Wednesday, 24 May 2017

Small Changes, Big Gains? The Avocado Blame Game

The Avocado Blame Game

If you've been on the internet at all in the last week you've likely heard the debate over millennials, home-ownership and avocado toast. Small sidenote, you know it's a thing when you can so easily find a free stock photo ;) Australian millionaire, Tim Gurner, did an interview with 60 minutes and spewed some advice and threw avocados under the bus as the reason millennials can't afford houses. (Ahem, millennial homeowner over here) He was quoted as saying: 
“I have seen young people order smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop and more. I can afford to eat this for lunch because I am middle aged and have raised my family. But how can young people afford to eat like this? Shouldn’t they be economising by eating at home? How often are they eating out? Twenty-two dollars several times a week could go towards a deposit on a house.” -Tim Gurner
Opinions are as varied as can be about what Mr Gurner said and I'm going to throw my two cents into the debate today. 

First off, who the hell actually spends $22 on avocado toast?! I am not above the trend (I love me some avocados, and just about anything is better on bread) but seriously, $22! Maybe we have significantly cheaper avocados here in Canada than they do it Australia but even at the fanciest brunch restaurant I can think of you wouldn't have to pay that ridiculous sum. So yes, if you are in fact a millennial who is spending 22 bucks a pop for avocado toast then there might be some issues we need to deal with. 

Let's take a look at the actual math of the issue. To keep things fair, I'm going to pretend you really truly are spending that amount. The average house price in Canada is currently (as of April 2017) $559,317, but that number is skewed because of the crazy markets in Toronto and Vancouver, so I'm instead going to focus on my hometown of Edmonton which clocks in with an average house price of $377,774. A 20% down-payment on such a purchase price is going to cost you $75,555 or a whopping 3434 avocado toasts. Even if you ate a $22 avocado toast EVERY SINGLE DAY, it would still take you over 9 years to eat away your down-payment. So no, cutting this out is not magically going to make you a homeowner...sorry guys. 

Do you really need to be a homeowner?
Sentiments are changing a bit, and it's no longer everyone's top priority to buy a home. Millennials aren't always following the graduate college, get married, purchase a home, and have a couple of kids path that guided our parents. It's much more common to delay marriage, travel the world, switch jobs a bunch of times, and not have kids at all. And some of these things are much easier to accomplish when you're not tied to real estate. You're much more likely to drop everything and take a job in a new city if you don't have to worry about selling your home first. All I'm trying to say is that you shouldn't feel bad if you'd rather keep renting...having a good grasp of your money is important, but it doesn't necessarily go hand in hand with owning property. 

But what if you do want to buy a home?
We've clarified that cutting avocado toast out of your diet isn't going to get you a down-payment, but what will? Honestly, hard work and time. Unless you have a rich relative who's willing to front you the money (small dig at how millionaire dude got $34,000 from Gramps to start his first business), you're going to have to do it the old fashioned savings way. For just a second, I'm going to give Mr Gurner the benefit of the doubt and assume his avocado statement was meant to touch on the bigger picture. If you are the type of person who is willing to drop $22 on breakfast, it's fair to say that you are also likely to drop that sort of money in other areas of your life. Avocado toast isn't going to crush your home-ownership dreams, but excessive spending very well could. 

If we look back on that example from above, you're going to need to save up $75,555 for a down-payment. If your goal is to buy a home in five years that means you need to save $15,111 per year or $1,260 per month (or $41 per day if you really want to break it down). So yes, if you're spending that much eating out every day and can cut that out cold turkey then you're all set. I'm going to go ahead and assume that if you're worried about buying a home, then you're likely not the type to be throwing money away like that ;) 

There are two ways you can save money...

1. Earn More
Not what you thought I was going to start with was it? Most people believe that the best way to save money is by cutting spending, but that's wrong. Bringing in more money will almost always have a bigger impact on your savings rate than decreasing how much you spend. There are a few ways you can make this happen: ask for a raise, sell stuff (excess items around your house or a hobby you can market), get a second job, or start a side hustle (tutoring, AirBnB, blogging, etc.) Whatever extra income you make should be immediately put away into a house-saving fund, so you aren't tempted to spend it. 

2. Cut Spending
The most important thing you can do for your finances is to create a detailed budget, so you know where your money is going. Start out by tracking your spending for a few months and then take a long hard look at the numbers to see what areas can be decreased (or even eliminated). Once you know where your money goes, you can determine how much you need for living expenses and how much you can sock away in your house fund. If you're serious about buying a house in 'X' years, this might be a bit of a reality check, but you can pull it off. I can preach about healthy money habits until I run out of words (as if that will ever happen), but you'll only 'get' it when you do it for yourself. Eliminating avocado toast may not get you your dream home, but a bunch of small changes will get you there a heck of a lot faster. One tip, don't be too brutal when slashing your budget. We all have our vices (expensive coffee, baked goods, books, whatever), so don't eliminate everything you love. You'll find yourself miserable and not be able to stick to your budget. So live...a little! 

In conclusion, take the millionaire's advice (and your avocado) with a grain of salt. Becoming a homeowner takes more than cutting out fancy brunches, but excessive spending isn't going to get you anywhere fast.  

The Avocado Blame Game

Wednesday, 17 May 2017

20 Frugal Ideas for Summer Dates

Cheap Summer Date Ideas

It might not officially be summer yet but the weather has been beautiful here in Edmonton, and it has me wanting to spend ALL the time outside in the sunshine! This is a problem for's so easy to hibernate during the winter, but as soon as the weather warms up I can't stay cooped up. I've talked before on the blog about how this relates to a big increase in my spending (The Busted Summer Budget). To combat that I've taken the initiative to set money aside during the winter so that I can afford to do the things I want without breaking the bank.

