Lining up for a facepunch (Canadian)

[Stashasaurus]

Hello everyone let me introduce myself. My girlfriend and I are 22 years old. We have been dating for 7 years and are currently living together in Regina SK. I have recently graduated with an Engineering degree and she is one semester away from completing an Education degree.

Long Term Goals (10+ years)
-   FI in 10 years.  ( estimating  I need a 70% savings rate to do this)
-   Start a family in around the same time (  when we are both 30ish)

Mid Term Goals (<5years)
-   Buy a house (Could do this sooner but I feel uncertain about current real estate values)

Short Term Goals (1-2 years)
-   Get married to my GF

Debt

Approx $400.00 to my parents. This represents the profit from textbook sales. They bought the books for me so the money should go back to them. They let it ride for a month while we pay the GF last semesters tuition.

Assets

My TFSA
   $23,000 in TDB902 , I have contribution room for $4,200 more

GF TFSA
   $14,000 in TDB902, she has contribution $12,000 more

Saskatchewan Pension Plan (SPP)
        $2700 a onetime investment from my family when I turned 18. It is a locked in plan, and I am just letting it ride

Public Employees Pension Plan (PEPP)
$2,500 this is my pension plan through work. They contribute 7.25% and I contribute 5%. I placed this in the most growth orientated plan they have.

Cash
   $1,800 in an ING Direct savings account.

Vehicles
97 Ford Ranger estimated value $1000 (my vehicle)
06 Malibu estimated value $5000 (her vehicle)

Monthly Spending/Budget

Credit
        $3,800 net from me
        $500-1,000 net from her, this value depends on what work she can schedule in around school.
Debit
        Investments: $2000, plan is to max out my TFSA first, then hers then open a cash account
        Rent: $1,200, contract runs to beginning of May, includes water
   Groceries: $500
        Gas (Vehicle): $200
        Electricity and Gas utility: $150
        Insurance/Plates:  $150 (paid in full once a year for both vehicles)
   Cell Phones: $150 (aprox $70 each)
        Restaurants: $100
        Public Transport: $62
        Internet: $50
        Hobby: $20
        Tenant Insurance: $18 (paid in full once a year).

This breakdown actually puts us overspending each month… Ouch, so while okay right now (Plates/insurance not due again until September and Tenant Insurance probably not going to be renewed… thoughts?)We do need to cut something and boost savings to the 70% mark.

Other things to note:
I am a user of Mint and have gotten my GF to start using it. I love it, she is a hesitant convert.

The truck was purchased from my parents and gets used on the weekends as I take the bus to and from work Monday to Friday. We plan to give it back to them when my GF completes her degree and has a more standard schedule.

My cell phone plan locks me in for another 23 months ($351.09 device balance + $50 cancelation fee), putting canceling and switching to a sub $20 prepaid plan at a 10 month payback. One thing we were thinking of doing is waiting until my GF phone contract runs out in March and letting her take over my current contract. She is not ready to give up the Smartphone yet, so this keeps her on a data plan and helps us avoid the biggest penalties, while ditching a $70 plan.

At our current savings rate, we will max out the TFSA’s before the end of the year. I intend to open a cash account to invest what won’t fit. I intend to use the TFSA as the equity portion of our portfolio and get that started first (why we are all equity at this moment). Dollar value of what can invest will increase when GF finishes degree in three months and starts being paid to teach.

Putting this together makes me realize that I am not in as good shape as I thought, but let us tear my plan apart and put it back together.

Should be fun!

[StarswirlTheMustached]

Overall, it looks like you're doing okay, but since you want face punches...
There's plenty of room for you to lower your expenses. You noticed one, on the cell phones-- I know Canada is pricey compared to our lucky yank neighbors, but oy. You don't need that.

Rent seems high, and I doubt it's an SK thing-- 1200$ for two sounds more like Toronto than Regina. You might want to think about downsizing if you can.
Grocery seems high, too. 500$/mo for just the two of you? Either you're cooking too fancy, not cooking enough.
And is that 100$/mo on restaurants? Really? Consider your face punched. Learn to cook.

I'm confused that you're somehow only paying 150$ year to insure and plate your vehicles. That would plate them, in Ontario. Insurance would be a couple thousand more.

I guess SK's teacher's colleges must not be overproducing like Ontario's have this last few years, since you seem pretty confident your missus will find employment quick. Here, less than a third of new graduates get into a classroom in their first year.

[Stashasaurus]

Thanks for the responses, to the numbers!

Cell phones:

On the chopping block for sure. I just need a way to not pay the $400 fee for cancelling my contract. I think we will
pursue cancelling her current contract (less time left so less fees) and shuffling her to my plan and myself to me to pay as you go. Exact provider will be whoever is cheapest. Something that i still need to figure out but a quick estimate of savings would be 40-50 a month. Solid savings.
 
Rent:

Yes, $1,200 a month is expensive. Unfortunately going down to the $1000 dollar a month price point gets dicey. It would mean renting a basement sweet (not the end of the world) or moving into the core neighborhood. I might be able to get GF to agree to a basement sweet but not core neighborhood.  I have talked to GF about a 1 bedroom apartment, she currently has no interest and believes we need the space. I know this is a area where we can make significant improvement but it is a touchy subject. We are locked in until May 2013 in any case will look at options closer to. ( any thoughts on what helped you convince/explain this to your significant other would be appreciated)

Groceries:

This deserves a further look. Groceries has our toiletries and paper products rolled in as well. Not saying this is not high but includes more then just directly what goes into my mouth. Is there an easier way to break this down in mint besides dividing up the bills? I have thought about it but have always gotten lazy after the initial push...

