How a Lawyer in Toronto Does Money
Elizabeth (not her real name) is a 31-year-old lawyer in Toronto.
So, Elizabeth, how much are you making?
$97,000 with a 5–10 percent bonus based on my billable hours.
How does that income compare to your expenses?
I save (and then invest) between 50–60 percent of my income, so I feel very fortunate in that regard. My fixed expenses are very low, which makes saving a large percentage of my income feasible.
Nice! What are your fixed expenses? Rent/mortgage? Car? Student loan debt?
I don’t have a car or student debt. My fixed expenses are rent on a downtown one-bedroom apartment that I share with my boyfriend (we each pay $750 in rent and a further $75 for internet/utilities/hydro).
Is $1,500 for a one-bedroom in downtown Toronto market rate? I know it’s one of the more expensive cities out there.
It’s not market rate. My boyfriend got a deal on the apartment five years ago when he moved in and our landlord is severely limited in the amount that he can increase our rent due to local housing regulations. We have friends paying closer to $2,200 for the same amount of space in our neighborhood.
Wow. It really is all about timing.
Yes, with a hot real estate market timing is everything.
On the subject of timing: how (and when) did you get into investing?
After I finished up my law degree about four years ago, I started a big law job and decided to start investing at least 25 percent of my take-home income. I started with individual stocks (which was fun but very stressful) and have now settled into using a popular robo-adviser (Wealthsimple) for the low fees and the easy use.
As I have gained more confidence, I have moved more and more of my money into the market (as opposed to keeping cash in a savings account).
In the past four years, the market has primarily been on an upward trajectory, right? (I guess you could say that about most of stock market history, but what I mean is that we haven’t had any major dips/crashes AFAIK.)
Yes, particularly the last 12 months or so. It’s been a very good year for investments. I am actually hoping for a crash or adjustment in the markets (as paradoxical as that sounds) because my timeline is long and I am probably in my highest earning years right now.
It isn’t paradoxical, necessarily. I’m also planning to put more of my money into the market in 2018 and I’m like “please don’t be the highest ever!”
I know! It’s amazing how many articles I read every day saying “oh, things are too hot! We are on the verge of a crash!” I have decided that one of these days, someone will be right. But in the meantime, I make regular consistent deposits and try to remember that the target year is 2051 (when I am 65) so yearly gyrations are neither here nor there.
Unless the next crash is in 2050, we’re good!
So are most of your investments for retirement? Or are you also investing to build up a down payment or for some other goal?
I am front-ending my retirement savings and aiming to be close to retirement free (i.e. completed the bulk of my retirement savings by the end of next year) in tax-sheltered and taxable accounts.
I am also saving $200 a month in an account for my parents as a supplemental retirement/travel fund for them. It help defer my worries about their future (knowing what I do professionally about the cost of long-term care).
What do you think you do really well, financially, and what do you wish you could do better?
I am good at planning and very good at only spending money on things that I care immensely about. I am working on being less emotional about investing. It’s nerve-wracking to be investing thousands of dollars a month when every day the WSJ is declaring “the markets are at a new all-time high,” but that’s the price of entry and I am privileged to be able to invest at all.
It’s still better than bank interest, right?
How did you develop your planning/budgeting skills? Did that come from your childhood, or did you become a planner/budgeter as an adult?
My parents have worried about money for as long as I can remember. They have only invested minimally and feel a great deal of regret in that regard. I learnt how to budget and manage my money when I graduated during the financial crisis in 2008. I made under $25,000 for three years until I went to law school.
It was very difficult, but now I know that I need very little to be happy. My spending habits are the same as during the lean years, so whereas then it was a real struggle to get by, now I feel flush with cash.
I know the feeling, although I have made a few minor lifestyle upgrades, like taking taxis/Lyfts if public transportation would take over an hour. Have you made any similar upgrades?
I have one nice meal with my boyfriend every week where I order a couple of glasses of wine (our work schedules mean that we have one night a week reliably together). Having someone else cook and do the dishes is a true luxury (I am a die-hard meal planner).
I also use my yearly bonus to buy vacations for my parents or family vacations. This year’s bonus went to an Airbnb in Hawaii on the beach for ten days.
So in addition to having the bulk of your retirement savings out of the way, where do you hope to be financially in five years?
In the next five years, I want babies and to move to a public interest job. I am ruthlessly saving so that I can comfortably take a 50 percent pay cut. I also hope to work a job where I have the time to be a present parent. My current hours make parenting seem very daunting.
I would imagine. Do you plan on buying a home, or renting?
It really depends. I was looking at buying for a while. Then I did the math and my rent is less than the interest on the mortgage on my friends’ two-bedroom, two-bathroom townhouse.
In a hot housing market, everyone likes to tell me that I should have bought yesterday, but there’s something to be said for not having being the one to pay for a new dishwasher when it breaks.
Right now, I feel financially secure and optimistic at the end of every month. I don’t think owning is worth the loss of peace of mind that I gain from living far below my means.
I’d agree with you there. Last question, then: what advice do you have for Billfold readers?
I’m not big on giving advice (which is ironic since it’s what I make my living doing). I would say: give yourself credit for the positive choices that you make every day and be kind to people who’s approach to money isn’t the same as yours. We are all doing the best that we can in the circumstances. Sometimes the circumstances are terrible.
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