When will I be able to buy my first house?

The success of the biggest purchase of your life depends on your financial capacity to become an owner. Preparation is the most important element.

Here’s how to prepare well:

1) How much money will you need when purchasing?

When buying your home, you will need a lot of cash.

It’s not just the down payment. You must have cash for many other things, such as legal fees, CMHC tax, welcome tax and more. It is important to estimate these costs carefully, because an unforeseen expense can make this event a nightmare.

2) Make two budgets

A first budget with current expenses and a second budget as an owner.

Will you be able financially to maintain the same level of activity as at present? Will your house become synonymous with prison?

3) Check your financial capacity

In order to be sure of your financial capacity over the long term, save the difference between the current housing cost versus the cost of your future home.

For example, if your rent, heat, and home insurance costs you $1,300 monthly, and the mortgage, taxes, heat, maintenance, insurance, and HBP reimbursement for your future home amount to $2,000; save $700 per month for a long period, a minimum of 1 year.

If after this period, you have not needed to use your savings, it is because you will be able to become a homeowner when you have accumulated the funds you will need at the time of purchase. The advantage of this method is that in addition to validating your financial capacity, you will have accumulated a good part of the sums you will need at the time of purchase, without additional effort.

4) Choose professionals

The success of your project is not only a question of money.

Surround yourself with professionals who will play the role of conductor, such as a financial advisor who will be able to help you with your investment choices and strategies to accumulate your cash. A mortgage financing broker, who will guide you through the mortgage loan process, a real estate broker, who will save you a lot of headaches, because doing business directly with the seller is not always easy.

You will also need to find an inspector, a lawyer, a damage insurance specialist and others, depending on your choice of house.

Good preparation will save you big trouble and don’t be in too much of a hurry, it’s a major purchase that could just as easily become the nightmare of your life.

Katie Lefebvre
Partner of your financial success

Finances as a couple can sometimes become a headache for everyone. How to divide the expenses, but especially how to carry out the calculations?

Here are three ways to share expenses:

1) 50 – 50
This method is very simple, we cut the pear in half, that is to say that each pays half of the family expenses.

If everyone’s income is similar, this method is fair, but if there is a difference in income, be sure to make choices based on the income of the person with the lowest income.

For example, housing expenses, make the purchase of a residence according to the financial capacity of the person with the lowest income, because you risk jeopardizing the financial health of this person if you exceed his boundaries.

2) According to income (%)
This method is the fairest method if the incomes of the 2 parties are different. Expenses are shared according to each person’s ability.

For example, if one has $40,000 available and the other $20,000, in this method, the one with $40,000 will contribute 66.66% to family expenses and the other with $20,000, 33.34%. The calculation can be tedious, so I prepared an easy-to-use tool.

I want my free tool

3) To each his own task
The last method is where everyone is assigned an expense and manages it alone.

The advantage of this method is that it is not necessary to have a bank account which requires management on the part of both, so it is everyone for themselves. The disadvantage of this method is more related to the greater increase on certain elements.

For example, groceries versus mortgage payments. Groceries will experience a much more sustained increase than mortgage payments, since these are often negotiated and fixed for a set period.

Regardless of the method you use, it is important that the agreement is fair and that you review it once a year or when a significant change occurs. DON’T FORGET savings for retirement when calculating the amounts available, for example, if one has a pension fund at work and the other does not, make a retirement savings plan for the one having no pension fund and decrease the amount available for that person.

Finally, with Budget Express, you will also be able to make several budgets, which will make your job easier.

Katie Lefebvre
Partner of your financial success

RRSP season is in full swing!

You have until March 1, 2022, to make your contribution for 2021, but is an RRSP really the best retirement savings strategy for you?

Here are 5 questions to ask yourself before contributing to an RRSP.

1. Will your marginal tax rate increase anytime soon ?
Given that the RRSP contribution reduces taxable income and that the tax savings are calculated on the marginal rate, would it be better to wait until you have higher income and thereby a better tax advantage on your RRSP contributions?