Another good way to keep your budget in check is to keep yourself busy with activities that are more cost effective. That way you will still feel like you've had a full summer but bypass the impending doom of calculating how much you've spent. To aid you on the mission I've rounded up twenty ideas to get you out of the house that aren't going to cost you your first born. You'll be able to do most of the suggestions no matter where you live, but I have included Edmonton-specific details for my local followers (and for me to refer back to when I need to make some plans!)

1. Go for a Hike
The perfect (and free) activity and pretty much my favourite way to exercise during the summer. Unless you are going on an advanced hike in the mountains, you won't need to invest in an expensive pair of hiking boots, and there are plenty of trails that won't cost you anything to trek on.
  • Local: Edmonton has an incredible network of trails throughout the river valley, but if you'd prefer to get out of the city then you should check out Cooking Lake/Blackfoot Recreation Area. It's my favourite spot and is only about 45 minutes East of downtown. It's a provincial park that is free to get into and has almost 85 km's of well-maintained, not crowded trails. Cooking Lake/Blackfoot is also directly South of Elk Island National Park, so you could also take advantage of your free park pass this year. 

2. Berry Picking
We do this every year, and it always makes for a fun day. Check your local area for U-Pick farms and head out to stock up your fridge, freezer and stomach with delicious fresh berries. 
  • Local: Our annual berry picking tour starts with Strawberries at Prairie Gardens, and then we head East to Horse Hill Berry Farm to stock up on raspberries. As long as we get an early start, we are usually done by lunchtime, and so we head to The Downtown Diner in Fort Saskatchewan for a bite. 
3. Backyard Campfire
Honestly, having a fire isn't exactly my favourite thing to do, but I know a lot of people love it. The only thing that wins me over about it is the smores. Yum. If you don't already have a fire pit in your yard then maybe you can hit up a friend who does, or sometimes local parks will have ones you can use at no cost. 

4. Gallery Tour
Take a stroll around town and visit your local art galleries for the perfect mix of outdoor heat and indoor air conditioning. Many large galleries also offer free admission days so keep an eye out for those.
  • Local: The Art Gallery of Alberta (AGA) is now offering free admission every Tuesday and Wednesday night from 5 pm to 8 pm. There are also many art galleries along 124 Street (full listing here) so you can plan your own walk, or there are organized walks every so often. 
5. Horse Races
A night out at the races is always a good time, and if you avoid eating or drinking (too much) at the track, it can also be a cheap night out as you don't have to pay to get in. Plus, maybe you'll even be a pro horse picker and will come home with some winnings. 
  • Local: Northlands Park is the place to go for racing in Edmonton (at least for now), so check the schedule and plan a visit. 
6. Picnic in the Park
Inject a little romance into your relationship and pack up a picnic. This is a cheaper option than going to a restaurant, and you get to soak up the warm weather. 
  • Local: Hit up the Italian Centre for a fantastic selection of deli meats, cheeses, and dips that will impress just about anyone. 
7. Brewery Tour
Another option to get you out of the blazing hot sun is to check out a local brewery and go on a tour of the facility. Plus, beer...enough said! 
8. Sporting Event
What's better than spending an afternoon at the ballpark (or field) to watch the game and drink a cold one (beer is a common theme here). To keep your costs low, you should look into local amateur sports teams and keep an eye out on special promotions that happen throughout the season. 
  • Local: We made it out to a few Edmonton Prospects baseball games last year, and it was always fun. The best seats in the house are only $20 ($10 for kids), or you can go on 'Toonie Tuesday' and buy one full price ticket and get the second for $2. Pro tip: get the perogy hot dog, it's delicious! Maybe soccer is more up your alley; FC Edmonton also has promo tickets for $20 and that includes a hot dog and pop. 

9. Go for a Bike Ride
Remember when you were a kid and you could ride your bike for hours and hours without a care in the world? Get back that feeling by hauling out your bike and hitting the trails. 

10. Browse a Farmer's Market
Farmer's markets are a great way to spend a morning, and you don't need to spend a lot of money. Take advantage of all the fresh produce and local food and get inspired to cook something for dinner from scratch. Even if you splurge a little on supplies, you'll still save money by cooking at home instead of heading to a restaurant. 
  • Local: There are lots of farmer's markets all across the city, you can find a listing of all of them here. My favourite is the downtown City Market, it's has a good variety but isn't too huge and Saturday mornings always seem to be the best time for us. 
11. Day Trip
Escape the city for a bit and hit the highway. Day trips feel like a mini vacation but don't have all the added costs of having to stay in a hotel. Head to a nearby beach, visit a historic site, or just explore a small town you've never visited before. 
  • Local: Alberta has this weird thing where we like to build random big structures, it's strange but can set you up for a pretty unique road trip. Head to Vegreville and check out the giant Ukrainian Easter Egg and then head to the giant Ukrainian Sausage in Mundare. 
12. Board Game Cafe
Board game cafes have been popping up all over the place, and it's a fun way to spend an evening. Most places will charge you a flat fee to play as many games and for as long as you want. 
  • Local: Board n' Brew in a new addition to Edmonton's board game cafe scene. They have a huge selection of games, tasty food, and local brews on tap. 

13. Backyard Movie
Set-up your TV or laptop up outside, pop some popcorn and curl up on a blanket under the stars to watch a movie. Much cheaper than going to the theatre, and romantic ;) 

14. Improv Show
Comedy shows are a perfect date night out, but they can get really expensive depending on who you are going to see. Instead, look for a local improv troupe. Their tickets prices will likely be much more affordable, and you'll still get a good laugh. 
  • Local: If you're in Edmonton you should go see a Rapid Fire Theatre show. Tickets to their Theatresports start at only $12. 
15. Small Town County Fair or Rodeo
Big ticket events come with high ticket prices (I'm looking at you K-Days and the Calgary Stampede), but if you go off the beaten track, you can find cheaper alternatives. 
  • Local: For a couple of options that are in Edmonton's vicinity you can look for the Ponoka Stampede or the Vegreville County Fair. Admission is free to the Ponoka Stampede, but you do have to buy tickets to the rodeo events, and it's $8 to get into the Vegreville County Fair. 
16. Tackle a DIY Project
We all have lists of chores we need to get done around the house, but maybe there's a project you can team up with your partner to get completed. Two summers ago we rebuilt our front porch, and aside from a few disagreements and a tetanus shot, it was a success. Getting through the job can be a challenge, but you'll feel accomplished when it's over. 

