The first day’s talks for the 2023 Canadian Financial Summit are now live. These videos (and the videos from subsequent days) will be free for a couple of days, and then available for purchase.
I checked a couple out this morning, and one in particular that I found useful was the talk by Jason Heath from Objective Financial Planners. Take a look, and if you find anything useful please share it in the comments.
I just read an article on Savvy New Canadians about requesting and receiving a small refund (as a flight credit) from Air Canada for a recently interrupted travel plan. We found ourselves in a similar situation in January 2023 but we had a different outcome and I wanted to share our experience.
For context, the Canadian Transportation Agency (CTA) says (as of 2018) that airlines have to give compensation for flights that are delayed or cancelled for reasons that are within the airlines control.
In December 2022, we flew from Halifax, through Toronto, to St. Louis to spent the holidays with my family. As you may remember, there was a huge winter storm from December 21 to 26 in North America. We flew to St. Louis on December 21, just ahead of the storm. We experienced a small delay (~2 hours) but that was it.
For our return flight, we were supposed to return on December 27. The evening of December 26 (~7 PM Central Time) we were notified that our flight the following morning at 9 AM had been cancelled “due to equipment availability”. I spent 2 hours on hold to talk to someone at Air Canada, by which time we’d been automatically re-booked on the same flights for December 30 (3 days later). The person I spoke to wasn’t able to give me any better options. We considered some crazier solutions (e.g. driving or taking the train to Chicago) but ultimately we decided to keep our re-booked flight.
After we returned home, on January 1, I submitted a complaint with Air Canada using their form. The auto-response from this form (as well as the CTA policy) promises a response within 30 days. After 30 days had elapsed without a response, on February 1, I also submitted a complaint to the Canadian Transportation Agency (using this form).
Here are the requirements to filing a complaint with the CTA:
On February 6, we received a response from Air Canada (36 days later) offering us $300 per traveller in Air Canada travel credits that expired in 3 years. This was the same thing offered to Savvy New Canadians. I added this information to our case with CTA, with a comment to the effect that we didn’t feel like this met the requirements of the refund process for travel interruptions.
Then, on February 27, we received another response from Air Canada giving each traveller a $1000 refund via e-transfer (and cancelling the $300 travel credit). I’m not sure, but I assume that the reason we received this updated refund offer is because our complaint with the CTA was moving forward. Thus, I would absolutely encourage you to file a complaint with the CTA (in addition to the airline) if you meet their complaint requirements.
If you have any experience requesting a refund due to a travel interruption, please feel free to share it below!
As I said in our 2021 Annual Review, I write with post with some trepidation. In the interest in helping financial independence seem more attainable, I want to be very open about the math behind it. At the same time, comparison is a real source of suffering, and I don’t want to contribute to that. I’m also not a passionate tracker of these things, so our numbers are inherently rough. Regardless, in the hopes that this will do more good than harm, here’s how our finances played out in 2022.
I still work full-time and my wife still works part-time. This year was our first “clean” year in the sense that we were both working for Canadian employers. You’ll note that both our salaries are lower. For me, that’s because I got a lump sum payout on my vacation time when I left my US employer in 2021. For my wife, that’s because her US employer paid more. Now that our income situations are cleaner, I’m considering taking over our Canadian tax filing. For now, I’m planning to do it alongside our tax accountant and see if I get the same results.
And note that this is just salary — it excludes things like the Canada Child Benefit, re-imbursements, and credit card benefits.
Spending (minus taxes)
This year, I shifted to tracking our spending in a much simpler way. Itemizing it simply took too long. Also, I’m not trying to cut our spending, so knowing where it goes (e.g. groceries vs home repair) isn’t important. And I’m leaving out taxes because we’re now having them pulled from our paychecks. Thus, when I pull our spending from our bank accounts I’m not getting them. I’m OK with that, though, as I need to figure them in manually for our post-work phase as we’ll have significantly less taxable income then.
All-in-all, I’m happy with this spending. Would I like it to be lower, sure, but that says as much about me as it does about our spending. Using the 4% rule as a rough estimate, this would mean we’d need ~$1.5M USD / ~$1.95M CAD to retire, with the caveat that we’d need to account for taxes. We’re close to these numbers, but not quite there as our net worth dropped last year.
