Author Topic: Am I on the Right Track?  (Read 2706 times)

MoneyMouse

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Am I on the Right Track?
« on: November 29, 2017, 09:45:38 AM »
Warning! Long-ass post.

Hi, everyone. Iím new to the forums, though Iíve been reading MMMís blog on-and-off for a few years now.

Iíd love some guidance and advice from the Mustached on how to get myself set up on the right track, especially as I resolve to make 2018 the year when I first start growing that savings rate.

Current State
Canadian
27 years old
Common law partnership w/long-term boyfriend (but weíre rocky right now ó which adds to my stress)
$32k/year net (after all deductions)
No debt
$19k in burning a hole in my ďmattressĒ of a bank account
$2k in a TFSA (also burning a hole in a low interest rate account)
Renting an apartment within walking distance of my work and train-distance of Mr. Mouseís work, rarely use my car (paid for in cash ó Ď07 Honda Fit)

NOTE: Iím committed to covering my half of things. Iím not sure that my boyfriend will be as Mustachian as I am, but Iíd rather get my finances in order regardless.

Monthly Income
$2,482 after all deductions (CPP, Pension, taxes, etc)

Monthly Expenses (myself)
$800 Rent
$32 Phone Plan
$65 Gym membership
$200 Food
$180 Insurance (searching for an insurance broker to help lower this)
$20 Spotify/Patreon subscriptions (love Spotify, could ditch Patreon)
$200 Entertainment/Date Nights*
$100 Spending*
$25 Coffee
$100 Medical/Dental
TOTAL: $1722

*I'm currently tracking/budgeting aggressively to see how low these can get.

Monthly Savings
$200 for Travel
$125 for LASIK (could eliminate this depending on how Iíd like to divide my money right now)
$435 Savings into RRSP
TOTAL: $760

My Current Plan
I currently have a few expenses I would like to ďpreserveĒ:
$800 Rent ó our lease is until July 2018, but we also really love our place and itís very walkable.
$100 Medical/Dental ó Iím dealing with some severe anxiety/depression, as is Mr. Mouse, so this is a fixed expense for now. I may be able to reduce it depending on how much I have left in my benefits and health spending account.
$25 Coffee ó for some much-needed relationship building coffee dates with my dad. Weíre both cheap, though, and have taken to sharing single cups of coffee when we go out.

Iím planning on starting the following:
$9800 Emergency Fund in a 2.5% TFSA high-interest savings account
$5000 RRSP contribution invested in a Tangerine fund.
$1722 ďbufferĒ in my chequing ó this is to ensure I have the money through the month to cover all the expenses I have budgeted. Itíll be ďrestoredĒ every month as pay goes through. If the balance ends up significantly over $1722, Iíll transfer the difference into savings.
$4000 set aside for LASIK
$788 for misc spending right now (gifts, upfront costs for some medical treatments currently needed ó anything left over will be put into savings)

After reading Mr. Frugal Toqueís Part 1 on investing, Iím thinking Iíll focus on maxing out my RRSP contributions. I can max out at around $600 a month, which I can reach if I put aside the LASIK stuff right away. If I have more to save after that, I plan to open a TFSA investing in a Tangerine fund as well and work towards catching up to my max contribution rate.

I also am planning to automate my savings as much as I can. I currently can automate transfers within my account, but Iím not sure if I can automate transfers to an RRSP outside of my bank. Will have to check. I plan to automate everything I can.

Iím planning on getting LASIK/PKR in the next few years, as I accumulate enough time off to be home recovering for a week. Iíve lived with glasses since I was 10 and I donít wanna no more. Plus, my prescription is mighty expensive with over $1k per set of glasses. It's a big reason why I haven't ever bought sunglasses.

I use my car twice a week to get to a neighboring town (a 30 min commute) for karate, my second family. I donít own a bike right now, but am considering trying to bike commute there in the summer months. (Any Canadian Mustachians have advice to riding on highways between cities?)

My big concern is how to maximize what I can save. I feel right now Iím limited by what I earn. I work for government and the fiscal restraints weíre being put under are putting my job and my pay in great danger. Iím not married to my current job ó I like parts of it, but am discovering perhaps HR isnít my true calling. Iím considering a more manual job like landscaping or carpentry, but Iím not certain those would be a good fiscal move considering my city is covered in snow 6-7 months of the year. Iíve also never done anything like that, nor am I certain of the money it earns.