17. Free Festival
Summer is the time when the events schedule for a city really picks up, and there are often free activities you can attend. 
  • Local: Edmonton is known for all of its festivals, so there's no shortage to choose from. The Heritage Festival, K-Days Parade, Canada Day Fireworks, and the Works Art & Design Festival are all free to attend, as long as you can resist the temptation to sample all the food options.
18. Jigsaw Puzzle
There's always a few days in the summer that are rainy, and you're stuck inside. Instead of feeling sorry for yourself and watching endless hours of TV, why not get a jigsaw puzzle and give your brain some activity. I love puzzles but they are a hard pass for the bf, so I'm usually left solo, but if you are both puzzle lovers then it's fun. 

19. Local Music
Just like how local comedy shows are cheaper than big names, local musicians also have much better ticket prices (sometimes even free). And maybe you'll get to watch an intimate performance by someone who ends up super famous! Someone out there got to see Taylor Swift play in a dive bar before she was a superstar. 
  • Local: If you live in Edmonton (or are visiting), check out The Needle Vinyl Tavern. It's a fantastic live music venue right downtown.
20. Wander around Ikea
This sounds super lame, but there always seems to be a time every summer when we make the long drive out to Ikea and just wander the displays. Usually, we have a couple of small things we want to pick up, but it's so easy to kill a few hours just looking at things. This is a good one to save for one of those days where your house is a sauna, and you can't stand it for another second. Plus, grab dinner at their's so cheap and those Swedish meatballs are delicious in the grossest possible way. 

There you have it, 20 ways to fill up your summer with date nights (or days) that aren't going to break the bank. What are you going to try first? Or maybe you have more ideas to add to the list? 

Cheap Summer Date Ideas

Wednesday, 10 May 2017

When Progress Means Going Backwards

One step back, two steps forward.

Many of us are of the mindset that improving your situation goes hand in hand with having the biggest, newest and most expensive things. You guys know what I mean right? If you're buying a new car you want it to be better than your last one, or if you go on vacation you want to try somewhere new, or if you buy concert tickets you want the best possible seats. We all do this, and there's nothing wrong with that. However, there are also times when downgrading something in your life is the best option, even if others may not think so.

Let's look at an example...

The bf and I are selling his Jeep and becoming a one-car household. For the first half of our relationship we only had one vehicle, but about five years ago we added a second car and have been living the car-independent life ever since. Now we are at a point where having a second car just isn't necessary. The bf takes the bus to work, and I walk to work in the summer, so we often have both cars sitting at home unused. And I know what you're thinking about NO cars?! That's a valid point, but for us, it's just not going to happen for a few reasons:
  • Pets - We have two dogs and two cats who need to be transported to the vet every so often (luckily not too often), and I refuse to be the lady with the cats on the bus. We also like to pack up the dogs and get out of the city for a hike, and you just can't put mud-bogged dogs in a car that's not yours. And our swamp diving boxer would be very upset if he had to stay home. There's also the chance that something tragic could happen and we have to make an emergency trip to the do you even deal with that if you don't have a car? 
Not my dog. I would be freaking out not filming.
  • Family - My parents live in the next town over, and we go out to visit them (and bring the dogs) at least once a month. Without our own vehicle that would be much more of a challenge. 
  • Freedom - Our neighbourhood is great for walkability and offers a lot of amenities, but not everything. Sometimes you just need to go to Ikea ok? Without a car, we would both need to purchase transit passes, and that would run us $188.50/month...aka more than my car costs me on a monthly basis (insurance, registration, and gas). Now, that doesn't include any maintenance I need to pay for which can add up real fast, but my car is still relatively new and has low mileage, so I haven't had to put much money into it so far. That extra cost is worth it to me. 
So obviously I am adamant about keeping one car, but it feels like an easy decision to let go of the other (maybe because it's not my car we're getting rid of, but who's really keeping track). 

As much as I don't like to be influenced by other people (except I'm super bad for that), it does bother me that people will think we are selling the car because we have to. You just know there will be those 'Oh, you're selling...that really sucks' people. But you know what, it doesn't suck; it's actually awesome! 

Let's think about the upside of being down a vehicle:
  • The immediate benefit of having an extra $5,000 (ish) in our pockets from the sale. That is a total ballpark number, and I have zero knowledge of cars or resale value, but it shouldn't be too far off. If you are like me and have never sold a car privately before, then you should check out Jordann's article over on My Alternate Life about that exact topic. 
  • Getting rid of that insurance payment will save us $120/month and not having to register the vehicle saves an additional $85/year. 
  • My car is better on gas so there will be a reduction in that category each month. 
  • The Jeep is 11 years old, and it seems like there is at least one significant repair that needs to be done each year that we will no longer need to deal with. Hopefully, my car doesn't start to pick up the slack in that department...
Those cost savings outweigh any downside for us, but there are a few things we will miss. The Jeep is great on winter roads, it has the capacity to fit big items, and the dogs can travel in the back instead of destroying my backseat. These are all easy enough for us to deal with though. We are upgrading to winter tires on my car, getting a good seat cover to deal with the dogs and we have friends and family with trucks who will get a call if we need a couch picked up ;) Anyone who has been around the blog for awhile will know my feelings on living central (you can get a refresher here), and I can just about guarantee that the only reason we can follow through on the plan is based on our location. The one time we would potentially need two vehicles is if we have conflicting plans. And sure that happens, but when you live close to downtown, it usually means your plans are within walking distance, or at most, a short bus ride. Plus, then you can drink freely instead of worrying how much a cab back to the 'burbs will be. 

