Ending a Long-Term Relationship and Buying a House

How a 36-year-old Mechanical Engineer in Edmonton, Alberta does money.

Anna (not her real name) is a 36-year-old Mechanical Engineer in Edmonton, Alberta. Dollar amounts are in Canadian, unless clarified.

So, Anna, how much money are you making?

Well, because I’m a giant geek, I pre-typed this out for you!

Gross salary: $116,000 ($85,000 USD)

Net salary: $67,000 ($49,000 USD)

Tax/CPP/EI: $28,000 ($20,500 USD)

Deductions (my portion of pension/RRSP): $21,000 ($15,000 USD)

Company contributions: $21,000 ($15,000 USD)

For clarity (and to make the math make sense), the gross salary minus tax deductions equals my net salary. The company contributions are on top of my salary.

How does your income compare to your expenses? Are you earning “enough,” whatever that means to you?

I’m making “enough.” I easily cover all of my bills and I don’t have to think too much about whether or not I can “afford” something. I do have to plan for big purchases, but not most day-to-day stuff.

It doesn’t seem like I’m saving a lot with this job — in previous jobs I saved a lot more toward retirement out of my net salary, but because this job takes out such a huge chunk, I feel justified in not doing a lot of post-deduction retirement saving.

How much do you have saved, both in any savings accounts and in any retirement/investment accounts?

I have about $235,000 ($172,000 USD) in Registered Retirement Savings Plans and $29,000 ($21,000 USD) in a Tax Free Savings Account. This job has a defined benefit pension plan. Its current value is about $60,000 ($44,000 USD), but if I work until I’m about 60, I will have a lifetime monthly pension of around $4,000 ($3,000 USD).

Is that enough for you to live comfortably in retirement? I feel like that’s an impossible question to answer, but also that you might have a guess.

It should be — my current monthly expenses (which include both a mortgage payment and a big expensive dog) work out to be between $4 and $5K right now. Assuming that I no longer have a mortgage and I have a less expensive pet (if any pet at all), I should be fine.

I’m expecting to bring in between $5 and $6K per month in retirement, between the pension and the other savings.

I also anticipate wanting some type of semi-retirement for a few years — either working at an engineering-type job or consulting part time, or doing something else part time — bookstore, coffee shop, gardening center.

Okay, we have to know: What kind of dog?

He’s a muttbull — pitbull mixed with ????

He’s probably a reserve dog — there have been lots of dogs that look like him that have been adopted out by various rescue groups and they’ve all been pulled from local First Nations reserves.

Very cool.

So tell us about your mortgage. At what point in your career did you decide to buy a house, and how did you go through that decision and purchase process?

Ha! Okay — I spent most of my 20s in a long-term relationship that turned out to be not all that healthy. We spent a PILE of time and energy building his dream, and as it got further and further along, I realized that his dream (and the lifestyle associated with it) was probably never going to end, and there wasn’t really any room for my dreams to fit in with his.

During this time, I had been saving a pile of money, with the end goal of “buying in” to his dream (and also incidentally financially supporting both of us — rent, food, car insurance, etc). We finally broke up (after months of trying to break up), and I bought a house the next weekend.

It was not my most well-thought-out decision.

HOW DO YOU BUY A HOUSE IN A WEEKEND? Isn’t there a bank loan process and a closing process and so on?

I had met with the real estate agent a few times previously, and had done the loan pre-approval and a bit of look at properties prior to the actual “official” breakup. For context, I told him I wanted to break up in February and we finally ended things in August.

So I made an offer on the property the Friday we broke up and they removed the conditions on the offer the following Tuesday. I didn’t take possession until mid-September.

My impression is that real estate deals in Canada are quicker and involve less hassle than they do in the U.S. Closing took a few hours.

Nice! Are you still happy with your homeownership, even though it was “not well thought out?”

I am still mostly happy with it. There are things I’m not thrilled with, but I think I did fairly well, based on my budget constraints at the time. Also, most of the things I don’t love about my house are things I wouldn’t have known until I lived in a place like this for a while.

Things like: My place is a two-story with three bedrooms upstairs and I find that’s a lot of space I don’t use. I’d prefer more space on the main floor that I would use daily.

I suppose you could always sell it, at some point.

Yes, I’ve also changed jobs and when I was working even further out of the city, this place (which is actually in a suburb of Edmonton) made a lot of sense. Now that I’m working in the central part of Edmonton, it’s less convenient.

The three to five-year plan is to look for something different. My issue is that what I want, where I want it, is not really in my budget.

And most of what I could afford would be basically the same — tw0-story duplex or three-story town house, with lots of space that doesn’t really work for me.

What would your ideal house be like?

I would like more space on one level, so probably a bungalow or some type or an apartment-style condo in a small building.

Also, even though this HOUSE isn’t exactly what I want, I live in an incredible neighbourhood — fantastic neighbours, good access to transit (on the rare occasions I use it), lots of shopping within five minutes, good access to walking trails and gym facilities and libraries, and good access to main commuter roads.