With my mental health being what it is, itís clear as day to me that Iím not living my happiest or best life. I dream of being able to wake and sleep with the sun in winter (when it rises at 8 AM and sets at 4PM) instead of walking to and from work in the dark. I dream of having time to write, draw, play games, learn to program an app. I dream of being able to adopt a puppy and spend the time needed to socialize and train it like it deserves. I dream of being able to try out different jobs to see what I like doing most, without the need to commit for a paycheque.

So, Mustachians, am I on the right track? Can I be doing anything better?

ketchup

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Re: Am I on the Right Track?
« Reply #1 on: November 29, 2017, 10:08:24 AM »
Honestly, you're not in any horrible emergency financially speaking, so I'd first focus on your relationship if issues there are stressing you.  No judgement here, but some things are more important than saving a few bucks, which is optimization that I'd put above relationship stability in a Maslow's hierarchy type way.  I'm not saying piss away money in the name of relationship help, but your time and brainpower is probably better deployed there first.

Now I'll be a hypocrite and give money advice anyway:

$65/mo seems like a lot for a gym membership.  Are you getting your money's worth out of this? Are you doing something special that only a fancier gym will have the equipment for?  Can't speak for Canada, but there are low-frills gyms in the states for $10-15/mo.

What does the $180 "insurance" line item consist of?  You mention a car but I don't see any expenses listed for that.  Is this car insurance?

Your $300/mo slush fund of spending/entertainment/date nights could almost certainly be cut way down with little impact on overall happiness.  What does this actually consist of?

Us Americans would kill for $100/mo on healthcare that you're actually getting value out of.

Do you actually need almost 10k for an emergency fund? What emergencies do you fear and what would be their impact?  I'm not saying it's a bad choice, but it is a bad choice to make arbitrarily.
« Last Edit: November 29, 2017, 10:09:57 AM by ketchup »

MoneyMouse

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Re: Am I on the Right Track?
« Reply #2 on: November 29, 2017, 11:55:11 AM »
Hey, ketchup! Thanks for the reply.

You're right that I should focus on relationship issues. Thank you. I definitely do want to put a priority into it. Mr. Mouse is a wonderful man, and I'd love to spend the rest of my life with him, but I also want to make sure we're a good fit with all our different priorities and such.

Ha ha, money advice is why I'm here, so hypocrite away!

Quote
$65/mo seems like a lot for a gym membership.
You're very right here. I have a few gym options around me and like to keep it within walking distance so I can avoid the car and also have less excuses to get out there, but the two that are closest are $61 or $65. The $65/mo that I'm at right now has much more equipment than the $61, including olympic lifting platforms. However, the $61/mo is a YMCA and there's a possibility they could offer a subsidized membership - I'm not sure what the threshold is, but it's worth asking.

I have been considering cancelling my membership, but I just really love oly lifting right now and I'm not sure the YMCA could offer comparable equipment. Worst case, there is a really sketchy apartment gym that I can use, but I worry about the rust on their squat rack...

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What does the $180 "insurance" line item consist of?
It's car and tenant insurance, with identify fraud coverage slipped in for $30/yr.
I'm currently looking into going through an insurance broker to see if we can lessen this.

Quote
Your $300/mo slush fund of spending/entertainment/date nights could almost certainly be cut way down with little impact on overall happiness.  What does this actually consist of?
It is definitely extravagant, I agree.

Currently, we've been spending a lot on going out to escape rooms with friends and dinners out together. I want to cut this down, but I think it might be stuck at the $300 level for a little bit as we figure out what we like as a couple and what we want to explore. I'm willing to spend more on it in the short term, but will definitely need to talk to the Mr. about it in the very near future. I want to be more of a home-body and find things to do for free/cheap, but I'm not sure what we can do to get there right now, or if he has an interest in that.

While we're not bad financially, we also haven't had a really in-depth conversation about our financial values. I think that'll change with our therapy upcoming, but if it doesn't, I think it'll definitely come up sooner rather than later.

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Us Americans would kill for $100/mo on healthcare that you're actually getting value out of.
I do wish I could share our great healthcare system with you guys. I feel like I'm so screwed up medically and mentally that it'd be heck for me to try to afford this if I lived in the States.

