Sam and Riley are a married couple living in Winnipeg, Manitoba in Canada along with their dog Bisky and two cats, Theodore and Greta. Sam works as a plasterer and Riley is a social worker at a local college. The couple, both age 36, hope to have a child soon and are wondering how to balance that new financial responsibility alongside their current goals of finishing up a Masters of Social Work (Riley) and changing careers to become a sprinkler fitter (Sam).
Additionally, they bought their first home in June 2022 and are still settling into the realities–and expenses–of home ownership. Sam wrote that they feel like a lot of things are up in the air at the moment and said, “We have so many ideas for ourselves but need help creating plans to execute them. We want to do all these things as soon as possible to increase our incomes, pensions, and employment options, while also having a child soon as we are both already 36 and feeling the pressure on that front too.” Join me in my 100th Case Study today as we help Riley and Sam plan for their future!
A note on pronouns: Sam uses he/him pronouns and Riley uses they/them.
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comments section.
For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.
Can I Be A Reader Case Study?
There are four options for folks interested in receiving a holistic Frugalwoods financial consultation:
- Apply to be an on-the-blog Case Study subject here.
- Hire me for a private financial consultation here.
- Schedule an hourlong call with me here.
- Schedule a 30 minute call with me here.
→Not sure which option is right for you? Schedule a free 15-minute chat with me to learn more. Refer a friend to me here.
Please note that space is limited for all of the above and most especially for on-the-blog Case Studies. I do my best to accommodate everyone who applies, but there are a limited number of slots available each month.
The Goal Of Reader Case Studies
Reader Case Studies highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!
The Case Study series began in 2016 and, to date, there’ve been 99 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.
I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight, queer, bisexual and polyamorous people. I’ve featured women, non-binary folks and men. I’ve featured transgender and cisgender people. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland, the Netherlands, Germany and France. I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.
Reader Case Study Guidelines
I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.
There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.
And a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises.
I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.
With that I’ll let Sam and Riley, today’s Case Study subject, take it from here!
Sam and Riley’s Story
Hello, I’m Sam, I’m 36 and I live with my spouse Riley (also 36) in Winnipeg, Manitoba in Canada. I was a chef and restaurant owner until 2019 when I came to the hard realization that I could not continue in that industry any longer and made the change to become a plasterer. Plastering was meant to be an in-between job until I found something more permanent, but I enjoy what I’m doing for the time being. My long-term goal is to switch to sprinkler fitting, since it’s a good union job with a pension and a higher rate of pay.
Riley is a social worker at a local college and they are weighing the feasibility of finishing a Masters of Social Work degree that they completed most of between 2015-2019, before dropping out due to the onset and diagnosis of systemic lupus. Riley’s had a couple of significant health leaves from work since then, also due to lupus, and has been fortunate to be covered by short and long-term disability insurance through their employer. This has resulted in only small decreases to overall income (although pension contributions were paused or reduced since they were based on employment income and not insurance benefits income). Overall Riley’s health is relatively stable now, but there are some challenges; recently they had to take a few weeks off due to Covid, which hit them harder due to their immunosuppressed status, but they seem to be making a gradual, full recovery.
Riley’s employer approved an education plan in which they will reimburse a portion of the tuition on completion of their MSW degree. They are awaiting final approval to transfer vacation time to have enough to use instead of taking unpaid leave during school, so Riley’s income should stay at the same level.
Sam and Riley’s Hobbies
Riley enjoys cross-country skiing and we both love riding our bikes and gardening. We try to get out camping when we can in the summer and enjoy seeing live music once in a while. We take care of our nephew, who just turned 5, every weekend. We have a dog named Bisky, who is a Shepherd/Husky rescue dog from up North. He’s a handful but keeps things lively around the house. He’ll be 3 this summer. We also have two cats, Theodore and Greta. They are great singers and love to cuddle. They are getting older, at ages 14 and 12.
The Wedding and The House
Riley and I married in September 2021, in a somewhat spur-of-the-moment decision to go through with a small ceremony, as we had a window of lifted pandemic restrictions and less transmission. We gathered a few of our closest friends and family in a park near a river and had a gorgeous (and affordable) wedding.
We bought our house in June 2022 and are head over heels for it. It has great character, lots of original wood, and a huge backyard with a lot of garden beds. We can’t wait to raise a child together in our home and hope to have a baby soon. We like having friends over for casual get-togethers on the weekend– brunch, bbq, bonfires, etc.–and it means a lot to us that our home is so conducive to hosting.
What feels most pressing right now? What brings you to submit a Case Study?
Right now there are so many things up in the air that we feel a bit tangled up and don’t know exactly the right order in which to do things.
Riley writes: In 2022 we made a larger combined income than ever before, and expect to make more in 2023. We are coming from periods of going in and out of debt as we struggled to manage expenses on lower incomes. Fortunately, the debt never became unmanageable and we were able to take advantage of low-interest balance transfers to pay it off quickly. We managed to start saving beginning in 2020-2021 when Sam shifted to plastering work and I increased from 4 to 5 days a week of work.