In short, yes, we may be downgrading from two vehicles to one but doing so will help us will allow us to hit our savings goals that much faster. And if that's not progress then I don't know what is! 

Becoming a one car family isn't even the best example, it's just the most applicable one to me right now. Think about housing; how many of you know people who sold a perfectly appropriate house because they needed more space? I'm sure almost all of us do. That's the whole reason there are 5,000+ sq ft. McMansions all over the suburbs. But who actually needs that much space?! My little 1,200 sq ft (no finished basement) house is perfect for the two of us and our pets right now, but I can see how it will get tight when (if) we have kids. No one wants to share a bathroom with a teenager. So yes, we are going to need a bigger house, but I promise you won't find me in a house that's over 1,800 sq ft. In my opinion, that's more than enough space to comfortably house a family of four and still leave you with your sanity when you have to clean it. Living in a smaller home has a huge impact on your budget because all the associated costs (property taxes, heating and maintenance costs) will be lower. Just like us going down to one car, reducing the amount you pay shelter will give you more money to do other things, like save for retirement or travel. 

What do you guys think? Would you be willing to 'downgrade' for the sake of progress? 

One step back, two steps forward.

Wednesday, 3 May 2017

First-Time Home Buyer Blinders

First-Time Home Buyer Mistakes

Before we get started on today's post I just want to send a big thank you to Mr. CBB over on Canadian Budget Binder for featuring yours truly in his 'Making a Difference' series on Saturday. Check out the link for the spotlight and a great post on living debt free. 

Buying your first home is a HUGE deal! It's crazy exciting but also crazy nerve-wracking and more often than not you will feel like you are in way over your head. I remember all too well the whirlwind of emotions throughout the buying process, and I'm so happy that we had a trusted real estate agent in our corner. I would absolutely recommend that you hire an agent instead of attempting to go it on your own. There are lots of small steps to go through, and they will be able to guide you through each one, giving you the best chance to find your dream home.

When we bought our home (almost 7 years ago!), we moved fast. I know some people take months to find a place, but we started looking and had an offer in within a week. The house we ended up buying was actually the very first one we looked at, but it was initially priced right at the top of our budget, and that worried me. We looked a bunch more places that first weekend but nothing compared. Then, the owners of that first place dropped the price by a not insignificant amount, and we jumped on it. The bad part? Another couple did too, so we ended up having to sweat it out and see who they chose. Talk about a stressful day. We ended up hearing from our agent at 11:30 that night with the good news...the house was officially ours! Hearing that you just spent hundreds of thousands of dollars is thrilling, in both the best and worst possible ways but we made the right decision and have no regrets. 

Buying your first home is so much more than just finding a house, getting a mortgage and then owing the bank a huge chunk of money. There's a lot of factors to consider, and you need to make sure you've done your research. It's common for first-time buyers (sometimes experienced buyers too), to make certain mistakes. Today we're going to talk about a few of those so that you can avoid them...

Getting Too Emotional
There's no denying the fact that buying your first place is an emotional process, but you have to keep your heart in check. You might walk into a place and be blown away by a stunning fireplace and be tempted to look past the fact that the house only has one super tiny bathroom with not tub. Ok, that might be a bit extreme, but things like this happen. Designers and real estate agents, especially in brand new homes, are masters of deception and can wow you with the great aspects of a house while distracting you from the not so good.

To help keep your emotions in check, you should write out a list of all the essentials you have for your first home. And I mean REAL essentials! Talk this over with your agent, and they will be able to give you a reality check if it's necessary, but once you have your essentials set it stone it makes it so much easier to stay focused. And really, you shouldn't even be looking at places that don't check off everything on that list.

Spending what the bank offers and not what your budget dictates
If you have never been pre-approved for a mortgage before then, there's a good chance you'll be shocked at how much the bank is willing to give you. Seriously, some of the amounts are just nuts. Do not take this to mean that you can actually afford to spend that much. Before even thinking about buying a home, you should have an excellent handle on your budget and how much you can afford to pay towards a mortgage every month. The last thing you want it is to be 'house poor' and not be able to do the things you want to do. Thinking you can lower your expenses to afford a home by eating out or shopping less will make you miserable and is a recipe for disaster.

Run the numbers yourself and be clear with the bank (or your broker) if they try to get you to overextend yourself. Remember, they get paid based on the size of your mortgage, so there's an incentive to get you the biggest mortgage possible.

Forgetting about Additional Expenses
Obviously, the most significant cost involved is the actual price of your new home, but that's not the only thing you'll be paying for. Closing costs, moving expenses, and insurance can all add up quickly and make those first few months in your new home more stressful than they should be.

This is especially an issue for first-time buyers who were living with their parents or in an apartment and are moving into a house. You will quickly realize that you have to now go out and buy things like snow shovels, a lawn mower, curtains, etc. There's also a good chance that your new digs will be larger than your previous space and that means you'll have to start adding new furniture to the mix. Planning ahead and slowly accumulating things over time can help you avoid a lot of large purchases all at once.

I've talked in more detail about closing costs before, so check out that post for cost breakdowns for lawyers, inspections, taxes, and more.

Skipping the Inspection
Getting an inspection done before you buy a home is non-negotiable. It will cost you a few hundred dollars, which is is basically nothing in the grand scheme, and you'll come out knowing if the house you've fallen in love with is a good investment or a total dud. The inspector will also provide you with a detailed report outlining the life expectancy of such things as your roof, windows, furnace and hot water tank. That way you'll know if you need to start setting aside money to replace your roof right away or if it should last you another decade.

