[CAN] Reader Case Study - 33-year-old single female, child-free, minimalist

[veganminimalist]

Hello!

I have always been interested in Wealth Management, but I had never found anyone I felt I could trust. That has changed now that I found you guys.

I understand that you are not licensed financial advisors, and anything you say or write must be taken as a suggestion only, not financial advice and that I am the one that should take responsibility for any changes I make to my financial plan.

Here a few facts about me:

I am not a US citizen
Single female who is 33 years old
I live in Vancouver, BC, Canada (new permanent resident)
Didn't make any money in Canada last year
Started working in March 2019
No children and no plan to have children ever #childfree
I am going to be making $80K CAD/year (not much I know)
No debts - I have a 2K No fee Scotiabank credit card, and I always pay on time
I have a Scotiabank Chequing account. Also, a Tangerine checking account where my paycheck gets deposited
I will close my Scotiabank chequing account and will only have my Tangerine chequing account
No house, no car

Monthly spending (in Canadian dollars)
Transportation: $200
Groceries: $400
Housing (Airbnb, so it includes utilities): $800 If I end up moving at some point, I'll have a roommate, and I don't plan to pay more than $900 including utilities. As you may know, housing in Vancouver is very expensive, so I will always try to find a way to keep my housing expenses low.

I rarely go out to eat
No coffee, no alcohol
Mobile phone: Canceling my plan in the next few days, so I'll be saving $60/month

Stocks
I have about $8K - $10K CAD in an individual investment account in the US, and I am trying to transfer that account to a Questrade account. I haven't been able to do so because Fidelity restricted my account because I moved to Canada, so I am trying to figure things out.

Savings
I have $70K USD in my home country (not the US). 15K in a fixed term deposit (5 years, 4.5% annual interest) and 50K in a savings account (3% annual interest)

Question:
Once I have access to my stocks in Canada( individual account from Fidelity), should I sell them and put the money towards my RRSP next year or my TFIA this year?


Employer Pension plan
I contribute 6%, my company contributes up to 5.8%, so a total of 11.8%. I can contribute more than that but have chosen not to do so because my employer won't contribute more.
Company: Desjardins - Distribution: US Equity Index Fund 90%   ,  Canada Bond Index Fund: 10%
US Equity Index Fund: https://www.erc-grs.dsf-dfs.com/erc-grs/App_Themes/Theme_TELUS/en-CA/Prospectus/funds_T274.pdf
Canadian Bond Index Fund: https://www.erc-grs.dsf-dfs.com/erc-grs/App_Themes/Theme_TELUS/en-CA/Prospectus/funds_T248.pdf

Question: Should I change the distribution of my contribution pension plan?


I can't contribute anything towards RRSP account this year because I didn't have any income last year.
I can contribute up to $11 500 towards TFIA/TFSA account

When would I like to retire?
In no more than 10 years if possible.

Questions
1. How can I lower my taxes? Net income approx. 4K/month  I'm trying to start an online business (e-commerce), but I've been told I wouldn't be able to deduct a lot of my expenses. Any ideas?
2. Should I pay for Critical Illness Insurance (SunLife is offering me one)?  Total premium: 301.95/month
3. I have opened a Questrade account, but the account does not have any funds yet. What type of accounts should I open and what should be the investment mix?
4. What can I do with the extra money I am able to save and not able to put towards RRSP or TFSA accounts because I have maxed out my RRSP/TFSA? (when that happens)
5. When should make my contributions/buy?
6. If I'm doing a 60/40 (equities/bonds) allocation, does that mean both TFSA and RRSP are funded with a 60/40 allocation?
7. Where can I find a financial advisor/tax professional that actually knows and wants to help me and don't want to sell me crappy products? Can you recommend anyone? I feel like I need someone to talk to, to understand things better. Would you be willing to help me out (Even if it is not free :) ) Thanks
8. What should I take into account when filing taxes next year once I start contributing to my TFSA/RRSP?
9. Should I move things around in my TFSA and RRSP accounts or should I only worry about contributing to both accounts? I've read about rebalancing the portfolios, but I am not sure I understand. Is rebalancing a must?

Thanks!

[Freedomin5]

Welcome to the forums! And congrats on your new job!

Jon Snow, goldielocks, and zikoris are three longtime forum members that live in BC. There may be more but those are the more frequent posters I can think of. Zikoris especially has a similar situation as she lives in Vancouver and I think her income is lower than yours. She’s still able to save a ton and is on track to retire before 35. Look up their journals and posts as I think they may have the answers to many of your questions.

The Canadian tax discussion thread on this forum may also hold the answers to many of your questions. Start reading and if there are any questions that haven’t been answered, you’ll get more Canada-specific responses by posting there. Here’s the link: https://forum.mrmoneymustache.com/canada-tax-discussion/

The only question from your list I am even sem comfortable answering is the last one about rebalancing. The answer is yes, you need to rebalance annually, but you don’t actually need to sell anything. Since you’re making regular contributions, simply contribute more to the equity fund or to the bond fund to rebalance. What happens is that as time goes on, one fund may gain value at a faster rate than another fund. So then you’re no longer at your 60/40 target allocation. If the stock market is doing well, you may end up being at 65/35. So then you contribute more to the bond side of things to get the values back to 60/40.

More Canadian specific investment discussions can be found at Canadian Couch Potato. Not sure if you’ve already checked out that site, but the link is: https://canadiancouchpotato.com/  Many of the Canadians here follow the investment structure found there, and there are also good discussions/articles on how to minimize taxes.

As a side note, 60/40 is quite conservative, especially because you’re still young. I know different people have different tolerance levels, but there is good data on the Canadian Couch Potato site that shows that an 80/20 allocation gives decent returns without much more risk. But YMMV. Just consider it.

ETA: If you put [CAN] at the front of your post title, it will draw out more of the Canadians who can comment on your specific situation. This site is American-heavy so unless you flag the Canadians, they may miss your post.

[Goldielocks]

Hi!  I sent you a PM as well.

The best place to start is to figure out what you annual expenses will look like after you are FIRE'd, and what Canadian benefits (if any) you will receive -- or if you will get something from another country.

That will drive your $$ amount needed in 10 years when you FIRE. For example, if you think that you will keep to $2000/mo expenses in today's dollars, forever, then at age 43, in 10 years, you will need approximately $525k in after-tax investments (TFSA and others), or $700k in RRSP's.  This assumes that you will only receive $500/mo, combined in CPP and OAS at age 65, due to fewer years in Canada. (Side note, delaying OAS to age 72 is highly recommended for your situation, to increase credits).

I FIRED two years ago (my version of it), in Vancouver area, with a single income household with two kids.   I made some mistakes before finding the MMM blog and site, including some very expensive international moves.  Let me know if you are interested in figuring out how to make retirement in 10 years happen. 

It is possible!

[veganminimalist]

Thank you very much to both for responding.

@Freedomin5 - Thank you for the warm welcome and for the suggestions. I really appreciate it!

@Goldielocks - I have responded to your message. I do not know if it actually went through. Let me know.

Thanks.

[veganminimalist]

@Goldielocks  Hello! I have sent you two messages, but I do not see them in my sent messages. Let me know if you received them.

I look forward to chatting with you.

Thanks.

[Goldielocks]

Yep!  I replied to the last one.. should be there!.  The messages disappear from your sent folder if you don't check the box before you send it.