Author Topic: Slight sizzle in my hair from Montreal!  (Read 3299 times)

Vince1689

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Slight sizzle in my hair from Montreal!
« on: February 24, 2017, 07:51:00 PM »
Hi everyone!

I dont have any specific questions really but I was really curious to see what my fellow mustachians thought of my current situation and what could be improved to help me towards my new goal of ER and acquiring a house in the close future! so here goes:


Life situation: 27 years old, Single (with a girlfriend), no kids, Living in Montreal, Quebec, Canada.

Gross salary/wages: My gross income is 38000$

Net Income: My job gives me a take home pay of 28000$ but I also have a small business on the side that brings me 3000$ net as well. So total Net income is roughly 31k Annually or 2583$/Month. My Salary deductions only include Federal and provincial taxes plus a fee for my union.

Current expenses: (every amount is Monthly)
-Rent: 200$ (will become 300$ this july)(Living with a roomate and my girlfriend)(my GF does not currently participate in expenses since she is a university student)
-Food: 200$ (Groceries for me and my girlfriend)
-Electricity: 60$
-Household: 20$ (Toileteries, soap, cleaning products e.t.c.)
-Cellphone: 80$ (I know this is too high and I wil change this as soon as my contract ends in 1 year)(I welcome any company suggestions to lower the cost, Im with fido)
-Clothing: 35$ (I try shopping only twice a year to keep my clothing somewhat up to date)
-Car Loan: 232$ (This is where my hair is slightly sizzling... I've done this purchase before encountering mustachianism and I now regret this decision extremely...)
-Car insurance: 85$
Car maintenance and fuel: 105$ (this cost will reduce drastically since I will be starting to bike 3 seasons on 4 to work!)
-Entertainement/Restaurant: 100$ (I have a little budget to have occasional nights out with my GF)
-Savings: 350$ (Putting 200$ into my RRSP and 150$ in an TFSA for emergency funds per month)

TOTAL: 1367$/Month

Assets:
-Car: I have a Mazda 3 2011 in great shape with only 35000km on it... worth around 10k (I know mustachians hate putting value on depreciating cars but I dont own much so let me have it :P!)
-Chequings: 1600$
-Savings acc: 930$
-RRSP: 500$
-TFSA: 250$
I have just recently woken up from La-La-Land it would seem... I was defenitly in the consumer gang acquiring everything I wanted and not saving a penny... Since I found MMM blog I have completely gone 180... I know I dont own much for now but im really working hard on putting everything in place to start saving and investing!

Liabilities:
-CAR AGAIN!: 11k in the hole... at 4% interest for 3 1/2 years more... I really want to get it paid and keep it since its such in good condition and low mileage... I could keep it for a long time and GPM is at an average of 28... not the best but def. not pick up truck garbage... Thankfully this is the only debt I have.

Specific Question(s):
I would like to have your opinions on anything I could improve and optimize especially on the car and cellphone side. I am currently searching for a better line of work since the one im currently doing is not letting me bring back enough money home... I have tons of experience in construction working many contracts but everything was under the table since I never went to school to have the papers... I have a high school degree and some college courses completed but no college degree...

I'd like to have your opinions as well on investing in canada. right now my total cost of living monthly is 1367$ which leaves me with 1216$ free cash every month that im putting in a savings account to start investing!


Thank you so much for taking the time to read my case study and looking forward to reading your responses!

Your new Mustachian familly member. Vince.
« Last Edit: February 24, 2017, 07:54:00 PM by Vince1689 »

PJ

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Re: Slight sizzle in my hair from Montreal!
« Reply #1 on: February 24, 2017, 08:52:40 PM »
Welcome, Vince!

I'm originally from the Montreal area myself, so wanted to be sure to welcome you.

The only thing that really stands out on the expense side of things is your car, which eats up a big chunk of your income all together, but you already know that!  Other expenses are not excessive, but you may still be able to reduce them a little bit here and there - optimize them - to squeeze out a bit more room for savings.  Especially important when your rent goes up in a few months.

The thing that strikes me, actually, is that your rent is SO cheap, and you've only listed the electricity bill - is there no gas, or water bill as well?  The thing is that your housing is relatively cheap, which is why you're managing ok financially.  But your best effort is probably going to be spent on trying to increase your income. 

