Learning to distinguish an RRSP from a TFSA at the advanced age of 35

Month: September, 2011

Feeling richer, looking poorer

Last winter, we switched to the jar system, allotting $60 a week in “entertainment” for our family of four. For the most part, we thought carefully about how to spend this money: at the movies? on a sitter? on a pizza and a bottle of wine? I didn’t carry it on me.

But sometimes, on my day off, a friend would ask me out to coffee after we’d dropped our children off at school. On such occasions, I’d find myself in the awkward position of having no money in my wallet, not even a loonie.

“I’d like to join you,” I’d say. “But I don’t have any cash on me.”

At which point, my friend would always offer to pay. In fact, she started to make a point of it. Coffee would be be on her, she’d assure me.

Slowly, I clued in to what was going on. She was interpreting my not having any money on me as my not having any money at all, when actually, quite the opposite was true.

The less money I carried on me, the more I started to accumulate in my bank account.

The fewer outfits I bought, the richer I was.

The less I ate out, the more I had.

I explained myself to my friend, but also started carrying a couple of bucks on me. Because I don’t want to miss out on coffee dates. Or be a mooch!


Horse-hair plaster and other arguments against renting

The other night, a well meaning friend tried to discourage me from even thinking about ever buying a home.

I don’t live in one of the Canadian cities with the toughest real estate markets (Toronto or Vancouver), but I do live in Montreal, where, according to a recent MoneySense article, homes rate D for value.

This is particularly true for us. We live in a downtown neighbourhood, Mile End, were it’s not uncommon for a family of four to spend well upwards of $300,000 for a 100-year-old apartment, with only 2 bedrooms and 1 bathroom, in need of urgent repairs.

After 17 years in the ‘hood, my husband and I find ourselves in the uncomfortable position of being renters who have been out-trended by the neighbourhood.

So move, you say.

But we are rooted here. Our children, 7 and 10, are in school. Their friends are nearby. Not to mention our own.

When my daughter first started walking to the store on her own, I knew that a whole set of neighbourhood eyes was watching her, checking to make sure that she looked both ways before crossing the street.

And I’m not sure where we would go.

It occurs to me, as I contemplate real estate, that I’m not so much a Montrealer as a Mile Ender. I feel at home here.

But the apartment where I have lived for the past decade is falling apart. The plaster walls are cracking to reveal the horse-hair binding used a century ago. This is a health as well as an aesthetic problem, since my husband is so allergic to horses that he can’t even set foot into Old Montreal, where carriage rides are one of the main attractions. The only solution, we are told, is to gut the apartment. But this is not something that we can instigate as tenants.

Water has leaked from the upstairs neighbour’s into our bathroom, leaving an ugly black mark and a recurring case of mildew.

A month ago, I woke up in the middle of the night to an unwanted present from my cat: a live mouse deposited on my leg.

Worse yet, one of our windows is broken. Our landlord has assured us that a replacement has been ordered, but that is has to be custom made, and, therefore, will take time. Until then, he has taken the astonishing measure of stuffing a sock in the window to protect us from the elements. A sock in the window? Ack!

For me, home ownership means a degree of control, the ability to phone up the window company myself, to negotiate repairs to the bathroom wall, to follow up on the inside and outside on the mice issue.

The question is not, should I buy a home, but how will I get there?

How PearBudget saved my marriage

My husband and I hadn’t been getting along, so we went to see a marriage counsellor, who drafted a list of 60 things we needed to work on to improve our relationship.

“How about we begin with finances,” he said. “It seems to be a thorny issue for you two.”

Our first “homework assignment”: make a family budget.

A budget? As far as I was concerned, this was an extremely frightening word that my husband sometimes threatened me with. I saw it as a reining-in, a limitation. And I didn’t have the least idea how to go about making one.

I turned to a friend, in the early stages of the divorce process, a process I myself was hoping to avoid. She’d had to make a budget for mediation, to arrive at a fair number for child support. She recommended using a budgeting website, PearBudget, for people who were afraid of budgeting. She described it as a “budgeting software for people who don’t do Excel.”

At first, I didn’t know what to enter into the budget. I really had no idea of how much money we made, or how we spent it. So I erred on the side of caution and tracked every single expense for the first few months. I even had a category for phones calls from phone booths (expected monthly expense, $0.50).

Then something magical happened. Just by virtue of entering our everyday expenditures into a website, our expenses started to go down. We realized that we did not want to spend $150 a month on alcohol. Or $300 a month on take-out. We started to think in terms of percentages: if I spend all of my disposable income (and then some) on food and drink, what kind of person does that make me? For the first time in years, my husband and I were talking about our values, about where we were heading, about where we wanted to go. Our budget was bringing us closer together.

Suddenly, money – the topic that had been the biggest taboo in our relationship – was the framework on which all new plans were based. Whereas before we had fatalistically assumed that we could never afford new clothes, or a vacation, or a new house, we were now thinking about what steps we would have to take to get what we want. It was revolutionary. It got to the point where talking about money was not only stress-free, it was also fun.

We enjoyed coming up with a strategy to the the $6,000 we owed to family and credit cards. We enjoyed coming up with less expensive ways to have fun. We enjoyed switching to a jar system for groceries, transportation, etc. We felt like a team again, but for this time, with RRSPs, TFSAs and an RESP firmly in place.

As for marriage counselling, we never did get to those 59 other points on the list. Number one had taken us further than either of us had every expected. Just over a year later, we are debt free and our net worth has increased by more than $40,000.