Clueless in Canada

[Serendip]

Alright, maybe not totally clueless but could use help figuring out where to put my somewhat limited resources. Would appreciate advice/expertise!  Dug myself out of student loan debt and then just stalled--investing turns my brain inside out. I'm highly emotional vs. logical as evidenced by some of my decisions (further below)..

Situation: Female, 40's, make an average of $50,000/yr but it fluctuates. I'm a contractor so don't have job security but do have fairly steady work. I live with my partner but we do not combine our finances. House has approx $170,000 left on mortgage but it's value has gone up approx 7x (crazy but true) We would still like to live here but it's a sought-after location so costs are going up as well (strata and taxes-- property taxes went up 42% last year). Home is under SO's name and is now worth a lot- I have lived here for a period of time (5+yrs) so have built equity by contributing but it's as a verbal agreement.

My personal accounts are
Tangerine RSP Saving Account (1% interest) - 52,200
Tangerine RSP Balanced Growth EFT Portfolio - 48,000
Tangerine Savings Account (1% Interest)--3000
Tangerine TFSA Savings Account (nothing--see below)

RBC direct investment TFSA- 2000 (opened this a few years ago and made an embarrassing purchase and lost a big chuck of money..took advice from a friend while knowing I shouldn't..lost around 14,000). GROAN.

Credit Union Savings Account--2000 (EF) (1.6%)

I have that big chunk sitting in an RSP savings account b/c I grew up with financial insecurity and have also paid off large student loans-- it was nice for my anxious-self to know it wouldn't disappear.  A 50,000 security blanket :) However I now think I'm ready to move some of it into investments.

Am also wondering how to properly invest in a TFSA? Is something like vanguards VEQT a good place to start? Just was reading through some other threads advising Canadians but I still am unsure what the best steps forward are.

[erp]

Not to worry! You're in pretty good shape financially (and congratulations on burying your student loans, that's a big win).

My approach for investing as a kind of lazy Canadian has been to put as much as I can in my RRSP and TFSA, invest it all in VGRO and hope it works out. This works pretty well for me because I have a lot of life stability and somewhat more income - I mostly use Questrade to do so.

I kind of get from the tone of your question that you might be more risk averse than I am (and that's probably sensible, I'm not strictly normal). So with that in mind, right now in Canada you can get ~ 5% interest on a GIC, which is basically a certain return. That's much better than what you're doing with your RRSP Savings Account right now (and it's also available through Tangerine, which might make things easier). It's relatively hard to access your RRSPs anyways, so I don't think you're losing anything in terms of flexibility.

A savings account with $3000 CAD is probably reasonable as an emergency fund, making 1% on that feels pretty good to me.

For the RBC account - A $14,000 loss in your TFSA hurts, for sure. I don't have much to say that can take away that sting, but it's a lesson that I learned too (trying to be clever with Canadian oil and gas stocks - it turns out I am less clever than I thought). On the other hand, you still have $2000, and you could put that into a balanced index fund ETF (there's a lot of choices - all you really care about is that the expenses are pretty low and that the risk feels okay - I use VGRO but lots of others on the forums have different ideas). The advantage of doing that with this amount of money is it'll give you a chance to build up some trust and feel a bit better about the fact that one bad choice doesn't make you a bad investor.

In the future, there's considerations like the fact that the Tangerine EFT portfolio has somewhat high expenses ... but I think your first priority should be figuring out how to get more of a return on that $52,200 in your RRSP.

(also, congratulations on the house - that's an enormous windfall if you ever decide to leave the area)

[Serendip]

I kind of get from the tone of your question that you might be more risk averse than I am (and that's probably sensible, I'm not strictly normal). So with that in mind, right now in Canada you can get ~ 5% interest on a GIC, which is basically a certain return. That's much better than what you're doing with your RRSP Savings Account right now (and it's also available through Tangerine, which might make things easier). It's relatively hard to access your RRSPs anyways, so I don't think you're losing anything in terms of flexibility.

