSP portfolio bc my pension is secure and indexed for life so I feel comfortable taking more risks with my invseting. I invest in RSPs when I can but it’s hard to because the pension adjustment eats up most of income and I would think that’s the same for you. I personally focus on my TFSA first so as to not pay tax if I have to withdraw it for an emergency. RSP comes second for me.
    Great work, Sidney! Sounds like you have made a great life for yourself!

    • Sidney says:

      Thanks Erin, you’re right my union has a connection for discounted life insurance that I had forgotten about. But I think it was similar in price to what we eventually found. The $58 is for both Steve and I. My portion is quite a bit lower, being a bit younger and female. Thanks also for the suggestion for slightly higher risk investments and the focus on the TFSA. I will do so!

  67. Walnut says:

    On the rental side, if your local university has a med school that requires students to do short term rotations, then you might make your home available for that purpose. I have done this for physicians assistant students I have personally known and they are dream tenants, as they work/school for long days and really only come back to sleep. Rotations are relatively short as well, so you can plan around guests/summer heat.

  68. Eric says:

    If you have any unused contributions to your RRSP, I think that considering your salaries (especially Sidney with her ~150 K$ salary) you should used them and get the annual tax refund. If you do so, it could increase (or maintain) your Canada Child Benefit (because you are lowering your annual net revenues) and you use your tax refund to save in your TFSA.

    You could use your TFSA for emergency purpose, travel or long term saving. Also, your money will be available at anytime if you use mutual fund or ETF, except if you are using a fixed term deposit (which i don’t think you should use anyway in a TSFA at your age).

    • Sidney says:

      Thanks Eric, This is my understanding too. And yes, our RRSP contributions as well as Steve’s university expenses have been claimed and that’s why our tax returns have been very good in the last couple of years 🙂

  69. Emily says:

    This is such a minor point but in the US, at least, you do want TWO credit lines on your credit report. We found this out the hard way when mortgage hunting for the first time. My husband was fortunate not to have student loans and just had one credit card. Some banks wanted more of a history and asked for more documentation or have us worse rates. Obviously, this family already has a mortgage but if you are a US reader who might want a mortgage someday — get a second card!

  70. Suzanne says:

    With a fixed rate mortgage (yes, those are super common in the US) I would recommend not prepaying your mortgage. After all, if you can afford your payment at the time you retire, when the mortgage gets paid off at a later date, you effectively get a raise a few years into your retirement! Whoo hoo! But this perspective changes with adjustable rate mortgages which are the norm in Canada. With rates currently low, you aren’t likely to see them go lower. But you could sure see them go up! So for anyone out there who has an adjustable rate mortgage, prepaying can make all the difference between being able to afford future, higher, payments, and not (though you could decide then to rent out your basement to cover the higher payment). Still, in this situation, I think you are wise to prepay it in the beginning years. As the principal balance goes down over the years, and your income hopefully rises, then stop prepaying and invest elsewhere.

    And for now, don’t rent out the basement. The after tax income plus the risk of eviction costs does not outweigh the joy of having more living space. I’m a frugal person, but at some point you do need to splurge a bit on those things that can strongly affect your overall happiness. If you lose a job, then rent the space out. I also like the idea of building an office shed – if you have Next Door where you live, visit the construction subgroup to find someone to build it.

    • Sam says:

      One small comment re: this is that in Canada, it’s almost always a better choice financially to *not* increase your current monthly payments, but rather to put down a lump payment at renewal time. Again, because it doesn’t really make any difference in the US, and most people read US blogs or articles, they miss this point.

      But in CA, if you save/invest the extra 200$ (for example) that you’d pay monthly over the current bill, that’s 2400/year, and just about 10,000 over the 5-year term. At renewal time, the outstanding amount to borrow over the next 5-year term is 10k less, which is cool, but…

      –On the other hand, let’s say you save/invest those 200$/month at an extremely conservative 2% return, at renewal time, you’ll have nearly 13,000! If you make a lump payment at that point, the outstanding amount to borrow over the next term is 13k less!

      (2% is already just about doable at an ultra-safe and guaranteed online savings account or GIC. You’ll likely be able to do far better over the next 5 years of increasing interest rates, even if you choose to remain extremely conservative.)

  71. Joanne says:

    I had another thought on your rental space. Perhaps contact your local university housing department, as they are often looking for short term rentals for visiting professors. That might be a good compromise to having some income from the basement, but having it empty in the summer for visiting family and friends. As well (and I know this is a huge generalization) you are likely going to get a quieter tenant who is busy researching/working alot.