Quote
Do you actually need almost 10k for an emergency fund?
I'm not really sure.
I'm going off the whole "3-6 months' living expenses" recommendation from a recent preparing for your retirement course I went to last week. Personally, I've always liked having 3+ months of living stashed away because that's a month longer  than my job search lasts when I transition between jobs. I also want a bit larger of a buffer right now because Mr. Mouse's work is laying off people and my job is also in jeopardy of not getting renewed - having a larger account would help make sure we can both take our time to find a job that won't rob us of our sanity.

But that being said, I'm not sure if it's really necessary. Is there something else you'd recommend?

Laura33

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Re: Am I on the Right Track?
« Reply #3 on: November 29, 2017, 12:28:32 PM »
FWIW, ITA that the first priority is both of you getting treatment for the depression/anxiety.  I am finally on the way out of a pretty bad depressive incident that in retrospect lasted for close to a year, and it changed my thinking and my attitude and my relationship in many ways.

- I withdrew from people.  That included my DH.  I also lost interest in doing many things, which led to much more boredom/feeling-stuck-in-a-rut-dom.  I generally stopped laughing and joking and being silly and doing all those little things that lighten up a relationship.  I lost interest in cooking and began to resent many of the little aggravating things he did.  I started to fixate on any signs that he didn't love me, looking for proof of the very thing I was creating.  As you can imagine, over the course of 10+ months, all of these little things piled up into "gee, Laura's not a lot of fun to live with," and very very little communication between us.  We have had to have some serious talks and some apologies from me once I started feeling better.  It's massively better now, but do NOT underestimate how much your mutual depression/anxiety can be an underlying causal factor to your relationship issues.

- I hyper-fixated on my finances.  I went into bunker mentality, running Quicken, rejiggering the budget, looking to cut everywhere I could.  Every unnecessary penny I spent annoyed me -- to the point that I wanted to stop doing things I had always really enjoyed doing because they cost money.  Basically, when I was depressed, I wanted to withdraw from life and hole up in my den, so it seemed completely natural that the Most Important Thing was to slice and dice the hell out of the budget so I could do that; anything that got between me and that goal was the enemy.  And then as the meds started to kick in, that anxiety, that need to hyper-control the purse strings slowly eased up as well -- not that I'm going crazy and throwing money around, more that it stopped feeling like a shot to the heart to spend $12 on an impromptu lunch out with DH.*  So, again, consider that your depression/anxiety may be playing a role here as well.  Yes, you want to control your budget and spend only on the things that really matter, but you don't want to cut back at the expense of everything else (like, say, your relationship).  Don't sublimate your anxiety into your money; you need to approach your finances from a feeling of strength and optimism, not fear and clinging-on-for-dear-life.

Tl;dr:  Get yourself and your SO better first, before you make any life-changing decisions.  Track your finances, pay attention to what you are spending on, but don't let it become another source of stress or strife right now.  Your mental health and your relationship are infinitely more important.

*I want to stress exactly how much I had NO clue at the time that my money anxiety was a symptom of my depression.  It was really only when I noticed that that need to hyper-control coincidentally eased up just as the drugs kicked in that I thought, hmmm, maybe the depression had something to do with that . . . .

MoneyMouse

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Re: Am I on the Right Track?
« Reply #4 on: November 29, 2017, 12:32:56 PM »
Laura,

Thank you so much for your post.

A lot of what you're saying resonates with me and, I think, perhaps also with Mr. Mouse, too.

I'm not sure that my anxiety is caused by my financial situation, but money does become a big topic of focus for me when I get anxious/depressed. I think it stems moreso from my work, which is why I fixate on retiring earlier and doing "things I love". I'm hoping that with therapy and meds, I can start to find the things that once attracted me to my job and profession so that I can live a happier life outside of work as well as at work.

You and ketchup have helped set me at ease a lot that focusing on my mental health first is alright. Thanks. :3

ketchup

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Re: Am I on the Right Track?
« Reply #5 on: November 29, 2017, 12:45:34 PM »
I'd definitely have an unsexy finances talk with him to make sure you're on the same page.  Of course, you'll agree on some things and not others and that's fine.  Big picture is what matters.

Maybe try out the sketchy apartment gym a few times to see if it's really as bad as you fear?

I have no idea if your insurance rates are reasonable for Canada/your area specifically, but it is high compared to what I'd pay here.

