Transferwise is the cheapest way to send money internationally compared to traditional bank transfers.
Transferwise is the cheapest way to send money internationally compared to traditional bank transfers.
So you’ve decided to move back to Canada eh? Maybe you didn’t like your new country, or maybe Canada lured you back through family, friends, access to nature, relative political stability, employment, universal healthcare, politeness, excessive skiing…. should I keep going?….. beavers, mild summers, few natural disasters, legal cannabis (pending July 2018), funny accents (or lack thereof), hockey, poutine, flannel shirts, immigrants, subsidized education, and of course the majestic moose.
Regardless of your motives for returning you’ll need to figure out how to re-establish your financial life to maple country. It’s not going to be simple, but it can be relatively cheap.
The information here will also be relevant to new immigrants. If you are a new immigrant or refugee there are additional government services to help with your transition that us former residents don’t get.
It’s very important that you pick a firm date to regain Canadian residency. Both countries will be after your precious taxable income and this date determines who gets first dibs. Typically it’s the day you physically arrive in Canada. The CRA will use this date to determine when to start taxing you. Here’s some things to do before and after that date:
You’ll need to decide what to do with your foreign financial accounts. This decision will mostly depend on your plans for the future and how the other country deals with non-residents.
If you’ve spent a significant amount of time abroad you’ve probably established some roots in your new country. Maybe you found a beautiful spouse who will want to visit their family back home every year. If you expect to be making repeat visits you’ll probably want to keep a bank account open for spending money. First check to see if the foreign bank allows non-residents to hold accounts, and check what you need to do to avoid monthly fees. The money will be just sitting there for months at a time and you wouldn’t want it to get eaten by fees.
Depending on your country you might want to keep some of the currency anyways. USD have always been valuable and should continue to be in the future. The downside is that the money will be just sitting there losing value to inflation. I’d advise against holding your overseas money in a savings account that earns interest. Chances are you’ll be earning 0.1% which might be a few dollars per year and you’ll have to deal with more complex foreign taxes.
What’s that? you got fired and your visa is void and you’re returning to Canada tonight? Bummer. Most reasonable banks should let you transfer your money and close your account remotely. Probably best not to mention that you got deported till after your money is safely back in Canada.
Welcome to 2018 chumps and chumpettes. Is one of your resolutions to save more money? Well it is now. Here’s yet another “how-to-save-money” list with three ideas.
What’s lifestyle creep? Let’s say you just got a raise or won the lottery or found a sac of cash in a dumpster. You take this cash and buy luxury items. Soon enough the items are no longer a “luxury”, they’re just normal, and you think you can’t live without them.
For example, maybe you get a raise and the next day decide to get the $3 Starbucks coffee instead of the $2 Tim Hortons coffee. Or maybe your next car is the $30,000 Lexus instead of the $20,000 Toyota.
After the “honeymoon phase” with your new fancy toy (or habit) it will begin to feel like normal. To make things worse you’ll have trouble downgrading to whatever you had before. Hence the phrase “once you’ve had X you can never go back” <Relevant youtube link>
How to avoid it? Channel all that extra cash right into your investments. By definition a luxury item is unnecessary. I’d wager that retiring 5 years earlier or with a higher income will influence your long term happiness more than owning that fancy whatever.
Whoa, climate change? On a finance blog? Yep it’s come to this. First, lets get this out of the way. Is climate change real? Maybe, maybe not… Just kidding. It’s totally real and anyone who says otherwise has been reading too many blogs. I mean… well… this blog is fine.
Don’t believe in climate change? You are free to believe in whatever you want but the objective truth doesn’t change based on what you believe.
Anyway this article isn’t for climate science it’s about profiting from the inevidible!
Not exactly, we aren’t buying stock in cigarettes or leaded gasoline here. Based on my own research into climate change and seeing this emerging denialist attitude, it’s my opinion that the future planet is going to be warmer and there is nothing that you as an individual can do about it. Might as well watch the world turn to hell with a few extra bucks in your pocket.