  72. Stephanie says:

    Hi Sidney,
    I didn’t read through all of the comments above – so sorry if this is already suggested.
    As someone who also has a government pension, I have considered that my pension payments + CPP + OAS may end up putting me in a higher tax bracket than some of my working years – therefor making it so that my RRSP withdrawals end up being taxed higher than the tax break I got when contributing. For that reason, I always max my TFSAs first. I do contribute to RRSPs knowing that it will be nice to have the ‘slush fund’ there come retirement but I don’t push myself to max them out. Considering taxation in retirement for people with strong government pensions, TFSAs are the better option for retirement savings.
    Good luck!

  73. ACP says:

    HI Sidney,

    Great to see a Canadian case study! I haven’t read all the comments but just wanted to mention a possible issue with renting out your basement. My understanding is that renting part of your principal dwelling can have significant tax implications if not done carefully. I am not an accountant but just wanted to mention this point in case it influences your decisions re: renting the unit.

    Here are some links you may want to look at.
    https://www.cpacanada.ca/en/news/canada/2021-11-09-rental-property-tax-tips

    https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate/changes-use/changing-part-your-principal-residence-a-rental-business-property.html

  74. Rise N says:

    I am just amazed. If you kept your current budget, which shouldn’t be too hard since you have some expenses that are flexible such as bars and eating out, you will be able to save 50,000 a year without renting out your basement! Without interest (and of course there will be some) you will save 600,000 in only 12 years. that is close to the rule of 6 x your expenses at age 50 since Steve will be 54 and Sydney will be 51. If you add in raises and interest, your money will be even more. (Obviously, some will not be in a retirement account but in a brokerage or taxable account.)
    I think it would be great if you would make a plan where you could retire about age 50 just because you don’t know the health and the situation of both of you at that time. It is good to have a backup plan.
    Taking that 600,000 and dividing by 25 gives you 24,000 a year for income. Does the value of your pensions at age 50 make up the extra $70,000?
    I think now that extra income from the rental of the basement looks attractive. If you rented it for 1800 a month times 8 months, that is 14,400 a year. Let’s say you have to spend part of that for office space, so you net 10,000 a year for 12 years. That extra 12,000 a year plus your 50,000 with 8% a year return (over 12 years) is now $1,340,081. This includes 80,000 as the starting amount. Subtracting the extra 120,000, the total after interest will be $1,150,309.
    The greater number gives you approximately 53,000 a year to live on. The lesser number gives you 46,000 to live on, again using that rule of 4%, which is the number divided by 25.
    Well, you certainly have many options! Isn’t compound interest amazing?

  75. Kaitlyn K says:

    Thanks for the post! I’m in a similar situation. Federal defined benefit pension plan is the best. Frugalwoods comments on having to retire early for health reasons are countered by the medical retirement option. If you are medically unable to continue working you can take an early retirement (medical retirement) without penalty. The benefits from the feds are incredible if you can handle the bureaucracy.

    I’m also in the same boat and have a basement suite. It was rented to great friends for the last four years and when they moved to another country in September we decided to leave it unrented. The money was noticeable at first but slowly you get used to it. I think you probably haven’t embraced you are a high income family and definitely don’t “need” the money. We have decided to be very fluid with our suite. If something pops up (we have friends living there for three months as we speak) then we go for it. You could leave it empty for a year and rent it the next. Or a semester. If you want to work in the space then do it. Financially you are set. All you have to do it keep moving forward and you’re golden. Now it’s time to enjoy things a bit! So try using it for yourselves and see how it feels.

    Mostly I’m here to comment on the $100 000 RESP situation. I’m all for RESP’s and the government top ups. But I think that number is overkill! Especially if you live in a city with a university (and likely several colleges if it’s the same University I went to). Your son could live at home while going to school. Or do the two years at the college then two years at the university to get the fancy name on the degree. Plus the government has a lot of grants.

    I personally would continue your increased payments on your mortgage (sorry Frugalwoods), stop renting your suite, and decrease your RESP contributions once you hit the life time max of government grants. You’re in such a good financial place that if in 10 – 15 years your son needs an extra $500-$1000 or so a month to help pay for school it won’t impact you much.

    Also, I would continue to prioritize RRSP’s for the tax advantage now. While you may still be in a high tax bracket in retirement, you might choose a different path. If you max the RRSP’s now – that is money in your pocket and it gives you the chance to decide your future. Maybe you don’t want to do a whole career so you take a reduced pension subsidized by your RRSP’s. There is no harm in maximizing your RRSP’s and TFSA’s and at this rate it won’t be too hard to do. You don’t get a ton of contribution room when you have a defined benefit pension plan.

    • Sidney says:

      Thanks Kaitlyn, Wow, a lot of similarities and thanks for your advice! I didn’t know about that medical retirement option. That’s very comforting.
      I have now realized that other than getting the government contributions, there is no further benefit of the RESP. So other than maxing that out, we will save our money for our kid’s education in the more flexible TFSAs and other investments. We do hope he’ll live at home for post-secondary education 🙂

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