Quote
Do you actually need almost 10k for an emergency fund?
I'm not really sure.
I'm going off the whole "3-6 months' living expenses" recommendation from a recent preparing for your retirement course I went to last week. Personally, I've always liked having 3+ months of living stashed away because that's a month longer  than my job search lasts when I transition between jobs. I also want a bit larger of a buffer right now because Mr. Mouse's work is laying off people and my job is also in jeopardy of not getting renewed - having a larger account would help make sure we can both take our time to find a job that won't rob us of our sanity.

But that being said, I'm not sure if it's really necessary. Is there something else you'd recommend?
3-6 months living expenses is a decent place to start.  So is what helps you sleep at night. 

Walk yourself through each of your scenarios and see what they would actually result in.  Also figure out how likely they are based on your own situation.  Decide what you would do in even a very unlikely "lightning strike during a tornado" type situation (multiple $$$ emergencies at once).

For me, I have high job security and my girlfriend is self-employed.  Her business is a bit seasonal, and sometimes she'll have big clients that are a bit slow about paying.  Also, she often needs to be able to drop funds on work-related travel ahead of getting paid for the work.  We have one car, no kids, multiple dogs, and own a house with a mortgage.  Our list of potential "emergencies" (loosely defined, I suppose, as unexpected thing that costs over a grand) and rough max associated costs looks something like this:

-I lose my job (unlikely, 5k cost)
-Slow month for GF's business (very likely and fairly predictable, $2k cost)
-Client bad about paying (medium likeliness, $2k cost)
-Need to spend on unplanned business travel (very likely, max $5k cost)
-major car problem (unlikely, $1k)
-car dead, need new car (unlikely, $3k)
-major dog emergency (unlikely, $1k)
-house burns down (very unlikely, $10k deductible)
-acute unexpected health problem (unlikely, $5k deductible)

Last year we had a bit of a liquidity crunch when a bunch of things happened at once.  GF had a slow month, AND a client that was bad about paying, AND had to drop 4k on upcoming work travel, AND our old car's engine gave out, all pretty much at once.  Our "emergency fund" at the time was not sufficient, so that happening has resulted in me taking this thought process more specifically and less abstractly.  Now we hold onto enough to weather any reasonably possible storm, and amusingly high credit limit credit cards to supplement in case we crash our car while driving home from the vet to see our house burning down while GF is on the phone with a client that wants her to fly across the planet, and the next day I break my leg and get fired from my job.  And that helps me sleep at night.

But you rent, don't use your car frequently, don't have dogs or kids, and have Canadian healthcare.  So your situation almost certainly has less of a need for a big emergency fund than I do.  It sounds like job loss is the main thing you need to insure against.  Walk through that happening and see where it takes you.

MoneyMouse

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Re: Am I on the Right Track?
« Reply #6 on: November 29, 2017, 01:35:59 PM »
I'm hoping that we'll be able to broach the subject soon. It's becoming clearer and clearer to me that I want to be FIRE'd sooner. (I just found out there's a neat app that can help me be a paid dog walker in the downtown area, which would be a phenomenal hobby job for me) I'm not sure how he might feel about that.

I can definitely try it out. Might try it tonight after work.
There is another option about a 10min walk from my place (building I used to live in, actually, but the apartment was crap) for $39/month. With my pulling out of my M, W evening drumming group, I might be able to make it work. I've been meaning to try out M,W,F after work workouts anyways.

Those are good points on the Emergency Fund. It might be worth lowering it to around $6k for a 3 month period. It covers all my expenses, even optional ones like entertainment/dates, which would obviously subside in an emergency period.

I guess another question is what to do to invest my paltry (<$10k) RRSP amount (Canuck version of the 401k). Is it better to invest it in a low-fee Mutual Fund, or is it worth starting a Questrade account and investing in ETFs straight off? What's best to quickly grow my savings?


ketchup

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Re: Am I on the Right Track?
« Reply #7 on: November 29, 2017, 01:48:23 PM »
I guess another question is what to do to invest my paltry (<$10k) RRSP amount (Canuck version of the 401k). Is it better to invest it in a low-fee Mutual Fund, or is it worth starting a Questrade account and investing in ETFs straight off? What's best to quickly grow my savings?
Probably the low-fee mutual fund, Vanguard or equivalent.