It super hot housing markets (hello Toronto!), there can be a push to limit the conditions on your offer, and this could include removing the inspection clause. I get that competition can be fierce, but you still need to know what you're buying. One thing you can do is actually get an inspection done before you put in an offer. That way there won't be a condition to pass inspection 

Buying a new house doesn't get you off the hook from doing an inspection either. Builders can be sloppy, and it's always better to know about deficiencies before moving in (you know, when you still have negotiating power).

Compromising on Non-Negotiables
Think about the lifestyle you want to live and find a home that will let you live it. For me, this means being centrally located and not having a long commute from the suburbs. It also means living in a home that is affordable so I can still afford to go out to dinner and have the odd splurge at Sephora. Maybe those aren't things you value, you might place greater importance on having a big, brand new house than a long drive. And you know what? That is just has to work for you. 

These are the priorities you don't want to sacrifice when you are buying your first home. Be honest with yourself when you ask 'Will this house make me happy?' That might even mean you have to hold off on getting into the housing market. Don't settle just because it's the best you can afford. There's nothing wrong with continuing to rent for a little longer to get into the house that will give you the amenities you want in a neighbourhood you're happy to live in. The worst thing you can do is get stuck with a house that makes you miserable. 

Are you planning to buy your first home soon? Or maybe you've already purchased a home and fell victim to one of these mistakes? 

First-Time Home Buyer Mistakes

Wednesday, 26 April 2017

Fixing an RRSP Over-Contribution

What to do about an RRSP Over-Contribution

RRSP's can be a valuable tool when saving for retirement, not only do they give you a tax refund when you contribute, they also allow your money to grow tax-free until you withdraw it. I've talked more about the details of RRSP's both here and here

As a quick recap, every year that you work you earn contribution room. The amount works out to 18% of your annual income up to a maximum amount set by the government; for 2017 it is $26,010. If you don't use your room, it does carry-over for future use. To figure out how much room you have you can look to your most recent notice of assessment, it will be listed on there, or you can log in to your CRA online access. You might think you have tons of room available but keep in mind that if you are contributing to a pension plan through your employer that also counts towards your limit. 

CRA gives you a cushion of $2,000 (lifetime) in case you do exceed your contribution room. If you do use that amount you won't have to pay any penalties but you won't get the tax refund on that excess. It will still grow tax-free in your RRSP though. The problems arise if you go over and above that $2,000 cushion. The CRA is really punitive in their penalties, and you will be looking at a 1% charge PER MONTH, which can add up real fast. That means you will want to get on top of the issue and fix it ASAP. This is the same penalty you have to pay if you go over your TFSA contribution limit, but there isn't even a cushion for that. 

If you do find yourself in the situation of putting too much into your RRSP, then you will want to work fast. There's a chance you'll figure out your mistake yourself before CRA even knows about it. Usually, it would come up when you're doing your taxes. If not then you'll end up getting a letter in the mail from CRA informing you of your screw-up. Isn't mail from CRA the worst? Even when you're pretty sure it's just your notice of assessment there's always that moment of dread when you tear open the envelope! Whenever you do learn about the over contribution, you will want to act fast to fix it and avoid any unnecessary penalties. So how exactly do you do that? Well, you have two options...

1. Pay the Penalty
You can choose to leave the excess contribution in your RRSP and pay the penalty. This might be an option to look at if you hold an investment that has been doing really well or if the amount owing isn't that substantial. 
If you are choosing this route, you will need to fill out and submit form T1-OVP which will determine how much you owe. Try and do this within 90 days of the year after the over-contribution was made otherwise you may have to pay interest and a late-filing fee. That means that if you contributed too much in 2016, you would want to make the payment within the first 90 days of 2017. 

2. Withdraw the excess and beg for forgiveness
The second option, and likely the one you will go with, is to pull out the excess amount from your RRSP and then write a letter to CRA indicating why the over-contribution happened in the first place and provide proof that you have corrected the situation. The sooner you can make this happen the better. Now, to make things even more confusing, you have two options when it comes to withdrawing the funds.
  • Pay the tax: The easiest and fastest option is to contact your financial institution and have them pull out the amount you are over-contributed by. In this scenario, they will need to withhold tax based on the size of the withdrawal. If the withdrawal is under $5,000 it will only be 10% tax, if it's between $5,000 and $15,000 it is 20% and anything over $15,000 is 30%. If you need to withdraw more than $5,000 you can request that it be broken down into multiple transactions to keep the tax at 10%. The tax paid will count towards your next tax return, so you will get the money back at that point. 
  • Complete a T3012A to avoid the tax on the withdrawal: Your other option is to complete the tax deduction waiver form, and your financial institution will not have to withhold any tax on the withdrawal. Honestly, the form is a bit of a pain. You need to fill it out (potentially with the help of your accountant for a fee), send it to CRA for approval, receive it back and then forward it to your financial institution for processing. 
Whether you choose to pay the tax or get permission to skip it, you will need to submit proof of the withdrawal (account statement) along with form RC4288 to CRA to see if you can get the over-contribution penalty waived. Make sure you provide a detailed summary of what happened and why the over-contribution was an honest mistake. Hopefully, they will accept your explanation and see that you corrected it as soon as possible and will waive the penalty. 

Obviously, whatever option you choose, the whole process is a complete pain so avoiding an over-contribution is always the best option. Pay attention to your notice of assessment and ensure you aren't going over your contribution room at any time during the year. If you are making automatic payments to your RRSP every month (yay for you!) make sure they still make sense and don't need to be lowered because you are suddenly contributing to a pension plan or your income has changed. Most financial institutions only submit information to CRA early in January, so if you catch a mistake early enough they might be able to correct it internally, and CRA will never even know. 