2. Will your marginal tax rate on withdrawal be lower than your current rate ?
To have a real tax saving, make sure that the percentage of tax paid during the withdrawal will be lower than the percentage of tax saved during the contribution.

3. Will my RRSP contribution provide me with the retirement income I need ?
Without knowing your needs in terms of retirement income, your RRSP contributions are made without real objectives, and you may have too many or not enough. If the amount is not enough, perhaps reinvesting your tax refunds back into your RRSP is a strategy to consider.

4. Am I really using all the advantages related to the RRSP ?
If your marginal tax rate is lower than that of your spouse, why not use it and save even more. Did you know that it is not mandatory for the contribution to come from the contributing spouse?

5. Am I well surrounded ?
I can’t say it enough, it is essential to master all the particularities of the RRSP, but also to be familiar with all the investment products on the market to make informed choices. If your knowledge of strategies, types of investments and taxation is not developed, refer to a certified representative. An advisor can help you answer the 4 previous questions and establish the best investment strategy for you.

Also note that the RRSP contribution can allow you to qualify for certain programs such as family allowances, additional subsidies on contributions to education savings plans and many others. These various advantages can represent interesting sums. Talk to your advisor.

Katie Lefebvre
Partner of your financial succeed

2021 was marked by several unforeseen elements that had a significant impact on our finances. Homebuyers in 2021 had to frequently enter bidding wars, inflation took a big leap, COVID had a big impact on business’ revenues that had to close temporarily. In short, our finances have been affected.

2022 promises to be just as difficult financially for many of us, which is why we must be prepared for these challenges. Here are some tips for a stress-free financial year.

1) Plan your cash inflows
Is your income likely to drop? If the answer is yes, try to make an estimate of this drop and prepare a plan B like the possibility of finding extra income or even reassessment of your future goals. Don’t forget that the first step to good financial health is to have a budget.

2) Control your expenses
Spending control is THE biggest challenge we will face in 2022 due to inflation. We must readjust our expenses regularly, but above all closely monitor them. Review your expenses, analyze them, and adjust your budget or your behavior accordingly.

3) Save
Save even $10 per paycheck. Schedule an automatic deposit into a savings account. Many financial institutions offer this type of account which, in general, is free of charge. If you are afraid of succumbing to the temptation and making withdrawals because the account is visible, use for example Moka, which is an application allowing you to accumulate sums of money in an account other than your financial institution. There are other applications of this kind, I invite you to do some research to find the one that suits you.

4) Enhance your knowledge
There are more and more Facebook groups, journalistic articles, blogs, and TV shows that talk about personal finance. Take 15 to 30 minutes a week to either read a blog, sign up for a workshop (soon to be offered at Budget Express), watch a TV show that talks about a financial topic that interests you, in short, take the time to educate yourself.

5) Be well accompanied
Financial services professionals can really make a difference. They will help you to establish clear objectives, but above all to build and implement a financial plan adapted to your situation. They are important allies for your financial health, they will help you make good financial choices and enrich yourself.
Also know that your financial health has a direct impact on your physical and mental health, prevention is essential in these times of uncertainty.

Katie Lefebvre
Partner of your financial success

Budget Express is primarily a tool for forecasting income and expenses, which is the main function of a budget.

However, the tool has some useful unknown features. These will be very useful for you to cover all spheres of your personal finances.

Check if you can afford an expense:
With the calendar, you only need to check the impact that an expense will have on your bank balance. In addition, the calendar is also very useful for self-employed people with variable incomes, it is easy to see when our funds will run out.

Adapt the tool according to your income and expense management method:
It is possible to modify the configurations to set up your preferred method of budget management. Take for this example the envelope system, which is a very efficient system, but everyone will have their own way of working with this system. With Budget Express, you can create a main envelope (account), for example, automobile, and in which there will be sub-envelopes such as tires, mechanical maintenance, registrations, insurance, etc.