Before I start blindly listing energy stocks we need to define how the world will change as the climate warms. First, lets think of the worst case scenario where average temperature increase dramatically:
Well that’s a scary list, except for #2. What kind of products and services might be in more demand in this new world?
As an engineer this list makes me excited. Lots of investment opportunity here. Finally lets rank them in terms of the greatest potential for short-medium term gain:
*These ones might have fantastic potential if a bright young person comes up with a miracle invention. Unfortunately we can’t rely on that for investing.
**If people weren’t so scared by GMOs this would be higher (especially those that don’t even know what GMO means)
Finally lets go through the points and identify some companies that provide these services:
Storms and flooding damaging coastal cities is one of the first things we’ll start noticing in the coming decades. Already Hurricane Harvey has flooded Houston and Irma is on its way. Lets find some companies involved in rebuilding and resilience:
Tetra Tech – TTEK – Consulting and Engineering services with lots of disaster planning and recovery services. Up about 19% in the past year
Ch2m (now Jacobs) – JAC – Also consulting and engineering with lots of resiliency work.
So you’ve read the articles, ETFs are getting saturated and you crave even more investment diversity. You want stability and a healthy return. Lets look at three investing alternatives. (Yes I am aware that #1 is available in ETF form. Shut up)
A REIT is an entity that owns multiple investment properties and rents them for profit. About 90% of the income is passed directly to the investors, who own shares in the REIT just like any other company. To qualify as a REIT the company must have 75% of their assets tied up in real estate and pass 90% of their income onto the shareholders through a dividend.
High returns, real estate market exposure, and liquidity. A REIT is the easiest way to sort of own real estate. Their prices are tied to the housing market and not the stock market. Beyond that the dividend can range from 4% up to 10% with monthly payments. Steady income here we come!
Whats that? you don’t have $4 million to buy a commercial property? Well you can invest in a commercial REIT to get exposure to that market! Furthermore it can take months to actually purchase a rental property and fill it with tenants, but you could log into your brokerage account and buy shares in a REIT right now.
Public REITs trade just like stocks. Log into your brokerage and buy shares.
TAXES – this is a big one. Income from a REIT property is taxed when the income arrives at the shareholders instead of the company. What this means is your REIT dividend is taxed at your MARGINAL TAX RATE. You seriously need to keep this in mind because suddenly your 10% dividend is more of a 6.5% dividend after tax. But maybe you are thinking what I’m thinking… “What if I put this in a TFSA or RRSP?” Damn straight, it’s tax free! Use this to your advantage. Fill your tax havens with high-tax high-return investments like REITs to keep the high-return but negate the high-tax.
HOUSING MARKETS – Perhaps you’ve heard about the Canadian housing bubble. You may not own any real estate yourself but if you own REITs you will be affected by real estate prices; if this bubble pops your REITs are going to take a huge dump. Maybe this will never happen, maybe it will happen tomorrow, no one knows, but it’s something to be aware of.
You get to be the bank and loan money to a business! Lending Loop will let you can put up as little as $25 and you’ll be paid back with interest the duration of the contract. You take on the risk that they might not pay it back, but you collect interest based on the likelihood of that happening.
INTEREST. These loans range from 5% to 20%. As of this typing the highest yield is 18.4%, where else can you get an 18% yield? Nowhere, that’s where. Not even here, because you’ll still need to pay tax and Lending Loop will also take a cut. But after-tax yields of 10% are still very possible.
Through their website. Similar to a brokerage you’ll need to sign up and fund your account before you can start issuing loans.
TAXES – Much like REITs your interest income will be taxed at your marginal tax rate. Your 18% return will be closer to 10% after income tax and Lending Loop’s fees. To make matters worse, you can’t shelter these investments in a TFSA or RRSP (at least not yet).
RISK – Like anything, don’t put all your money into one loan, especially not one with a D rating, there’s a real chance you could lose your entire investment.