What to do about an RRSP Over-Contribution

Wednesday, 19 April 2017

My Travel Bucket List

Today I'm taking a little break from talking about money and am instead going to daydream about my travel bucket list (you know, where I would go if I had ALL the money). Lately, I've been feeling plagued by the travel bug and have been dreaming up all sorts of places I would like to plan a trip to. We were in Barcelona last November, and I fell in love with the city, and it made a short trip to Europe seem completely doable. Before we went, I was a little hesitant because I didn't know if it was worth it to go all that way just for a week, but let me tell sooooo was! The one downside though was that a big trip in November meant we were stuck in Edmonton for the whole winter. And by whole winter I am including the April snowstorms that have been happening this past week...seriously, shoot me. It's halfway through April and we have more snow than at Christmas! So yes, I have a major urge to get the heck out of here.

Unfortunately for me, it's just not in the cards right now. We are going on a road-trip out to Vancouver Island in June, but that will mostly be to visit family and friends, and while that's great and all, it's not the splurgy kind of vacation I'm dreaming about! Hopefully, we'll get away to somewhere hot early next year, but I think we've got a pretty lame year of vacation on our hands for 2017.

So, if I did have the time and money to travel where would I go? Obviously, there are endless places I'd love to visit but today I'm keeping things semi-reasonable. This is more of a 'drink my way through Italy' as opposed to a 'climb Everest' kind of bucket list ;)

Prague, Czech Republic
I've heard wonderful things about Prague and how beautiful it is, so I've got it on our radar for 2020. Why 2020? Well, the World Juniors! That's a big hockey tournament for all you non-fans out there. Sounds fun right? I've never travelled anywhere specifically for a sports event but watching the juniors is a Christmas tradition (it starts on Boxing Day every year) for many Canadian families, mine included, so I think it would be an amazing experience. Nothing is set in stone right now, but I'm hoping we can make it happen. The one issue is the timing. Travelling during the holiday season is always pricier and busier, and Prague won't exactly be warm. How do you even pack for somewhere cold?!

The Maritimes
I feel like a bad Canadian for admitting that I've never travelled anywhere further East (in Canada) than Ottawa, not even Montreal. I'd say it's time to fix that and I would love to road trip around the Maritimes. I think my plan would be to rent a car in Montreal and head East all the way to St. John's. That way I could stop off at all the highlights along the way and get more out of the experience. Fall seems to be the best time to make that trip as you'd get to see all the Fall colours along the way. How do you guys feel about road trips? I think they are fun, as long as you can make frequent stops and not have crazy long driving days. Basically, I'm a child and will throw a tantrum after 8 hours of driving. 

New York, New York
I don't have much desire to travel to the States right this second because of all the ridiculousness down there, but at some point, I have to make it to New York. I spent one year living in Southern Ontario and still regret not taking a weekend trip to the Big Apple. A Broadway show, Yankees game, an overload of amazing restaurants, and endless shopping...pretty much a dream come true for this girl.

This will likely have to wait a few years before it's an attainable dream (unless I win the lottery) because of the expense and the number of vacation days I'd need. There is just so much to see! Really though, who doesn't want to go to Italy; the food, the culture, the vino {insert heart face emoji}. Sidenote: I did a jigsaw puzzle with a very similar image of Cinque Terre on it like the one above and have dreamt of going there ever since.

I think Cuba will likely be our next winter getaway. We've done Mexico a few times now but it's time for a change, and the bf's family highly recommends Cuba. When I'm looking for an all-inclusive vacation, all I really want is hot weather, a decent hotel and a beautiful beach, so I think Cuba would work just fine. It's also fairly reasonable price-wise, and you can get a direct flight from Edmonton. The one complaint people seem to consistently have about Cuba is the food, but I'm not too worried about that...maybe it will be the one vacation I don't gain weight on ;) Plus, Havana looks beautiful with its vintage charm so I would like to spend a day exploring the city.

Wednesday, 12 April 2017

Treat Hiring a Financial Advisor Like Buying a House

How to Find a Financial Advisor

Many people have a negative impression of the financial industry, and of financial advisors in particular, but how bad is the situation? There have been numerous reports circulating recently (examples can be found here and here) about people getting scammed by high fees and improper sales tactics at their financial institutions, but there are things you can do to help protect your assets. 

You might be thinking that you are better off just going it on your own, and with the uptick in robo-advisors and discount brokerages, this is easier (and cheaper) than ever before. I'm not here to dissuade you from doing that, but make sure you are willing to put in the time and do your research before building your own investment portfolio. Yes, it will be cheaper, but if you don't really know what you're doing, then it could cost you in the long run. Some people love being in control of their investments, but others want nothing to do with it, and for them, having the right person on their side can make all the difference. If you want to take the DIY approach, then it's not a bad idea to seek out a fee-for-service planner in your area that can help you with more detailed planning when you need it. This way you can manage your own investments but still receive the expert advice and planning skills of someone but only when you need it. Most fee for service planners will charge an hourly rate or have a flat rate for the preparation of a plan. 

How do you know if you have a good advisor? 
There's no perfect answer to that question, and an advisor who might be the best fit for one person might not be the best fit for another. A lot of advisors have a particular focus and have more knowledge in some areas than others. For example, if you are planning to retire in the next year your needs will be very different from someone who is just starting to invest and wants to take more risk. There's also no magic number to look for when it comes to how much an advisor should charge or how high your rate of return should be. If you are meeting your goals and are happy with the service you are receiving, then you're likely in the right place.

What you really want is to be comfortable with whoever is running your investments. This is your life savings after all, so having someone you trust in charge is essential. And by this I don't mean your closest friend or family member who happens to work in finance...don't go that route, it can get messy. The financial industry is sort of an 'old boys club' (shocking right?), and this can make finding someone to manage your finances daunting, especially for young investors and us ladies. If you feel like you are getting forced into something then let the person know you need some time to think and continue the search somewhere else. I promise there are great advisors out there, you might just need to kiss a few frogs along the way. 

If you are in need of an advisor or looking to make a change, there are some tips you should follow when seeking someone out. Think of the process like buying a house; you wouldn't walk into the first place you see and throw all your money at it right? Not a chance! You would look at lots of different options, get the place inspected, do some research on the neighbourhood, and figure out how much it's going to cost you both short and long term. Choosing who is going to be in control of your life savings is an equally important decision, and you should take it seriously.