Estimate the future value of your investments:
With analytics, you can estimate the value of your investment products at a future date. This can, among other things, allow you to keep an eye on your goals such as buying a house, retirement, or children’s education funds.

Control your loans and credit cards:
First, create a payment schedule with the same frequency as your income. Subsequently, with the analyzes you will be able to view the remaining balance for each future payment. You can even add a new loan (loan) to it, in the case of a credit card or line of credit.

Plan your withdrawals:
With Budget Express you can plan the withdrawals that will be made from your savings and investments. Take the example of the RESP, when creating the account in Budget Express, you indicate the payments and the frequency at which the deposits are made, you can indicate the annual return as well. Thereafter, you can plan a withdrawal (use) at a future date, this date corresponding to the estimated date of the start of your child’s post-secondary studies.

Several video clips containing the steps to follow are available on the Budget Express YouTube channel. I invite you to view them to familiarize yourself with the different features of Budget Express to use the tool to its full potential.

Katie Lefebvre
Partner of your financial success

Part 1 – Budgeting for a Visa.

Have you ever thought of moving abroad to work and live for a few years? Is the idea of a great expat adventures something attractive to you? Have you ever told yourself, “Oh yes I would love that, but I’m too scared to do so financially?” If so, maybe my experience could inspire some of you to take the big leap! In this series of 4 articles, I’ll share with you different aspects to think about when planning to move abroad. Today, we will discuss the most important thing: the working visa. Then in the upcoming articles, we will discuss housing, transport, banking and shopping in general – so stay tuned if you don’t want to miss this “expat-focused series.”

Maybe I can tell you a little bit about my experience before getting into the heart of the subject. I left Canada in September 2015 to move to Newcastle Upon Tyne, in England’s North East region. I lived and worked there during the totality of my 2-year working visa. Then I moved in October 2017 to New Zealand, in Hamilton, in the Waikato Region, on the North Island. I lived there for almost 2 years. Both times, I didn’t have a work contract before going and I managed to live abroad for four years without breaking the bank so it can be done!

Making the decision to move abroad is never easy; you have to think about the positive and negative aspects of your future life and evaluate the risks. A good way to do so is to look up different websites on the country (government websites are always a good start!) and blogs discussing the expat lifestyle. In my case, it took me about a year before deciding to go through the formalities to get a working visa. Because these different steps can be long, stressful and pricey, it is important to be 100% sure of your decision.

Let’s dig into the subject and start talking about the first step – the working visa! Bear in mind that each country has different rules and that this article is based on my own experience. It is in no way to be considered as official advice, but more as a way of decrypting the process. If you’re looking for legal and official guidance, I advise you to contact the relevant immigration services.

Different visas are available depending on the country you are from, your age and your working skills. If you are starting from scratch and don’t have a prior job contract with a local employer, the first thing to do is to verify if your skill set and working experiences match their shortage occupation lists. In most cases, governments put up a list of occupations where international workers are needed to meet their market demands. In New Zealand, you can easily access their “Skill Shortage List Checker”, and in England it is called “Shortage Occupation List.” If you are lucky enough to have a skill set matching this list, you can start contacting potential employers and try to get sponsored by one of them before even moving to the country.

If you are not able to be sponsored, don’t despair! Other programs are also open to a “younger” audience (18-30 years old or 18-35 years old depending on the countries). If you are part of this age group, it is relatively easy to get a visa under their “Youth Mobility Scheme.” These programs usually have a duration of one to two years and are put in place to help the “younger generation” to have an international experience. You don’t need to have a prior job offer to access them and can only apply to the scheme once in your lifetime. In my case, I used this type of visa for my trip to England and New Zealand. Although easy enough to obtain, they have different requirements and fees, so make sure you fit them all before starting the process. For example, to get the UK Youth Mobility Visa, you have to demonstrate that you have at least £1,890 saved in your bank account – what they consider enough to survive on when you arrive. The visa fees (when this article was written) are £244 and you must pay for the healthcare – £300 per year (so £600 if your visa is for 2 years). You need to pay in the local currency, so keep an eye on the exchange rate. In 2015, when I left the exchange rate was £1 for 2 Canadian $… I don’t have to say that it burned a big hole in my savings, but it was all so worth it!