All values in USD
Jan 1, 2023
Jan 1, 2022
Jan 1, 2021
Jan 1, 2020
403(b)s and RSPs
Our net worth went down by 14% in 2022, which isn’t too bad considering the market performance. We’re continuing to hold more cash than we usually would, along with ~$42K in iBonds, with an eye towards paying down a chunk of our mortgage when it comes due in 2025. After we top off our RRSP contributions for 2022, I’m planning to put the bulk of this cash into a 2 year GIC.
We don’t count home equity as part of our net worth. We purchased our house in July 2020 for $254,000 CAD (~$200,000 USD). The value has definitely increased from there based on comps. I’d guess, if we were to sell it today, we’d be close to (if not over) $350K CAD, which is nuts. When our mortgage comes due in 2.5 years, we’ll owe ~$178K. We’ll likely pay it off (or at least down significantly) if interest rates are high then. If not, we may do another 5 year mortgage.
Even with the market downturn in 2022, we’re still in the ball park of FI. At the same time, I’m not currently considering shifting to part-time work. This is partly because my company is going through a rough patch and I don’t want to make myself appear expendable. In addition, I’ve really come to appreciate the work-life balance that my job provides, along with a salary which would be very difficult (if not impossible) to find locally in semi-rural Nova Scotia. For now, my plan is to stay as a full-time employee for the next couple of years, then re-assess.
In addition, I’ve really come to realize that full retirement isn’t my goal. It does me good to have structure and purpose, and to have projects that make me engage with other people on a regular basis. Ultimately, I’d like to create this type of structure myself through part-time work and volunteering but, for now, I’m appreciating the security of a good salary with good work life balance. At the same time, I’ve started working with someone locally on some IT consulting that could eventually become a part-time replacement for my current job. We shall see.
I have mixed feelings about putting these numbers down on the page. On the one hand, I think bringing more transparency and openness to personal finance is a good thing. At the same time, I think that our tendency to compare ourselves to other people is a lousy thing, and I certainly don’t want to encourage that. Fortunately, there are many people out there who have more money than we do, and there are lots of folks in the personal finance space who spend less that we do, so I don’t think our numbers should stir up too much suffering.
I’m also a bit hesitant to do this as I’m not a zealous tracker of every dollar that passes through our lives, and I realize that this isn’t a popular approach in the personal finance space. Until we moved to Canada, for example, I never tracked our spending or wrote out a budget. I’ve always felt that one of the perks of living well within your means is NOT having to track things religiously.
The combination of the international move and closing in on our FIRE number, though, made me more interested in knowing our actual spending. So I’ve been tracking that since we moved to Canada in the summer of 2020. I’ve also been tracking our net worth for about 9 years.
Currently, I work full-time and my wife works part-time. For most of 2021, we were both employed by US employers, switching over to Canadian employers in the fall. I got a bonus as I received a lump sum payout for my banked vacation time when I left my US employer. Next year, both of our salaries will likely be somewhat lower. And I’m only tracking our earnings from our jobs. In other words, I’m not counting things like the Canadian Child Benefit or investment earnings (which were all re-invested). We also received a small inheritance (~$15K USD) in 2021.
All expenses listed in CAD
Home Repair / Maintenance
The utilities number is actually a bit higher, as the pellets that we buy for our primary heat source are counted under “home repair / maintenance” (as that’s where everything from a hardware store goes. We probably spend about ~$750 CAD per year on pellets. Finally, spiritual health is a combination of meditation retreats and classes that we do.
All values in USD
Jan 1, 2022
Jan 1, 2021
Jan 1, 2020
403(b)s and RSPs
Net worth over the years, in USD
We moved in July 2020, selling our house in Tampa, and clearing ~$100,000. That’s part of both the jump in our taxable account, and also the jump in cash for January 2021 — I was dollar cost averaging into our taxable account at the time. The tremendous growth by January 2022 is primarily market gains. We’ve contributed a bit to our RRSPs up here, but I only had a little room.