I also assume your GF has at least a part-time job, and is able to pay for her own clothes, toiletries, haircuts, etc?  Also, when will she be finished school, and will you guys continue in the shared accommodation after that time?  If she's graduating soon, it would be good to start thinking now about your future plans, so that you two don't get sucked into excessive lifestyle inflation once she starts earning more.

Anyway, best of luck to you!
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Freedomin5

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Re: Slight sizzle in my hair from Montreal!
« Reply #2 on: February 25, 2017, 05:42:56 AM »
You're 27 but only have $500 in your RRSP. My guess is that you have quite a bit of contribution room left in your RRSP. Max out your RRSP, then max out your TFSA. You have a pretty decent savings rate.

Personally, I like TD e-series mutual funds, but you could use any one of Canadian Couch Potato's model portfolios.

human

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Re: Slight sizzle in my hair from Montreal!
« Reply #3 on: February 25, 2017, 06:01:40 AM »
Sell the car pay the loan then decide if you really need a car in mtl. Is it for work?

No buses to a metro nearby? if it's for hobbies buy a ten year old civic with 150k km on it. You pay more on your car than rent get rid of the damn thing ready.

I lived in mtl so I have a hard time believing it's for work. I can understand wanting it to move around the island though check out communauto and other services.

jessicat

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Re: Slight sizzle in my hair from Montreal!
« Reply #4 on: February 25, 2017, 07:26:49 AM »
I think the car is really dragging you down as well.  If you are going to keep it then I would look at how long it would take to pay it off as fast as you can so that it stops being such a drag. 

TravelJunkyQC

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Re: Slight sizzle in my hair from Montreal!
« Reply #5 on: February 27, 2017, 11:09:19 AM »
Contrary to what's been said above, I actually recommend you put more in your TFSA right now than your RRSP - when your salary jumps up to the next tax bracket, you'll be happy to have the extra room. Put just enough in your RRSP yearly to pay zero taxes (without actually getting a giant return), and everything else in your TFSA.

I also recommend TD e-series (both TFSA and RRSP are available here).

Other than the car, as you know, your other expenses are very reasonable. And your rent is super cheap, take advantage of that while you can! Once your GF gets a job, you guys will be on the fast track!

ChpBstrd

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Re: Slight sizzle in my hair from Montreal!
« Reply #6 on: February 27, 2017, 07:30:44 PM »
I think you're doing pretty damn good in terms of frugality. The roommate situation is saving you a bundle.

A $5k car will cost less in depreciation and insurance than your $11k car, and yes there are cheaper cell phone plans, as was pointed out. These details will save you a year or two of work, but your savings rate is sometimes not as important as your savings amount.

I think you should focus on opportunities to increase your income. As someone with construction experience, you could flip houses or be a landlord. Personally, I'd rather complete that degree if I knew what I wanted to do in life. Management? Engineering? A trade specialty? Total change of direction? Pick a path. The alternative might be slower wage growth. Earning 3% more per year for the next 20 years is a much worse outcome than earning an average 10% more each year. If you can hold the lifestyle steady and rapidly grow the wages, you could be looking at a 10-15 year career.

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #7 on: February 28, 2017, 05:01:13 PM »
Hey everyone!

I would like to start thanking all of you for your support and advice given! I really appreciate the responses!

Just to answer some previous questions, Yes my GF does have a part time job of her own to pay for her essential daily stuff. I'm not including her in my case study since her revenue is relatively small and she has some debts to pay (which we are working very hard on and will be done paying around august this year).

She still has 1 year and a half to go before graduating and we are planning to continue to share accomodations. We already had ''the talk'' and she is definitly on board so we arent planning on going back to consumerism!

Like TravelJunkyQC said I am maxing out my TFSA first since im using it to build my emergency fund first while doing some small payments to my RRSP to keep the tax return in the positive!

For the car..... I really am undecided... I will take extra time to consider all my possibilities and keeping your suggestions in mind... and yes I am using it for work but I could easily bike 3 seasons a year.... winter time would be very tricky to bike though since theres a decent amount of snow here and bike paths arent really cleaned... i'd have to bike in the streets with the crazy drivers drifting around in snow? not so sure about that one hehe...