You have options! 
Just because you do all your banking and maybe have your mortgage at your bank it does NOT mean you need to have your investments there as well, no matter how much they pressure you. If you are new to investing and are just starting to build your assets it can be a challenge to find a more experienced advisor to work with. One way around this would be to contact your parent's advisor, often they will be more willing to help because of the family connection. 

Ask your family and friends
Getting a referral from a trusted friend or family member is often the best way to find someone and many advisors will take on referrals even if they aren't technically accepting new clients. Money can be such a taboo subject to talk about but if you are working with someone you think is amazing then share that info! You can also ask other professionals you use; accountants, lawyers, mortgage brokers, etc. often have relationships with advisors and can provide a referral. 

Interview more than one person
Take the process seriously and line up meet and greets with at least a couple of different advisors before making your ultimate decision. Be prepared with some general questions but also questions that relate to your specific situation. For example: 
  • What is your investment philosophy? And can you show me a mock portfolio? 
  • What is your fee structure and how do you get paid? 
  • What do you know about my specific pension plan?
  • What demographic are most of your clients? 
Ask for references
Yes for real! A potential advisor should be able to give you the names and contact information for a few clients who you can get in touch with and see how happy they are with the service. If they're not willing to do this, then there's probably a good reason for it. Obviously, only people with positive things to say will be asked to be references, but it can still provide some degree of comfort knowing that other people out there are happy. 

What services do they provide?
How much an advisor charges isn't the only thing to focus on and going with the cheapest option might not actually give you the best value. Think (and ask) what other services might be provided. Not only can your financial advisor give you guidance on which investments are right for you, but many also offer comprehensive plans and advice on such topics as tax planning, debt repayment, pension plans, budgeting, and buying a home. A detailed financial plan can cost you hundreds of dollars so if your advisor is willing to do that at no charge and keep it updated you should factor that in when it comes to fees.

Bad advice is out there, both floating around the internet and coming from so-called professionals, so you need to prepared to deal with that. Remember, it's your money, and that means you have a certain responsibility to do your homework and make sure you are only taking advice from someone you trust and who knows what they're talking about. You wouldn't buy a house just because somebody told you it was a great deal, so don't make the same mistake with your money!

How to Find a Financial Advisor

Wednesday, 5 April 2017

That Time I Ran into a Parked Car

The Importance of an Emergency Fund

Shit happens...everyone has that mortifying story that they'd rather keep under wraps, right? Feel free to share yours in the comments (anonymously if you prefer) and make us all feel a little better about ourselves. Anyways, last month I was in a minor car accident and not only is that bad enough, but my accident involved me running into a parked car. You might be thinking, how does that even happen? Very good question, but unfortunately I don't have a good answer. I'm not actually a horrible driver, but that doesn't mean I wasn't still (at least partially) to blame. Up here in freezing cold Edmonton, we can find ourselves dealing with some pretty treacherous winter driving conditions, and this was one of those days...

I am a five-minute drive from work, practically nothing, and that fine morning I woke up to a dump of snow and the roads were complete crap (there was something like 180+ accidents just that day in Edmonton). I decided to avoid what I could of the main roads and drive through our neighbourhood, thinking it would be better with less traffic. Oh, how wrong I was! Only a couple of blocks from my house, I was in a single lane going in between parked cars on either side, my car hit a patch of ice and went sideways right into one of those parked cars. I was shocked and felt completely helpless, I've never been in a car that has just lost control like that. Luckily I was going really slow (like 20km/h...seriously!) but it's amazing how much damage can be caused even in a small accident like that. My front bumper had a chunk taken out of it, and the SUV that I hit had a cracked back bumper. It was also a Mercedes (of course) so that wracked up the bill higher than it likely would have been (i.e., my car looked way worse and yet cost less than half to fix). I promise you, there is nothing worse than having to knock on someone's door at 8:30 in the morning and telling them you just ran into their car. Thank goodness the lady was way more understanding than I likely would have been and didn't make me feel any more horrible than I already did. 

Now, time for a confession; I didn't have winter tires. I know, I know...who lives in Edmonton with our awful winters and doesn't have winter tires. This girl. In all my 15 years of driving, I have never had them and stubbornly refused to bite the bullet on the expense because I drive so little. The bf has a much better-equipped Jeep, and when the weather is bad, we use that almost exclusively. The only exception is my short drive to work. You are right, though, no excuses. 

I promise, I've learnt my lesson though and have already bought winter rims (yay for Kijiji deals) and will 100% have winter tires before the snow flies in the Fall. Any recommendations? Costco seems to be the way to go, but I've heard horror stories about trying to get in to get them put on or taken off. We are also in the early stages of becoming a one-vehicle family, and it would be the winter-hardy Jeep that got the boot. That would mean my car would need to be decked out as it would get significantly more use. More on that in a later post :) 

Back to my accident, I knew I didn't want to cover the cost of the accident out of pocket and my auto insurance included accident forgiveness so putting through a claim would not raise my rates. I had made it this long without having to put in an insurance claim so here's hoping I can make it another 15 years with no issues! I did, however, have a $1,000 deductible on my coverage, so I had to come up with that money. Here's where my 'Shit Happens' (aka emergency fund) came into play. Not having to reach for my credit card (ok I did, but only for the points) to cover the cost of the accident was a huge relief and made a terrible situation a little less stressful. Going through insurance also made things easier from a logistical perspective. After just one quick phone call to them, they had me booked into a body shop to get the repair dealt with and set-up with a rental car, so I wasn't left car-less. It took a couple of weeks to get my car back, that's what 180+ accidents in a city will do, but I didn't have to worry about not having wheels. 