A penny saved is a penny earned? WRONG. A penny saved is MORE than a penny earned. The money in your pocket is post-tax, but if you (legally) earn another dollar it is pre-tax income. Assuming you get taxed 30% that means a dollar earned is actually 70 cents earned. Send your eyes to the informative chart below:
|$1 SAVED||$1 EARNED|
To put it another way, one dollar saved is $1.30 earned. So start being a cheap bastard and save your money whenever you can! I have a good idea to get you started. Learn some DO IT YOURSELF skills.
And now for my list of reasons why you need to start fixing things yourself (besides saving money):
The thing you fix yourself will seem more valuable than the thing you just paid someone to fix. Human psychology assigns more meaning to objects that were created with our own hands. If you appreciate your possessions more you’re less likely to purchase new possessions furthering the saving money cycle.
Tired of paying for things? You’ve come to the right place. Here I’ll present a perfectly sound and reasonable plan for you to live for free. That’s right FREE. Let’s tackle the most common expenses:
Food is expensive. A decent meal at Mcdonalds is going to cost us upwards of $10, three times a day, that’s $30/day! UNACCEPTABLE! Let’s start by never eating out ever again. That should reduce food expenses by around 2/3 according to my other food post (SAVING HACKS: COOKING). We can make better food than the disgusting poison they serve in restaurants anyway.
BUT COOKING IS ALSO EXPENSIVE. Yea I know. First let’s cut down on luxuries like condiments, spices, salt, sugar, meat, dairy, anything imported, and anything that absolutely requires heat. We can’t be bothered spending precious electricity on heating up food.
All we really need to not die is calories and vitamins. We can get calories from rice and vitamins from vitamin pills.
We’ve successfully gotten our food budget down to $176.50/year:
The title of this post is how to live FOR FREE, not how to live for $0.48/day. Forget everything I just taught you about rice and multivitamins. It’s time to get free food!
We could grow food, but that takes too long and we’ll be dead before harvest time.
We could steal food, but people these days put locks on their doors.
We could live off sunlight, but we’d get too hungry when it’s cloudy.
The solution? GARBAGE. There’s literally tons of food thrown away every year! You only need to find a trash can and get digging!
Houses are expensive. Rent is expensive. But how expensive is it really? A quick search of Kijiji shows the cheapest rentals go for about $300/month. Clearly that’s too much. We can get almost two years worth of food for that!
I’ve been getting a lot of similar questions lately. What are bonds? Why should I care? Why are you wasting your time on this silly moose website?
I’ll answer some of those questions. Turn on the thinking part of your brain…. now… and here we go with bonds!
A debt issued to some entity where YOU act as the issuer and collect interest. (You loan money and they eventually give it back plus some extra)
You give the government or a corporation some money, say $1000, and they promise to pay you interest, say 6%, over a specified time frame, say two years. At the end of the two years you’ll get your $1000 back plus $60 interest for a total of $1060.
Bonds are issued by governments and corporations to gain access to cold hard cash for various long term projects like World War II. Corporations prefer bonds over direct bank loans because bonds offer more flexibility. Banks are strict on what you spend their money on and won’t give you anything more till you pay back the first loan.
Governments typically don’t take loans from banks and thus will normally issue bonds to raise cash or cover a deficit. Alternatively the government can just print more money but that’ll weaken the currency on the open market and thus weaken the country.
A Guaranteed Investment Certificate(GIC) is an investment sold by a bank that provides a guaranteed return over a specified time frame.
GICs are normally issued by banks, not corporations or governments, and as the name implies is guaranteed. The word guarantee is a strong statement, but these banks have been pretty reliable these past few centuries. Bond values can change over time(more on that later) and thus their value is not guaranteed. A bond can also be SOLD at any time whereas a GIC is completely locked up for its duration.