There are other options that I haven’t discussed here because they are not typical “working” visas, but you should have a look at them if you don’t match any of the previously discussed criteria: you can usually get a “family visa” if you are looking into joining a family member already living in the country or an “ancestry visa” if your descendants are from the country you want to move to. If you think looking into visas by yourself is too overwhelming, there are also a lot of agencies that offer their services in exchange for a fee to help guide you through the process. For example, in the UK, Select Visa Services offers to help you from start to finish for about £1000 (their agency fee). On top of the visa costs, you also have to think about the price of your plane ticket.

Hopefully you’ll start to have an idea of the initial costs and savings you need for the first step into your expat life. Have a think, be bold – living abroad can be challenging but is worth it! Thank you for reading this article and as mentioned, stay tuned for the next one in this series on expat housing.

Cynthia Côté

Part 2 – Budgeting for Housing.

This is the second article of a 4-part series aiming to give you tips on how to be financially ready for a life abroad. If you have not read the first one on how to budget for a visa, you can access it here.

Once you have your visa in hand, you have to think of where you will be living. From my experience, it is really hard to find long-term housing before leaving. I’m not saying it’s impossible, but it is harder than if you were in the country. Often, the landlords are not confident to start the process if they haven’t met the potential tenant. On top of this, pictures and descriptions online can sometimes be misleading and one thing you don’t want is to sign a 6-month or 12-month contract without having visited the property previously and you also need to consider the neighborhood. If you have no idea where to start, it’s always a good idea to wait to be in the country before house hunting. Saying this, it is not a bad idea to do some preliminary research on different areas and on what is on the market. You need to understand what you want and what you can afford.

For England, I found that SpareRoom (good if you are looking into house sharing and finding flatmates) and Rightmove are decent websites to search the UK housing market. The prices will definitely depend on where you want to live. London is by far the most expensive city to live in. The average rental values can fluctuate from about £530 in the North East of England to £1600 in Greater London. Most of the time, landlords will ask for the first month in advance and for a deposit that will be given back to you when you leave the property at the end of your contract if everything is in order. The deposit is often equivalent to one month’s rent.  So, in effect, you have to pay two months’ worth of rent when you sign the house contract. You should also keep an eye on the prices and what you get for them. Some landlords will offer “all-inclusive” rental prices (internet, gas, electricity, water, taxes will all be included in the price) whilst others won’t. Rental insurance is also generally comprised in the rent price. You can ensure your valuables, but you don’t have to ensure the house or the flat itself as the landlord will have their own insurance for it.

Landlords also generally want to see your job contract as a proof you’ll be able to pay the rent. It’s almost essential to have a job offer if you want to have access to long-term housing. Sometimes this can be difficult if you have just arrived in the country and are not sponsored by a company – finding a job can take a few weeks. You have to think to add the cost of renting a hotel, hostel or Airbnb to your initial budget and to estimate how long it will take before you have a job offer.

For example, in 2015, I shared a big house with 5 other people in Newcastle Upon Tyne, in England’s North East. The rent was £375 per month and I had to pay a deposit of £375. It took me about 3 weeks to find a job. The house was already furnished, and the rent also included the internet, gas, electricity, water and yearly taxes, which I found a lot easier than having to open accounts with the different providers.