I don’t consider our house as part of our net worth. We purchased our house in July 2020 for $254,000 CAD (~$200,000 USD). Crazily, based on the price per square foot of several recent sales in our neighborhood, I suspect it has already appreciated to close to $300,000 CAD. We have a mortgage of ~$195,000 CAD, with a monthly payment of ~$1100 CAD. I’m currently leaning towards paying it off (or at least down significantly) when the mortgage matures in about 3.5 years.
I suspect our future spending will be a bit lower, as we were still getting established in Canada this year. At the same time, we didn’t have any major one off expenses (we replaced our ERV, but that wasn’t too bad) so it may not be too far off. And I feel like the tax portion of our spending will drop significantly in retirement, as some of the money that we’re spending each year won’t be income. In other words, it will come from our taxable account or (eventually) our Roth IRAs.
If we take $65,000 USD as our target for annual spending, the 4% rule would give us a FIRE number of $1,625,000. At $1,448,280, that puts as about 90% of the way there. And neither my wife nor I plan to fully retire in the near future. I’m thinking I’ll go down to part-time in the next year or so, but at the same time with the combination of working from home and generous leave, I’m also thinking I might just stay full time until I’m ready to pull the plug. Regardless, I feel like we’re in great shape.
I must confess — before we moved to Canada (in July 2020) I never tracked our spending. I used Mint to aggregate our investments, and I usually added credit cards there as well, but I never cleaned up or looked at the data. I’ve always felt that one of the perks of living within well within your means is not having to track expenses or make a budget.
I changed my tune when we moved because I thought we were near our FI number. To be sure, though, I had to pin down what our spending was. I had a rough idea of our spending in the US, but since we were in a new country I decided to bite the bullet and track it.
I’m using a tool called GnuCash. I’m only using a fraction of it’s functionality — it’s a full accounting suite, but I’m only using it to track spending. I chose it for a few reasons.
It’s located on my PC (rather than cloud-based). I’ve increasingly moved away from “free” apps or websites where I’m providing them with a lot of personal data.
It learns — as I classify expenses each month, it makes better guesses as to how to classify them in future months.
I thought, when I started doing this, that handling multiple currency (CAD and USD) was going to be a priority for me (which GnuCash can also do) but to get the results I want (a single view of my expenses) it’s easier to just convert my few USD expenses into CAD each month.
Here’s how our average monthly expenses broke down for the last 13 months. This is all in Canadian dollars.
principal and interest
Home Repair / Maintenance
having house (interior) painted having the garage / attic finished with aspenite service for our pellet stove and HVAC every trip to the hardware store
another catchall — if I was looking to cut expenses I might dig into this one
Auto (gas, parking, insurance)
doesn’t include the purchase price of our used Subaru Outback
doesn’t include pellets (which appear under home repair / maintenance).
mostly winter, shoes / boots, and skates / sporting goods
retreats and classes w/ our meditation group in Florida
currently 2 US, 1 Canada.
Education (school lunches and summer camp)
Other / Miscellaneous
There are undoubtedly places we could trim our spending. I also suspect that this first year in Canada will be a bit higher than subsequent years. My goal in this exercise, though, is to understand our spending, in order to get a sense of where we stand in terms of financial independence. And, based on these numbers, we look to be in pretty good shape.
Our current portfolio sits at about $1.3 million USD. Using the 4% rule (an imperfect but reasonable quick and dirty estimate), that should enable spending at about $52,000 USD (or $65,000 CAD) per year. Our current spending is just under $78,700 CAD (or ~$62,000 USD). This is very similar to what we were spending in the US.
If we were to fully retire, some of these expenses (including our taxes) would reduce, and we’d get an increase in some benefits (like the Canadian Child Benefit) as well. If, for example, we were drawing down so that my wife and I both had $20,000 CAD in income, we’d pay less in taxes and get almost $6000 in CCB, which would put us very close to the ~$65,000 CAD spending target.
Regardless, my wife is currently working part time (and really likes her job) and my plan is to go down to part-time next year (I think). We’ll do that for a few years and see where things stand. Plus, I’d like to pay off our mortgage when it opens up in a little under 4 years, which would significantly reduce our monthly spend.
All in all, I was happy to see, after this first year, that our spending in Canada wasn’t too far off our spending in the US. What about you? How carefully do you track your spending? And what tools do you use?