You’ve probably heard that people need 30% bonds and 70% stocks. There are reasons for that:
The easiest way to buy individual bonds is through your brokerage. Questrade offers zero commissions on bond trades. You will normally call the bond department of the brokerage to place an order. Government bonds can be purchased through the Government of Canada website.
They’ll even mail you a fancy bond certificate! (Update: Canada Savings Bonds are being discontinued in November 2017. Dangit)
ETFs – You guessed it, bonds also come in ETFs! With a bond ETF you can buy a small fraction of 1000 different bonds at once rather than a single bond. You can buy them just like a stock through your brokerage and can easily target a bond market, like government or corporate.
Vanguard’s Canadian Aggregate Bond ETF holds 770 different bonds, mostly government, it has an annual dividend (or distribution as they call it with bonds) of 3.3% which is paid monthly.
It will make sense with an example. Let’s say you buy a bond at $1000 paying 5%. You will eventually get back a total of $1050. But the next day interest rates rise to 10%. You decide to sell your first bond and buy a new one that gives 10%. Unfortunately you can’t find a chump to buy your sissy 5% bond when they can just as easily walk across the street and get 10%. The only solution is to lower your selling price to artificially give a 10% return.
You manage to sell your $1000 bond for $954.55. Had you kept it you would have earned $50, but the new owner will earn $95.45 ($50 plus your discount of $45.45) which is 10% of $954.55. Summarized below:
|5% interest||10% interest (new owner)||Difference|
|Value at purchase||$1000||$954.55||-$45.45|
|Value at maturity||$1050||$1050||–|
Whoever issued the bond pays the exact same no matter who owns it. But as you can see the $45 was transferred between owners because of the interest rate change.
There! You’re now smarter! You can smugly talk about interest rates affecting your investments!
In the game of building wealth you either earn more or spend less. Not everyone can easily earn more, but anyone can spend less. I’d wager that if you are reading this right now you eat food. Did you know you can make your own food? If you want to get serious about building wealth you’d better start. It might be the easiest and most effective way to save money.
“But Mr ProfitMoose, I’m a terrible cook, I burn spaghetti!” Ignorance is a terrible reason to not do something. What you are saying is “I can’t follow basic instructions”. Whatever you want to cook, just type it into google with “recipe” and you’ll be inundated with cooking instructions. Other reasons NOT to cook:
“Whatever Mr ProfitMoose, I choose to ignore your fancy logic and reasons. I still don’t like cooking” You need someone to hold your hand. What about getting everything delivered right to you? The latest trend are companies like Chef’s Plate that will deliver everything you need to cook a specific meal in a refrigerated box right to your door(although it can be expensive). Why not learn how to make a few of these meals then buy the ingredients yourself?
“Well Mr ProfitMoose, I’d rather put cooking time into things that make me MORE money” Cooking has so many benefits beyond saving money:
I see too many friends and colleagues eating out for every meal yet saying they don’t have time to cook. What if you spend 2-3 hours cooking meals for the next 6 days? (including buying groceries, cooking, and cleaning). Spread out over 6 days that’s about 25 minutes per day, and I’d guess that the time spent in a restaurant (including travel time) is more than 25 minutes (unless you only get delivery).
Lets make up some rough numbers for cooking and eating out, starting with eating out:
The average employers budgets a daily food allowance of $50 for travelling employees, so I’d say my estimate is good. What about cooking yourself? I’ll make up some numbers based on my typical meals:
So based on my estimates you can save an average of $30 per day by cooking everything yourself. Let’s be conservative and cut that in half to $15/day, or roughly $100/week. That’s $5,200 per year. That alone will nearly fill your TFSA! Now lets invest it at 7% return for 30 years:
Half a million seems like a good enough reason as any to start cooking. And you’ll live longer to enjoy it if you are eating healthy.
So you’ve decided how much you want to retire on. Now how do you save enough get there? Enter your goal and current savings into the calculator to find out. The calculator assumes a 7% return per year and 3% inflation.