Then if you think housing in England is expensive, wait to see the New Zealand prices! A big difference is that you have to pay rent weekly. The national median weekly rent is now about $515 per week. Rental prices will once again differ depending on the location and will be more expensive in the big centers like Auckland or Wellington. Overall, I found the process of renting a house in New Zealand similar to what I experienced in England. You have to have a job contract beforehand, leave a deposit (they call it a bond), you can find furnished or unfurnished houses. As an example, in 2017, we rented a 2-bed furnished townhouse in Hamilton, the fourth-biggest city in New Zealand, for $420 a week. This price didn’t include internet, gas, water and electricity but included the house insurance and taxes.

Because renting a house long-term is a big monetary commitment, you must really think of what you can afford in your new country and that is why budgeting becomes so important. Rental processes are sometimes slightly different than what we are used to in Canada and something worth mentioning is that in both England and New Zealand there is no 1^st of July rush. You can rent a house and move in anytime of the year! I hope reading about a real-life experience will help you with your research and budget. The next article of this series will be on expat means of transport.

Cynthia Côté

Part 3 – Budgeting for Transport.

In this second to last article of this 4-Part Series on personal finances of an expat, I will be discussing my experience using the different means of transport in England and New Zealand and the costs associated with them. If it’s your first time reading this series, you can also go back and explore my first two articles on visas and housing.

Once you have arrived in your new country, you will soon enough have to find the best means of transport for you depending on your budget and needs. How will you get to work? Are you aiming to travel around the country a lot? Where are you going to live – directly in town or in the countryside? Is your expat experience going to be short-term or are you planning to stay long term? These are all questions worth asking yourself if you want to make the best choice for you. One thing you don’t want is to end up wasting money because you went for a monthly tram pass that you end up only using once!

From my experience when I arrived in England, I didn’t have the money upfront to buy a car and decided it was best to rely on public transport. Luckily for me the public transport is excellent in the UK – it was really easy to get by and even to explore the country without owning a car. I lived in Newcastle Upon Tyne just outside the city center in an area called Heaton. The center was about 45 minutes away by foot or 10 minutes away by metro or bus. From the city center you could jump on a train and go as far away as the British National Rail Service permits (which means almost everywhere in the country). Their railway system is efficient as a lot of workers use it to commute daily and it saves you the hassle of being struck in traffic which can be very bad in certain areas.  As an example, I found a job in Durham, a smaller town south of Newcastle, and took the train every day back and forth. Durham is about 30-35 minutes from Newcastle City Center (without any traffic) and about 12 minutes on the train. The monthly railway pass is between £101 and £131 for the Newcastle-Durham journey. If I wanted a cheaper option, I could have decided to commute by bus but the 1h journey just wasn’t worth the £10-£15 monthly savings for me. As I have never used the train back in Canada, I thoroughly enjoyed the British experience of commuting by train!

On the other hand, New Zealand was a completely different experience transport-wise. If I didn’t feel the need to have a car in England, I definitely felt the need to have one in New Zealand. This is because the entire country is part of the “Ring of Fire” (the area in the Pacific Ocean where many earthquakes and volcanic eruptions occur) so investing in a national railway system like England would be quite difficult and expensive. Saying this, you can still use the train and bus to travel around the country as they have a service linking major towns, but it is on a smaller scale than what I experienced in the UK. If you want to explore the country and get outside the major centers, you will have to buy a car. I highly recommend it as most of the hidden gems and outdoors activities are out in the countryside. I understood this quickly and bought a second-hand car from a dealership for about $NZ 6000 that I managed to sell after 2 years for $NZ 4000. Buying used cars is something very common in New Zealand and you will have the choice of multiple dealerships around the country. I used the car mainly for exploring at the weekends and doing errands as I was living just outside Hamilton and working in the city center. It took me about 40 minutes to walk to work and I decided I preferred walking than paying for the daily parking charge and having to deal with the traffic. Because it was used only occasionally, it cost me about $NZ 80 every second week for petrol.

When you move to a new country as an expat, it is usual to find work and settle into a new culture. Being aware of the different means of transport available is an important aspect of your global experience, because on top of working you also want the fun – to explore and experience what the country has to offer. I know for a fact that my Kiwi experience would have been a lot less enjoyable if I didn’t have a car. My advice would be to do your research, estimate your needs, see what you can afford before leaving and budget accordingly! The last article on this series will be on banking and shopping.