A savings account with $3000 CAD is probably reasonable as an emergency fund, making 1% on that feels pretty good to me.

For the RBC account - A $14,000 loss in your TFSA hurts, for sure. I don't have much to say that can take away that sting, but it's a lesson that I learned too (trying to be clever with Canadian oil and gas stocks - it turns out I am less clever than I thought). On the other hand, you still have $2000, and you could put that into a balanced index fund ETF (there's a lot of choices - all you really care about is that the expenses are pretty low and that the risk feels okay - I use VGRO but lots of others on the forums have different ideas). The advantage of doing that with this amount of money is it'll give you a chance to build up some trust and feel a bit better about the fact that one bad choice doesn't make you a bad investor.

In the future, there's considerations like the fact that the Tangerine EFT portfolio has somewhat high expenses ... but I think your first priority should be figuring out how to get more of a return on that $52,200 in your RRSP[/u].

(also, congratulations on the house - that's an enormous windfall if you ever decide to leave the area)

Thanks for the reply @erp --appreciate the insight!  I just looked--Tangerine has a 18 month GIC with 5.5% which seems like a solid improvement compared to my current 1% situation :)

I will take a look into the TFSA as well and see how I can start to build savings there as well. It's funny how much aversion I've had to that RBC account for the past year but it was an important lesson. Being humbled by that TFSA loss at the start of my investing career was an important lesson ( I'm so glad I didn't have access to more cash in that account). It showed me how quickly things can go sideways and how emotions can get the best of me.

I just finished the book The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel. Likely basic info for many on this forum but really good insights into how people lose track of their goals and make decisions based on wrong outcomes.

As for the house, yes--we are super fortunate even if annoyed by the rising property taxes!

[SunnyDays]

I'm also a risk averse person, but you can do much better with your basic savings accounts.  Pretty much any credit union, likely the one you already use, will offer at least 4.5% on regular savings.  Plus mine also pays a bonus percentage each year.  Interest rates are likely to still go up, so you'll probably get a bump up in a few months again.  Make that switch immediately!

[erp]

I'm also a risk averse person, but you can do much better with your basic savings accounts.  Pretty much any credit union, likely the one you already use, will offer at least 4.5% on regular savings.  Plus mine also pays a bonus percentage each year.  Interest rates are likely to still go up, so you'll probably get a bump up in a few months again.  Make that switch immediately!

Are you in Canada SunnyDays? As near as I can tell that's not true in Alberta, but I'd be very happy to be proven wrong :)

[SunnyDays]

I'm also a risk averse person, but you can do much better with your basic savings accounts.  Pretty much any credit union, likely the one you already use, will offer at least 4.5% on regular savings.  Plus mine also pays a bonus percentage each year.  Interest rates are likely to still go up, so you'll probably get a bump up in a few months again.  Make that switch immediately!

Are you in Canada SunnyDays?  As near as I can tell that's not true in Alberta, but I'd be very happy to be proven wrong :)

Yes, I'm in Canada.

I misspoke slightly, going from memory of my last statement, but my numbers were not far off.  They sure beat banks, and even some other CUs.

Current rates at my CU are:

High Interest Savings account - 3.8-4.0%, depending on balance amount (higher rate for higher balances)
GIC on RRSP,TFSA or High Interest Saving Account (12 month term) - 5.0-5.10%, depending on balance amount
TFSA Variable - 4.05

And then each account gets a bonus at the end of the year because this CU does so well and is very community minded.  It's a percentage of the interest accrued, can't remember how much, but I can look back into my accounts if anyone really wants to know.

If anyone wants to know the exact CU, PM me.

[Serendip]

I'm also a risk averse person, but you can do much better with your basic savings accounts.  Pretty much any credit union, likely the one you already use, will offer at least 4.5% on regular savings.  Plus mine also pays a bonus percentage each year.  Interest rates are likely to still go up, so you'll probably get a bump up in a few months again.  Make that switch immediately!