I can't even imagine how much more stressed out I would have been if I didn't have easy access to that $1,000. Even having to run that balance on my credit card for a few months would have meant additional costs to cover the interest charges. It is shocking to me how many people are in this situation, though. The Federal Reserve Bank of New York recently released the results of a study they completed in February and the most startling stat to me was that 32.8% of Americans couldn't come up with $2,000 if an unexpected expense arose. I realise this is based on data from the US, but I doubt Canadians are doing that much better. Consumer debt is extremely high on both sides of the border, and this is a big reason why people aren't able to save and prepare for the worst. It also explains my constant need to nag you about paying off debt and building your emergency fund ;)

The Importance of an Emergency Fund

Wednesday, 29 March 2017

Financial Education & Money Lessons from my Parents

Money Lessons from my Parents

I get so frustrated talking to people who don't know basic things about handling their finances. Now don't get all defensive if you feel like you are in this situation because I'm not mad at you! What I hate is that we don't give people the tools to handle money when they are young. Really, what could be more important than ensuring children and young adults know that going into debt is bad and that starting to save early is essential? Apparently learning advanced algebra and who fought who in WWII are higher priorities. 

Just last week Ontario was making headlines because they are (finally) launching a pilot project to incorporate financial education into their schools. Their hope is to create a new course that will be implemented in the Fall of 2018. Obviously, it's still a work in progress, and we don't know what the actual curriculum will be, but it's certainly a step in the right direction. Other provinces across Canada have varying levels of financial literacy components included in high school curriculums, but I don't think there are any that couldn't use some improvements. For example, Saskatchewan has no official financial literacy component included in their schools, but BC and Manitoba have both revamped their math programs to include such topics. Here in Alberta (the only province I have experience as a high school student), they currently have a mandatory 'Career and Life Management' course. I took it, and honestly, it was kind of a joke. Everyone tried to take CALM in summer school because it was an easy two weeks of fun and games, seriously. Part of this for sure is that fact that most high school kids don't worry about money the same way they will 10 years later but it doesn't help that the course itself has such a poor reputation. The one thing I actually remember was going to a car dealership to 'learn' how to buy a new car. Cringe! 

So, what can we do? 
Obviously, I believe that high school curriculums should put greater focus on financial education and provide kids with tools that will actually help them succeed in the real world, but it doesn't end there. Parents need to take some responsibility too and pick up the slack. The problem with this is that not all parents have good money skills themselves, and sometimes bad education can be worse than no education. 

I was lucky to have parents who were positive money role models and picked up a lot from them when I was growing up. Both my parents were professionals (my Dad an engineer and my Mom a physiotherapist), and we were comfortably middle class, but that didn't mean they weren't careful with their spending. Both my parents are Scottish, and I still joke that my Mom fits the bill for the stereotypical cheap Scot. 
"Have you heard the rumour that the Grand Canyon was started by a Scotsman who lost a coin in a ditch?"

My Dad was definitely the money guy in the family, in fact, I still remember him spending every Monday night sitting at the dining room table paying bills, balancing the checkbook, working out a budget, etc. Apparently, this left a lasting impression on me, and although I don't balance a checkbook (who uses cheques anymore!), I do keep a detailed account of my budget. He was old school and used the antique pen and paper method, but with all the advances in technology, it is easier than ever to keep on top of your finances. Now you can get everything done through an app on your phone; more efficient...absolutely! But you do still need to put in a bit of time/effort to keep things updated. 

Even though I was an only child, I didn't (still don't) consider myself overly spoiled. My parents taught me that I couldn't always get what I wanted and that sometimes they just couldn't afford to spend the money. Was I scarred for life about never getting that pony I always wanted? Hardly (it's still on my Christmas list, though, hi mom). Instead, I learned that I had to work to afford the things I wanted and considering how many hours you have to work to earn 'X' amount of dollars really puts purchases in perspective. My 5-cent candy buying days were sure cut down when I had to spend my own babysitting money. I also remember a very long lecture conversation before I got my first credit card about the negative impact debt could have and the importance of always paying your credit card off in full. At the time, I was an 18-year-old high school student working a part-time job and hardly in need of a credit card, but my parents also understood the value of building credit. I think that first card had a limit of $500 (maybe even $250), but it still felt like a big deal, and I never abused it. 

Where do you start? 
Maybe you are a parent and are wondering how you can instill in your kids a sound basis of financial knowledge. Now, remember, I'm no parenting expert and am only speaking from my experiences growing up, but there are some guidelines you can use to set your kids on the right track. 

1. Educate Yourself
You're not going to have much credibility with your kids if your own finances are a mess, so step one is always to get yourself in order. Your good or bad habits will rub off on your children no matter what you do, so make it a good impression. 

2. Start Early
Obviously, children have the capability to learn different skills at different ages, and you'll have to hold off on complex subjects to later days. You can, however, incorporate money matters even at a young age. Consider role playing a supermarket transaction or playing monopoly. Anytime they have to give up money for goods will get them thinking about spending. 

3. Allowances
There's no better way to learn about your priorities in regards to money than to have to spend money you actually earned. This is where an allowance would come in. Younger kids don't have any way to make money (except maybe through Birthday or Christmas gifts), so an allowance can give them that access. I also like the idea of taking them to the bank to set up a bank account. There's no minimum age to set-up a bank account in Canada, and the requirements will depend on your bank, but most of the big banks offer accounts for kids. This way they will have a place to deposit money and watch their savings grow, you can even get them online access to help learn the ins and outs of the banking system. 

4. Encourage Working
Nobody likes laziness, so build up a good work ethic in your kids by encouraging them to take on a part-time job. I worked at my Mom's physio clinic from the time I was 14 all the way up until University. Working taught me to be more responsible, how to deal with a variety of people, and gave me an income that let me be more independent. 

How did you learn about money? Was it through school or from your parents? And, what the best money tip you ever learned? 

Money Lessons from my Parents