Cynthia Côté

Part 4 – Banking and Shopping.

This is the fourth part of the personal finances of an expat series. You can also read about the previous entries on visas, housing and transport. In this last chapter, I would like to talk about banking or bank accounts and the different prices of shopping in England and New Zealand compared to what we are used to in Canada.

Once you have found a job, you will most likely need to open a local bank account. I found this process easy enough in both countries. In general, most banks are willing to open accounts for foreigners and if you can provide a job contract, it’s even easier. I would suggest having a look at different bank options and the plans they offer. However, you have to keep in mind that your first account will generally be fairly basic. You’ll have to work in the country for a few years and show that you have a good credit there before having access to a credit card or any other form of saving accounts. In England, I went with Lloyds Bank and I chose Westpac in New Zealand. I never had any problems with any of them and had a good service for my basic accounts.

With your job, you also might have access to retirement savings programs. If you do sign up for this, make sure you know what you are doing as some of the programs will give you access to the money only when you retire. If you don’t plan to live in the country long term, it’s sometimes easier to just opt out of these programs. I was offered one in England and I decided to opt out, as I knew, I would be there for only two years and would probably forget in 40 years that I have some money in England. In New Zealand, on the visa I was on, I didn’t have access to these programs.

Before finishing I also want to say a few words about shopping. The main spending you will have to do in this category is for food (I imagine!) When budgeting for food shopping, I noticed big differences in prices depending on the country you are in. I generally found the food prices in England extremely cheap compared to Canada or New Zealand. I generally was paying between £20-£25 for my entire shopping list for a week, for one person. I was amazed at how much I could get for that price. I even remember once buying items to make a big spaghetti sauce (on top of my usual list) that would keep for a few months in the freezer and thinking: “today it will definitely cost me more than usual.” At the checkout it only cost me about £26! Compared to this price, in Québec, I am usually paying between 60-65$ a week for the same number of items and I would be paying about $NZ 70-75 in New Zealand. Fruits and vegetables are particularly cheap in England and you have access to them all year long for the same price due to the proximity of the southern European countries’ production and distribution channels. In New Zealand, the fruits and vegetables were seasonal. Their price was fluctuating depending on the local production, imports and availability at the time. You just learn to cook and buy according to the season.

Although remember – when you first arrive and are yet to be paid in the local currency makes sure you are aware of the exchange rate and budget your shopping list accordingly as you will most likely have to pay with your savings from your home country.

In this 4-part series, I went through a few factors to take into consideration when you start your expat journey. Other expenses will happen over time and your situation might be different to mine, but I wanted to discuss my experience, so you have a good idea of the impact of a move abroad on your life and your budget. As you can see, this is not a decision you make on a whim. The expat life is a life of challenges, good and bad, but it can be extremely gratifying and fun if you are prepared to go with the flow. If I could leave you with this little tip of advice: always keep part of your budget for unforeseen events or purchases because it doesn’t always go to plan!

Cynthia Côté

2018-11-06 – Update.

This article was written in 2017 and it’s still very popular and up to date.

In 2018 I would add 2 more reasons, from 7 to 9 reasons to spend 20 minutes on your budget (see point 8 and 9.

It amazes me to see how many workers go about their lives living from pay check to pay check. The long-awaited bank deposit that arrives on Thursdays disappears as suddenly as it appeared, leaving behind an empty bank account, unpaid bills and a feeling of disempowerment to those who work Monday to Friday to earn a living.

To remedy this, a personal budget can easily be made in 20 minutes, once all the necessary information has been collected. This time investment is a rather small “inconvenience” when weighed against seven good reasons to create a budget, as listed below.

Continue reading “Nine (used to be seven) good reasons to spend 20 minutes on your budget.” →