Are you in Canada SunnyDays?  As near as I can tell that's not true in Alberta, but I'd be very happy to be proven wrong :)

Yes, I'm in Canada.

I misspoke slightly, going from memory of my last statement, but my numbers were not far off.  They sure beat banks, and even some other CUs.

Current rates at my CU are:

High Interest Savings account - 3.8-4.0%, depending on balance amount (higher rate for higher balances)
GIC on RRSP,TFSA or High Interest Saving Account (12 month term) - 5.0-5.10%, depending on balance amount
TFSA Variable - 4.05

And then each account gets a bonus at the end of the year because this CU does so well and is very community minded.  It's a percentage of the interest accrued, can't remember how much, but I can look back into my accounts if anyone really wants to know.

If anyone wants to know the exact CU, PM me.

Thanks for chiming in @SunnyDays --That is definitely a higher rate

I moved a few things around...pulled $3000 from the CU account (turns out their high-interest savings rate is 1.6%) and deposited it into my savings account in Tangerine which has a promotional rate of 5% until end of Sept on new deposits. So that gives me some time to figure out some things.

Also put 20,000 of my RRSP in that 18 month GIC at 5.5%
And feels good to be a bit more proactive in moving things around.

[Dee18]

I’m concerned about the equity being protected only by a verbal agreement.  I don’t know anything about Canadian law but in the US:

Statute of Frauds: A law, originally adopted in England in 1677, now adopted in some form by all 50 states, that states that certain contracts, including those transferring an interest in real estate, must be in writing to be enforceable.
 
I have more than one single female friend who cannot retire because a partner did not honor a promise about a  property interest. 

[Serendip]

I’m concerned about the equity being protected only by a verbal agreement.  I don’t know anything about Canadian law but in the US:

Statute of Frauds: A law, originally adopted in England in 1677, now adopted in some form by all 50 states, that states that certain contracts, including those transferring an interest in real estate, must be in writing to be enforceable.
 
I have more than one single female friend who cannot retire because a partner did not honor a promise about a  property interest.

How awful for your friends.

Thanks @Dee --a valid concern and one I shared (kept myself on a subsidized housing list b/c I didn't feel like I had any right to jump in on SO's real-estate investment). However over time it's become more obvious that we will need to draw this up into some type of formal agreement. We are common-law and I'm a benefactor of accounts but we both need to make wills and formalize some things.

My partner and I spoke about it just this month due to a family members' concern that I didn't "own" property and SO said "Don't they realize you are part-owner here?" which brought up the discussion which now just needs to be followed up on.  I currently have no concern of us splitting but if we did I also have very little concern of unfairness however no need to tempt fate. Life goes sideways for many people.

[Must_ache]

The equity in the house was the main concern I had too.  If the two of you are that committed would it not be unreasonable to put your name on the house, even if you had to "buy in"? 

[parkerk]

Not a lawyer so confirm this before relying on it, but I've worked on many divorce cases in BC. Assuming your partner owned the property before you got together, in general if you're common law (or even if you're married) your equity in the property is 50% of the increase in equity since you became common law. So if equity was 100K when you moved in 5 years ago and now it's 500K you'd get 200K. Beyond that getting put on title is the best thing to do to 100% secure that legally. It also helps with inheritance in a worst-case scenario, being on title helps avoid taxes. It will cost money to get on title though, they make you pay a certain amount of property transfer tax when being added to title so talk to a lawyer or notary and be prepared for that side of the conversation.

Edit: changed "value" to "equity" in the explanation to make it clearer.

[Serendip]

Thanks @Must_ache & @parkerk

That's interesting info about the equity split @parkerk and it lines up with what I have heard. Going through the process of changing paperwork has not been planned but if we do our wills this year it may make sense to go through this process as well.

 I also didn't consider costs for property transfer and appreciate that insight! More to mull than my original post intended.