Really, it could be a lot worse.

Very true. So is your mortgage your biggest monthly expense? And what are the other expenses that take a big bite out of your earnings? Food? Your adorable muttbull?

My mortgage is my biggest expense at about $1,300 per month. Condo fees are another $120 and taxes are about $200. Utilities (heat/power/water) ranges between $200-$350. Phone and internet are about $175. Food (including eating out) is around $300-$600.

The dog ranges between $200-700. He’s a big dog with anxiety issues, so that includes food, vet visits, anxiety meds, daycare once per week, boarding when I travel, and training classes (which are mostly just for socializing/making him tired).

I also spend about $100 on fuel each month. I have no car payment, but I should probably start saving to replace my car.

So do you do specialized savings like that? Cars, vacations, and so on? Or does it all come out of the same account?

It all generally comes out of the same account for shorter-term savings. For something like a car, I’d probably dump money into the short-term savings account each paycheque and then transfer into a dedicated investment account a few times per year.

(My car is only five years old, so the savings timeline is probably 3-5 years before replacement. Shorter-term savings items would include travel and house renovations.)

That’s all in one account and I just kind of keep a running mental tally — like “trip to see my sister — $2,500, minor kitchen renovation $1,500, backyard improvements $1,500.” Some of those are more negotiable than others. I’d skip out on the kitchen work so I could afford to travel, for example.

So how do you think about yourself, financially? Are you a spender? A saver? A budgeter? A worrier? All of the above?

A combination of all of the above? I like to know that I have ENOUGH — whether that’s time, food, money, whatever. So once I feel that I have ENOUGH (and there are a whole pile of security issues tied up in that feeling), I tend to be willing to spend on things that I think are important. As I get older and I’m more set up on my life, those things tend to be experiences. I’m also willing to spend more on a better quality version of something, and have fewer of those things (shoes).

Can you speak a little more to what you mean by “security issues?”

Hmm, well, my parents were farmers — which meant that they were sitting on a LOT of money in assets (land, machinery, cattle), but there was usually very little available cash to spend. Also, the cash they did have usually showed up once or twice per year as large lump sum payments.

Also, farming is a horribly uncertain business — if the crops are good, you make money, if they aren’t, you don’t. If cattle prices are good, you make money. If a case of Bovine Spongiform Encephalopathy is found in Canadian cattle, your herd is worthless.

So there was always a sense of “do we have enough?” that floated around when I was a kid. Is there enough to pay for this, or do we need to borrow more (that would be paid off as soon as the crops were harvested, but you don’t pick up on those nuances as a little kid)?

In university, my parents had initially given me cheques to pay for my residence, but before the second semester they asked for them back and I paid for the second semester of residence out of my student loans. There wasn’t ENOUGH.

Oh, wow. Got it.

As an adult, I try to make sure that I have ENOUGH (whatever that is).

I remember at the end of last year trying to figure out how much I’d earn and how many total expenses I’d have (including discretionary expenses) and I just didn’t want to think of the number once I figured it out, because that meant I had no wiggle room AT ALL.

Which isn’t quite the same thing, but I get how that can feel very tense.

Yeah, I think my parents did a lot of that math.

In their case, they were always backed up with a huge asset base, but they couldn’t really tap into that asset base without “quitting” their jobs. It’s worked out well for them in retirement, once they could sell everything, but there were also helped by timing. When they sold everything, land prices were high.

Which is another unpredictable element, but I’m glad it worked out in their favor!

So I was going to ask you how your family background influenced your relationship to money, but it looks like you already answered that. Is there anything else you learned from your family that affected the way you save/spend?

Hmmm, well, I grew up in a TINY house (five people in under 1,000 square feet), so I have a great appreciation for having space — my friends describe my decorating style as “cozy minimalist.” I have a pretty strong background in cooking, canning and handicrafts, and (thanks to my ex) light construction skills. So I have a really good understanding of what it takes to make things and I find that influences my willingness to pay sometimes. Sometimes I’m willing to pay a seemingly high price because I can see how much work went into something and other times I’m not willing to pay because I could do it myself.

If you have skills, you don’t have bills. (I just made that up.)

It’s true! It also helps when I look at a project and think about how much it’s going to cost in materials and how much time it’s going to take me. Then I can decide if paying someone else to do it is a worthwhile trade-off for me.

So very last question: What advice do you have for Billfold readers?

Other than careers in STEM are a good idea? (I know that will come up in the comments!)

Hmm, I think that there’s a balance to everything. I borrowed about $30,000 to pay for university, but I’ve been really fortunate to have a career where that wasn’t a huge expense to pay off. Then I spent the first few years after university hustling to pay that off, which helped me to develop good saving/spending habits that I’ve maintained.

Also, lifestyle creep is real — minimize it for as long as you can. And compound interest is a magical, marvelous thing — save as much as you can an early as you can.

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