Restaurants:

Looking through mint shows me that in the past three months I actually spent $447 in restaurants.  I should reclassify three of these meals as gifts (taking people out for supper as a thank you or Christmas presents), subtracting $285 from the category makes restaurants a $55/month category. It also has the side effect of making gifts way out of whack.  I guess the solution to that is offer to cook supper instead of going out?

Insurance/plates:

Sorry for the confusion StarSwirl, the $150 would be the monthly equivalent to what I paid all at once. (The government insurance charge a 4% premium to pay monthly) The Ranger only has plates (no package policy) for $750/year and the Malibu is the balance $1050/year. The $750 won't be paid again as I will be selling the truck back to my folks when GF gets out of school.

Teacher Thing

Concern is very understandable about a new teacher getting a contract. Subbing while undesirable still pays relatively well Monday to Friday shifts. So even without a contract and just subbing we consider it a win. She does have a couple things going for her though. First she has family in the system who has created a very good name for themselves, and this trickles down to her. Apparently this is very important. (I have to trust her on that one, sounds like patronage but I don't know the system) The other main bonus is she is half complete her special education certificate. This allows her to be a special ed teacher and/or a Learning Resource Teacher (LRT). Only time will tell but we are fairly confident this will set her apart from other new applicants.

TFSA

The current lack of RRSP was a cognizant decision. While in school I was not making enough income to gain from the tax rebate so a TFSA made more sense. This year both of us will be caught up to full TFSA contribution and then potentially a RRSP will be started. It is hard to weigh in my mind how beneficial a RRSP will be. Yes, the money can go in tax free and you can pull up to 25k using the home buyers plan. Meaning together we could pull 50k for a down payment. My bone to pick is that I then have to pay the money back using after tax money anyways so what did I really save? Also, the amount can add is relatively small as my pension (PEPP) takes 12.25% of the potential 18% Your advice Dmy0013 would be greatly appreciated, I admit I am an amateur at the RRSP game.

ING Money

I have been trying to buffer a months worth of rent in this account (genuine emergency money) and have been siphoning of anything above $600 from my chequing account. When this account reaches $2,400 I will take a grand out. Having a little bit of buffer helps both of us sleep.

Hope this clarifies your questions and thanks for pointing out the points of improvements. I will consider this the first jab to the chin! :)




 

[KMMK]

I want to say that I don't think you need a facepunch at all. For your age you are doing extremely well (just planning for early retirement at that age is unusual, let alone having the means to do so).

You need to balance your lifestyle with your plans for retirement. Since it's likely you may be able to retire before 35-40, you don't really need to do the extreme lifestyle to retire significantly earlier than the average person. Don't sacrifice your relationship or nickel and dime yourself too much.

The money you are making at 22 years is only what I am now almost making at 36. You should have no trouble saving a lot.

As far as expenses I'm in Winnipeg so expect mine are comparable.

Your rent is only a little higher than ours for a 2 BR. That seems a reasonable price. Sure, you could get lower, but at what cost? I cannot emphasize enough how important it is to not try to convince your partner that your preferred spending amount is the correct one, when you have so much wiggle room. The relationship is worth much more than the $100/month you might save.

Groceries: We spend $600. I could spend less but I love food and have some specific health requirements. I've done the skimping thing before and if you don't need to, don't bother. Unless you are the types who just eat because you have to. Eating is a reoccurring pleasure. Of course, if you can get the exact same thing for a lower price, do so. But don't purposely deprive yourself.

Gas - $200 seems high, especially if you bus. We share one car and pay less than half that. There's probably ways to decrease that.

Gas/Electric - I assume that's because of the type of place you are renting. High, but you might not be able to do much about that in a rental. I'm sure you know all the usual stuff about lowering the temp when it makes sense.
     
   Car Insurance - same as here. Can't do much about that.
Phone - appears you are locked into that
 
   Restaurants - similar to us. We probably average to once  a month or so.

Do you only spend $20/month on hobbies? Any miscellaneous spending? If not, you're doing great.
Sounds like pretty soon you'll be able to max TFSAs and RSP, which is great, since you don't have to worry about which to use first. Only about what investments to put in what.

As far as housing buying, I agree that you shouldn't buy in Regina any time soon. Your prices have been crazier than ours.

Anyhow, don't think you'll have any problems obtaining an early retirement, if that is your goal.

[SoftwareGoddess]

TFSA

The current lack of RRSP was a cognizant decision. While in school I was not making enough income to gain from the tax rebate so a TFSA made more sense. This year both of us will be caught up to full TFSA contribution and then potentially a RRSP will be started. It is hard to weigh in my mind how beneficial a RRSP will be. Yes, the money can go in tax free and you can pull up to 25k using the home buyers plan. Meaning together we could pull 50k for a down payment. My bone to pick is that I then have to pay the money back using after tax money anyways so what did I really save? Also, the amount can add is relatively small as my pension (PEPP) takes 12.25% of the potential 18% Your advice Dmy0013 would be greatly appreciated, I admit I am an amateur at the RRSP game.

Regarding RRSPs, you can save money into an RRSP plan and not claim the deduction until later years, when you hopefully have a higher income. And, of course, you still have the contribution room from previous years available to you now, so it's not too late. I forget how many years you have to make up contributions, so look it up if you want to take advantage of this.

[Gerard]

Regarding RRSPs, you can save money into an RRSP plan and not claim the deduction until later years, when you hopefully have a higher income.

Really? Wow! I never knew this. Thanks, SG. I do have a question, though... what happens to the money earned in the meantime, tax-wise?

[SoftwareGoddess]

Really? Wow! I never knew this. Thanks, SG. I do have a question, though... what happens to the money earned in the meantime, tax-wise?

The money earned inside the RRSP accumulates tax-free, whether or not you have claimed the deduction.