I also realized that I haven't designated beneficiaries for all my accounts so I need to make a list and work on all these details.

[Serendip]

So I've made a few steps and will still need to do more going forward but thanks to everyone for chiming in.

Discussing finances with my parents was a big impetus to look closely at my situation (other siblings are in tough situations) and I feel like I'm going to get a better handle on all of this now. Am inspired to do more reading about TFSA's and investments so I can be more confident moving forward. However..I'm happy with the improvements already!

UPDATED in bold

Tangerine RSP Saving Account (1% interest) - 52,200 *30,000--wil likely shift 20,000 once when I decide where to put it
Tangerine RSP Balanced Growth EFT Portfolio - 48,000 *50,000-moved 2000 from above account
Tangerine Savings Account (1% Interest)--3000 *6300 (with promotional 5% interest until Sept then maybe invest?)
Tangerine TFSA Savings Account (nothing--see below)
NEW 18m GIC @5.5% interest -*20,000

RBC direct investment TFSA- 2000 (opened this a few years ago and made an embarrassing purchase and lost a big chuck of money..took advice from a friend while knowing I shouldn't..lost around 14,000). GROAN.

Credit Union Savings Account--2000 (EF) (1.6%) *1500

[Lews Therin]

Alright. Jumping straight in with a logical viewpoint, I understand it's not your norm, but it should clarify some things.

Your current money is
20k GIC (100% guaranteed)
50k balanced growth with tangerine which is 75% stock, 25 Bonds.
30k uninvested.

For a reasonable 80/20 split for long term money, your 30k should go into a stock only investment, and you leave it alone for a couple decades. Example, Vanguard's VEQT. (You are already above that and will remain at lower than 80 and higher than 20)

Nothing should be in taxable accounts if you have TFSA space, if you shop around you'll find offers that will match the promotional tangerine rates, especially since those rates get taxed.

What info are you looking for on the TFSA?

[Serendip]

Alright. Jumping straight in with a logical viewpoint, I understand it's not your norm, but it should clarify some things.

Your current money is
20k GIC (100% guaranteed)
50k balanced growth with tangerine which is 75% stock, 25 Bonds.
30k uninvested.

For a reasonable 80/20 split for long term money, your 30k should go into a stock only investment, and you leave it alone for a couple decades. Example, Vanguard's VEQT. (You are already above that and will remain at lower than 80 and higher than 20)

Nothing should be in taxable accounts if you have TFSA space, if you shop around you'll find offers that will match the promotional tangerine rates, especially since those rates get taxed.

What info are you looking for on the TFSA?

thanks for the reply @Lews Therin --sorry I was away for a while there
Before I left and before your response, I had placed the $30,000 (which was already in an RRSP savings account) into another 5.5% GIC.

So now I have (roughly):
50k GIC
51k balanced growth (75%stocks, 25%bonds)

Re: My TFSA confusion--the initial account I had Tangerine was just a TFSA savings account so when I moved that money into an RBC direst investing TFSA--I didn't factor in that each and every transaction would cost $10 and unfortunately I just spread the money around (and lost a fair bit of it)..

 I currently have around $1500 spread into 6 holdings..not much value but is it worth paying $60 to transfer that into a better performing investment? Perhaps! 
Also is it best to only invest once monthly or every other month so that I just pay one transaction fee? or find another bank with less fees and count these losses as a learning experience..

[Lews Therin]

It would depend on how much you are investing. At 7% annual return, you'd have to put in around 2000$ to even out a month of the fees

(10$ is .05% of 2k.)

Math: investment X 7%/12 > 10$

Whenever the math statement above is true (investment higher than 2k, invest it, then accumulate again).

That said, you might as well go somewhere else right away, most places will pay your transfer fees. Those losses add up longterm.

Those 6 holdings, are they useful ones, or single stocks? If stocks, it could be a nice reminder of not picking stocks, since they'll most likely do worse than your etfs.