For work, I am starting to look around to see if any general contractor would take me under his supervision to be granted my certifications after completing a certain amount of hours... If there is any mustachians out there in montreal doing construction and in need of a well rounded worker send me a message or e-mail!

Thanks again to everyone for your help! Until next time!

Canadian Ben

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Re: Slight sizzle in my hair from Montreal!
« Reply #8 on: February 28, 2017, 10:15:27 PM »
Does the public transit in Mtl allow you to get to your job/move around? I know a lot of people that don't use cars, due to the BUS and METRO being quite omnipresent.

For the Cell; depending on usage, Koodo is a pretty good value.

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #9 on: March 01, 2017, 03:23:54 PM »
Yes, public transport is possible for me but I hate using it... I'd much rather bike to work than using Bus and metro... thing is the closest metro is 15 minutes walk atleast from my place. in normal conditions I wouldnt mind walking that but everyday in winter... it would be really a pain in the arse...

the other thing to consider is that most of my friends and family Live outside of montreal and most of them outside of public transports reach... i think thats the biggest factor that keeps me from selling my car.
 
and thank you for the tip! ill definitly look into koodo! I was also advised to check public mobile out too! hopefully I'll find something good to change my current plan with!

ChasingStache

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Re: Slight sizzle in my hair from Montreal!
« Reply #10 on: March 01, 2017, 03:46:47 PM »
Vince1689,

I'd say the best investment you can make right now is in yourself. $2500/mo isn't much in Montreal, Toronto, or really anywhere in any city in Canada. (I've worked in Montreal and St. John's, NL)
I am in construction also on the management side. If it is something you like, and are capable, get your Engineering degree. The Engineers I worked with in Canada are some of the brightest, hardest working people I've ever met. I have much respect for the education you receive in Canada and believe it to be superior to much of what we get in the States.

So, long story short, save up some of that $1200/mo extra, get a your degree, or heck, even your papers if you want to stay on the craft side. Either will increase your value and future earnings which is likely a better investment than anything else right now. Once your income grows, that's where the real magic can happen.

Good luck!

tyir

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Re: Slight sizzle in my hair from Montreal!
« Reply #11 on: March 05, 2017, 11:40:14 PM »
Hey, fellow montrealer here.

I mostly agree with the advice given, but want to highlight what I think is important.

The invest in yourself advice. You're already pretty frugal, so building your long term income is the way to go.

You mention you're putting money in TFSA as an "emergency fund". I wouldn't think of TFSA as an emergency fund, you should use it for investing. You didn't mention what is inside your TFSA, and I worry, is it just a high intrest savings account? If you want to grow your wealth long term - that's a big mistake, TFSAs should be best used as investment vehicles. Putting a 1% intrest savings account in a TFSA is a huge waste, if your TFSA is 250$, that's 2.50 in intrest, which means putting it into a TFSA saved you maybe 50 cents in taxes.... very unexciting.

Here's what I suggest to learn about basic investing.

Read http://canadiancouchpotato.com/couch-potato-faq/ - this is the blog that Freedomin5 suggested earlier, and it isa *highly* recommended by the Canadian FIRE community. Then read as much as his blog as you can stand. Note this is similar investment advice that MMM and many others in FIRE use.

Stop investing in RRSP - you mention you want to get money back at tax return time, but that's short term thinking. If your income is lower and you want to make it rise (which should be your #1), RRSP space is *very* valuable that you don't want to waste while your income is lower. TFSA is perfect for you. I would open a TFSA with a CCP style portfolio and store as much as you can in there for the long term.

Prairie Stash

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Re: Slight sizzle in my hair from Montreal!
« Reply #12 on: March 07, 2017, 03:46:30 PM »
Hey, fellow montrealer here.

I mostly agree with the advice given, but want to highlight what I think is important.