MoneyMouse

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Re: Am I on the Right Track?
« Reply #8 on: November 29, 2017, 01:51:51 PM »
Thanks, ketchup. You're a star! :D

Aminul

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Re: Am I on the Right Track?
« Reply #9 on: November 29, 2017, 02:05:58 PM »
I guess another question is what to do to invest my paltry (<$10k) RRSP amount (Canuck version of the 401k). Is it better to invest it in a low-fee Mutual Fund, or is it worth starting a Questrade account and investing in ETFs straight off? What's best to quickly grow my savings?

Fellow Canuck here.  A $10k RRSP is a great place to start.  Don't be hard on yourself.  The TD e-Series Funds are popular and what I've chosen to use.  The fees aren't quite as good as what you get in that country below us, but they're about as cheap as you can find up here.  The Canadian Couch Potato website has some decent info about which funds to choose and how to split them up.  Basically the suggested funds are TDB900 (CDN Index), TDB902 (US Index), TDB905 (ITL Index), and TDB909 (CDN bonds).  If you don't like the green bank, I understand Tangerine also has some options.



MoneyMouse

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Re: Am I on the Right Track?
« Reply #10 on: November 30, 2017, 11:18:59 AM »
Hey, Aminul!

Thanks for the tip.

The Tangerine mutual fund (ETF?) that I'm considering is from Canadian Couch Potato's site.

I do want to get into some of the funds suggested on there like you've mentioned, but I'm a little intimidated by the platforms I'd need to use. Do you know of any good resources for learning the basics on using them? I'm considering Questrade most of all since ETFs are free to purchase through that platform. Do you know of a really basic dummy's guide to how that all works?

Aminul

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Re: Am I on the Right Track?
« Reply #11 on: December 01, 2017, 12:56:47 PM »
Hey, Aminul!

Thanks for the tip.

The Tangerine mutual fund (ETF?) that I'm considering is from Canadian Couch Potato's site.

I do want to get into some of the funds suggested on there like you've mentioned, but I'm a little intimidated by the platforms I'd need to use. Do you know of any good resources for learning the basics on using them? I'm considering Questrade most of all since ETFs are free to purchase through that platform. Do you know of a really basic dummy's guide to how that all works?

Setting up a WebBroker account with TD was straight forward as far as I remember.  There are no fees to purchase the eSeries funds (TDB9xx).  I do have a Tangerine account, but I don't have any investments over there so I can't really comment.  Overall Tangerine does a decent job at making things simple, so I would expect the same for their investing interface.  Sorry, I don't have any specific reference guides on how it all works.  I just kind of jumped in and sorted it out. 

Freedomin5

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Re: Am I on the Right Track?
« Reply #12 on: December 01, 2017, 09:33:11 PM »
Hey, Aminul!

Thanks for the tip.

The Tangerine mutual fund (ETF?) that I'm considering is from Canadian Couch Potato's site.

I do want to get into some of the funds suggested on there like you've mentioned, but I'm a little intimidated by the platforms I'd need to use. Do you know of any good resources for learning the basics on using them? I'm considering Questrade most of all since ETFs are free to purchase through that platform. Do you know of a really basic dummy's guide to how that all works?

Setting up a WebBroker account with TD was straight forward as far as I remember.  There are no fees to purchase the eSeries funds (TDB9xx).  I do have a Tangerine account, but I don't have any investments over there so I can't really comment.  Overall Tangerine does a decent job at making things simple, so I would expect the same for their investing interface.  Sorry, I don't have any specific reference guides on how it all works.  I just kind of jumped in and sorted it out.

I have a TD WebBroker account. If you eventually decide to move to ETFs, the commission is $9.99 per purchase/sale. If you're thinking of doing ETFs anyway, Questrade may be a better option.

Also, you may want to work out the tax implications of maxing out your RRSP rather than your TFSA. I got some good advice once on this forum that for low-income earners who are in a lower tax bracket anyway, you may want to choose to max your TFSA rather than your RRSP. The reasoning was that maxing your RRSP would not lower your taxes in any significant manner (since you already pay low taxes), so you might as well save your after-tax dollars and defer the RRSP contribution room to year when you have higher income and can save more on taxes by maxing your RRSP. You will probably need to run both scenarios to see which one would save you more on taxes.