Note: this post was sponsored by Scotiabank for Financial Literacy Month, but the views and opinions are my own.
Last weekend when I was in Toronto for the Canadian Personal Finance Conference, I chatted with a few of my blogger friends about how we sometimes get caught up in our own little nerdy financial bubble. We often assume that our friends outside of the blogosphere understand the basic concepts personal finance, and so we tend to glaze over fundamental topics like paying yourself first, or even saving for retirement.
And that reminded me of a conversation I had recently with a friend about our work pension plans. Both companies we work for offer matching RRSP contributions to a maximum of 3% every year. I enrolled in my corporate plan on my first day. It’s free money – and I honestly assumed everyone did the same. So, imagine my surprise when my friend told me he had been at his job for over 3 years, and never contributed!
I asked why (since he knew he was leaving around $2,000 on the table every year), and he said that after all his monthly expenses are added up, he doesn’t have anything left over to save. I understood where he was coming from (living in Vancouver is super expensive), but I couldn’t help but think that if he looked a bit deeper into his finances, he could figure out a way to save for his future – or at the very least, get that 3% match. :)
Coincidentally, I had the chance to speak with Ahmad Dajani, VP of Retail Deposits and Investments at Scotiabank last week, and wanted to ask him some questions that could potentially help my friend get started on his path to financial independence.
Here are a few of the questions I was able to ask:
How would you suggest someone start investing when they have very little room left over in their budget after their monthly expenses?
AD: The best approach would be to Pay Yourself First. What I mean by this, is putting aside a portion of your income to save, before you begin to pay any other expenses. And, by making saving automatic using a pre-authorized contribution, saving becomes a habit. Even starting with a contribution of $25.00 will help set you up for success and you should revisit how much you contribute as your situation and goals change.
(Just as a side note – that’s exactly how I began saving for my future – with contributions of just $25/month when I was just starting out. Then as my salary increased, so did my contributions!)
When would you suggest someone start saving for retirement?
AD: As early as possible, as soon as you start your first job. Even a small contribution can grow to a surprising amount with compound interest over time. When using tax sheltered plans, such as an RSP or TFSA ensure you are eligible and have contribution room available as the rules are different for both. Please check with your advisor on other eligibility criteria and with CRA on your contribution room for each. There are lots of great tools online you can use to determine how much you’ll need to retire. Better yet meet with a financial advisor and they can work with you to figure out all those details.
What are the elements that make up a solid financial plan?
AD: A financial plan is dynamic and always evolving – just like you. It should take into account your current financial situation and provide you with strategies to help you stay on track to achieving your goals. It includes both borrowing and investing elements, and more sophisticated plans can include insurance and estate planning. Financial Planning does not have to be overly complicated however. A financial plan is available at Scotiabank at no cost and no minimum portfolio is required to ask for it.
What are the top things Canadians need to learn more about when it comes to their own finances?
AD: Canadians may be interested in learning more about the many resources available to help them prioritize their financial goals and save more. Finances do not have to be overwhelming or intimidating and there are many programs and tools available to help you save. Remember that even small changes can make a big difference in your savings. I would encourage everyone to do their research, start conversations and sit down with a financial advisor to learn about the options and free tools available. It could make all the difference in achieving your financial goals.
So, what’s the best financial advice you’ve ever received? Share it on Scotiabank’s Facebook page for a chance to win $1,000!
I can’t believe its already been a year since we moved into our little laneway house in Vancouver. The appeal of living in a tiny house is still strong, and I feel really fortunate to be in a fantastic neighbourhood for such a reasonable price. Our one year lease is up at the end of the month, and after discussing it with our landlord, we are happy to stay here on a month-to-month basis.
Now that we’ve been living together for a year, we’ve discussed what the future holds for us, and where we think we’ll be in a few years. Unfortunately, the reality is that we’ll probably be in Vancouver for the foreseeable future. RD’s job is very specialized, and there are really only a few places we could move to in Canada where he could find work. We’re happy living where we are for now, but if we plan on being here for the next 10+ years, the idea of buying a home down the road begins to make sense (again).
Because for all the pros that renting and specifically laneway living provide, there are still definite cons to our current situation:
- We are paying a very reasonable price for rent. If we wanted to find a new rental in this neighbourhood for whatever reason, we’d be looking at paying $400-600 more per month for something similar.
- The people renting next door are sometimes very loud. Because we live in the alley, in the summertime when our windows are open, we’re often subjected to their cigarette smoke, loud talking in the middle of the night, and constantly hanging out just feet from our front door.
- The layout of our house isn’t the best. Because half of the downstairs is actually a garage, the layout is such that our TV/living room is actually our second bedroom upstairs. Which wouldn’t be so bad, except that there is wasted space downstairs that is too big not to use, but too small to be constructive.
- 685 sq.ft. split on two levels is just a *tiny* bit too small. We stayed in an AirBnB in Dawson City on our vacation, and we both agreed that it was our dream house with the perfect layout. The 2-storey house couldn’t have been more than 850 sq.ft. total but it was absolutely perfect for what we would want.
- There’s no outdoor space. I miss having a balcony or a porch where I can just sit outside and relax.
- The inability to customize our space or have pets. Not that we’d want to do any major renovations, but it would be nice to have the option if we wanted to. We’ve also discussed potentially getting a pet in the future, but it is extremely challenging to find rentals that would allow pets in the city.
That being said, we wouldn’t even consider buying anything for 8-12 months. Even though we have a nice down payment ready to go, we both want to get a good sense of what the real estate market is doing here in Vancouver (and the suburbs). We are both perfectly happy renting for however long we need to (perhaps even forever), so if we did decide to buy, it would have to be in a neighbourhood with a similar feel to our current one, and the purchase really shouldn’t have any impact to our current lifestyle and budget. Meaning early retirement and lots of traveling will continue to be the priority. And for that reason alone, I think it will be very difficult to take any real estate listing seriously.
November is going to be an expensive month … not because I’m going anywhere (although I am going to Toronto next week for the Canadian Personal Finance Conference), but because I pre-ordered one of the new Apple Macbook Pro computers.
I bought my current MBP six years ago, and it has served me well. In fact, aside from it running hot, it’s still a very good computer … it just doesn’t work for my purposes anymore. I work my computers hard, and the lag in the last 6 months has become so bad that I’ve stopped doing any sort of photo editing or design work. And that needs to change.
So with some of the freelance money I’ve earned this year, I’ll be getting my new computer in just a couple of weeks! I had budgeted $3,500 and with taxes, my purchase came to $3,269.84. I’m really pleased I was able to come in under budget, and I plan on selling my old computer which I think should get me a few hundred dollars.
Anyway, onto this month’s budget!
I’ve included money in my budget this month for clothing – I’d like to get a pair of black boots as I had to throw away my last pair two winters ago. I also need to get two pairs of shoes repaired, and would like to buy a pair of pants for work.
Also I’ve included about half my budget for Christmas gifts. :)
November 2016 Goals:
- Shop around for tenant insurance – ours expires at the end of the month, so I’ll call around to a few places to see if we can get a lower rate.
- Create my budgeting spreadsheet for 2017 – I stopped using Quicken a few years ago and track my budget in my own Excel spreadsheet. Except that it has gotten quite robust and complicated over the years with so many linked cells across multiple tabs. I want to set up a clean version for 2017 so that I don’t have to worry about it next month. :)
- Freelancing – I need to wrap up the last of my freelance contracts for 2016 and start the negotiating for contracts during the first half of 2017. I’ve also been getting inquiries about doing some freelance design work, which I might pick up just for fun … haven’t done any contracted design work in a while!