Stop investing in RRSP - you mention you want to get money back at tax return time, but that's short term thinking. If your income is lower and you want to make it rise (which should be your #1), RRSP space is *very* valuable that you don't want to waste while your income is lower. TFSA is perfect for you. I would open a TFSA with a CCP style portfolio and store as much as you can in there for the long term.
+1 TFSA is best at the lower tax brackets

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #13 on: March 09, 2017, 04:34:09 PM »
hello Again!,

Wanted to thank you for your advice Chasingstash! I am indeed looking into increasing my income! I will definitly work hard on that matter!

To answer Tyir's concerns, I am only temporarily using my TFSA account to build my emergency fund until I have reached a satisfactory amount in it. As soon as I am done building it I will be removing the funds in the TFSA and stash it in a savings account so I can then use the TFSA account to invest in vanguard with it! As for the RRSP concerns, I didnt consider the fact that it might be advantageous for me to wait until I have a higher income to take advantage of its benefits... Thank you very much for this info and I will definitly keep it in mind.

If there is anything wrong with this plan please let me know!

Thank you all again for your input! Greatly appreciated!

PDXTabs

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Re: Slight sizzle in my hair from Montreal!
« Reply #14 on: March 09, 2017, 07:33:49 PM »
People on MMM really don't like cars or car loans, and with good reason. With that said, your income is far greater than your expenses. If you want to keep the car, and you do it with eyes wide open, then go for it. It's already 6 years old so its bad depreciating years are behind it, and you know the history. I would strongly encourage you to ride your bike on most days that there isn't snow on the ground.

tyir

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Re: Slight sizzle in my hair from Montreal!
« Reply #15 on: March 09, 2017, 11:31:41 PM »
Vince - that sounds good to me. Contribute to your TFSA investments until it is maxed out. At that point it probably will make sense to start filling your RRSP. Remember that you keep the RRSP contribution room you accrue every year. So it's ok you're not contributing to it yet - in a few years when you start on your RRSP you're going to reap huge tax refunds.

Oh, and rereading your original post, I think it's fair to go either way on the car. If you keep it, at 4% it's probably best to pay it off before starting TFSAs, so I would say:
- stop RRSP contributions, fill TFSA to a small emergency fund.
- pay off car entirely
- max TFSA with investments
- RRSP
« Last Edit: March 09, 2017, 11:36:35 PM by tyir »

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #16 on: March 10, 2017, 03:14:46 PM »
I am very grateful to have my fellow mustachians blessing to keep my car! I will definitly be using it with my money and the environment in mind I promise! and I will be biking as much as I can so I can add an extra 70$ or so per month in my savings!

Tyir- I will definitly be proceeding with this plan! Thank you so much for all the good advice! I will repost back in a couple of months to keep you guyz updated on my situation!

In the meantime if anyone has any further advice you are very welcome to share it!

Talk to you guyz soon!

Carless

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Re: Slight sizzle in my hair from Montreal!
« Reply #17 on: March 10, 2017, 08:15:31 PM »
Just so you know, if you fill your TFSA and then take the money out, you can't add any more until the next fiscal year.  So if you empty a full TFSA in March it'll be more than a year before you can put anything back in (at least without penalty).

Canadian Ben

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Re: Slight sizzle in my hair from Montreal!
« Reply #18 on: March 16, 2017, 03:06:42 AM »
Actually, it works by Year, so if you remove money in 2016, you have to wait until 2017 to be allowed to put more in. You can remove money in December, and put it back in in January.

PJ

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Re: Slight sizzle in my hair from Montreal!
« Reply #19 on: March 16, 2017, 10:37:24 AM »
I am very grateful to have my fellow mustachians blessing to keep my car! I will definitly be using it with my money and the environment in mind I promise! and I will be biking as much as I can so I can add an extra 70$ or so per month in my savings!

Tyir- I will definitly be proceeding with this plan! Thank you so much for all the good advice! I will repost back in a couple of months to keep you guyz updated on my situation!

In the meantime if anyone has any further advice you are very welcome to share it!

Talk to you guyz soon!

If you are really committed to not using your car for commuting to work, or if you've achieved a significant and sustainable reduction in your overall mileage for the year, make sure you inform your insurance company.  It may bring your premiums down slightly.
'To be human you must bear witness to justice. Justice is what love looks like in public." 
Dr. Cornel West

Le Barbu

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Re: Slight sizzle in my hair from Montreal!
« Reply #20 on: March 16, 2017, 12:33:55 PM »
Sell the car and buy a 3k$ Honda now!

Max out the TFSA with all your cashflow, invest 100% equities (1/3 Canada, 1/3 US, 1/3 Int'l)

Keep 1,000$ in checking account

Open a 5k$ line of credit @ 4% (dont use it!)

Good luck, you're a badass now!
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #21 on: March 16, 2017, 09:31:24 PM »
I will definitly try and reduce the insurance PJ! Thanks for the tip!

LeBarbu- What good will opening a 5k line of credit do? Not challenging your advice... just wondering cause im completely ignorant as to what benefit I would get by opening that line of credit?

Canadian Ben

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Re: Slight sizzle in my hair from Montreal!
« Reply #22 on: March 17, 2017, 12:02:04 AM »
Here's a detailed explanation of what investments you should put in which accounts; and the tax explanation of why

http://www.freedomthirtyfiveblog.com/2015/07/best-investment-vehicles-different-investments.html

For the Line of credit, it allows you to invest the difference, and you don't have to keep and emergency fund. But that requires being extremely job stable/job security.

Le Barbu

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Re: Slight sizzle in my hair from Montreal!
« Reply #23 on: March 17, 2017, 05:15:48 AM »
A line of credit is the grease in your financial system. With a 40k$ gross salary and little obligations (no kids, no mortgage etc) you could use it as an emergency fund. I did this for many years, usualy paying less than 5$ of interest/year (often 0$).

I always invested to the max and now, our NW is over 1M$...

Today, I have a 50k$ LOC that I did not used since 2004 and a 200k$ HELOC that is used for investing.

"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #24 on: March 17, 2017, 02:39:05 PM »
So your basically saying I should Invest the emergency fund money instead and replace it with a LOC?

Le Barbu

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Re: Slight sizzle in my hair from Montreal
« Reply #25 on: March 17, 2017, 03:23:33 PM »
So your basically saying I should Invest the emergency fund money instead and replace it with a LOC?

All depend of your own situation.

With no child, a somewhat stable job/income, previsible expenses, newly turned  mustachian etc.

I went that way and I would do it again. I'm responsible with my money and never really need an emergency fund. When I used the LOC, it was more like a cash buffer ex.: contribute to my RRSP in late february and reimburse in early april when I got my taxes refund. For 45 days, 2,500$ would cost 10$ of interest. Otherwise, 2,500$ cash siting still in checking or HISA would "lose" 200$ so I'm 190$ ahead! Every year!

If you consider you to be the kind with emergencies every 2 weeks, this strategy is not for you...
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Goldielocks

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Re: Slight sizzle in my hair from Montreal!
« Reply #26 on: March 17, 2017, 03:37:10 PM »
Get your apprenticeship training in.   Look into the school you need to register with.   Finding an employer, once you have decided on this track should not be too hard, and finding one that will come close to your current salary should be not too difficult either.

Aim for your Red Seal Journeyman ticket.   Especially as you are paying union dues.   (Have you asked about apprenticeship positions with your union?  Get the word out?)


Here is a link to the Red Seal information page. 
Note that there are grants (money) available to help if you qualify:  "The Apprenticeship Incentive Grant is a taxable cash grant of $1,000 per year, up to a maximum of $2,000 per apprentice."
http://www.emploiquebec.gouv.qc.ca/en/citizens/developing-your-skills-and-having-them-recognized/vocational-qualification/interprovincial-standards-red-seal-program/

Link to trade school in Montreal:
https://ecole-metiers-construction.csdm.ca/programmes/gestion-entreprise/

Vince1689

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Re: Slight sizzle in my hair from Montreal!
« Reply #27 on: March 17, 2017, 04:53:46 PM »
Lebarbu- I see the appeal in this way of doing and with all the recent revelations about how irresponsible I was with my money before, I am definitly confident that I can be very careful with my future spendings and would not need emergency money every 2 weeks. That being said I would still like to have a small just in case fund but I might re-think the amount ill put in it... might lower the amount that will be sitting around so I can invest as much of it as possible.

Thank you for your input! Ill use it wisely!