That helped us with the down payment and costs to buy our home, but we still basically wiped out our savings buying the house and went briefly into debt from moving expenses. Not the smartest move, but fortunately we have quickly paid off those debts and are slowly rebuilding our savings again. Our car was totaled this fall, and it turned out to be a financial opportunity for us as we were able to take the insurance money from the car, pay off our car loan, and buy a lower cost car we could afford outright, while still having some money leftover.
I think that was a significant shift in our thinking as we made the difficult choice to downgrade our car for the sake of not having a car payment any more.
It’s saving us several hundred dollars a month. We would like to look ahead now that we’ve reached the big milestone of buying a house, and set some bigger saving, investment, and retirement goals for the first time in our lives. Clarifying our goals will help motivate us to keep making frugal and smart financial decisions.
Sam writes: I want to make a career change but that will mean less money for a few years as I start out as an apprentice again. It will take about 2-3 years to make the same income I have now, and about 4-5 years to reach journeyperson status and max out the income for the trade. It will be worth it in the long run, especially to switch to a union job with an employer-matched pension.
Riley wants to complete their MSW which may mean more student debt. However, their work will reimburse a portion of the tuition upon completion of the MSW.
Starting a Family
We want to have a child, which means parental leaves from work and reduced incomes (we want to take close to a year off). The Canadian government Employment Insurance (EI) provides 15 weeks of leave for the parent giving birth, and up to 40 weeks of standard parental benefits that can be split between both parents (55% of income to a max of $650/week).
We are looking at starting IVF by the end of the summer if we’re not pregnant by then; the medication costs of $5,000-$6,000 would be covered at 80% by Sam’s health insurance; the other costs would be around $14k. There is a provincial fertility tax credit that would return 40% of the cost to us; we can also claim medical expenses on our federal taxes but it would reimburse a smaller amount (the lesser of 3% of net income, or $2,479). We have an unused line of credit with $10,000 available to help with the upfront costs.
Riley’s employer also tops up their income to 90% (including the EI benefit) for 17 weeks. If Riley becomes pregnant soon, they would be in school when they have the baby. The implications of that are: the employer top-up would be reduced because it would be 90% of the 80% income during school. The EI may be less depending on the timing; EI takes your best paid 22 weeks from the last year to determine the income the benefit is based on. And we would need some extra help to allow Riley to finish the program with a newborn, and it’s really hard to predict how the postpartum period will go. But we do have friends who live nearby and family who would be able to help a lot. If Riley goes back to school, tuition will take some of our savings that would otherwise go toward supplementing our income during parental leaves, and their income will be a bit less during school so we will be saving less during that time.
The rush to complete the MSW is because previously completed credits are starting to stale-date, and have to be assessed for currency.
If Riley can complete the degree in 2023-24, only a few courses will have to be re-assessed (and repeated if not found to be current). If more time goes on, more courses will have to be assessed. So, it feels like the last chance to complete this degree. If not, they could go back to school to re-do it or do a different master’s program sometime in the future. The motivation is to have more confidence in trying new roles in their current job and to have more job options if they want to make a job change in the future.
Retirement Plans
We want to retire as soon as we can. Although realistically, we expect that won’t be super early based on where we’re starting from, but even age 55 or 60 would be nice to aim for. We do our best to keep our expenses low and live a frugal lifestyle.
I suppose this is where you come in. We have so many ideas for ourselves but need help creating plans to execute them. We want to do all these things as soon as possible to increase our incomes, pensions, and employment options, while also having a child soon as we are both already 36 and feeling the pressure on that front too.
Other short-medium term expenses are that our aging cats could start to have additional costs, a car replacement (hopefully the Mazda can hang in there another 3-5 years) and dental surgery for Riley (not urgent but in the next 1-2 yrs, about $2,000-$3,000).
We recently bought a new bike for Riley and a second-hand trail-along bike for our nephew for a total of $900. Riley’s been biking to work and we’ve been taking our nephew on bike rides every weekend.
What’s the best part of your current lifestyle/routine?
We aren’t under any major pressures and we live a pretty relaxed lifestyle. We’ve fine-tuned our routines around cooking, chores, and getting to bed on time. We love enjoying summertime outdoors in our yard gardening, chilling on the front porch, camping, and biking around the city visiting with friends and family. Lots of friends live in our neighborhood and it’s nice and central in the city, easy to walk, bike, and bus to many places. Plus, several car co-op (short-term rental) cars are located within a 10 minute walk, which allows us to remain a one-car household.
Although we don’t have much savings or a clear plan for the future yet, it feels great to not have too much debt hanging over us and the ability to have some of our spending align with our values, such as purchasing our meat, eggs, some of our veggies, and much of our grains/beans from local CSAs. Although interest rates went up more than expected after we bought our home, we were able to switch our variable rate mortgage to a fixed rate for peace of mind, and it still feels affordable for us. We can see ourselves living here for a long time and that feels really good.
What’s the worst part of your current lifestyle/routine?
We feel some anxiety when we want or need to make bigger purchases because we don’t have the saving buffer we know we need. We’d like to be able to travel a bit more and visit friends and family in other parts of the country. We’d like to feel less financial pressure about purchases that improve our quality of life, such as Riley getting acupuncture and taking some supplements that support their health, or sending Bisky to doggie daycare once a week so we can have a slightly less hectic Saturday with our nephew.
Riley’s bus commute is not ideal on the coldest winter days but since it is only twice a week it is tolerable. Riley’s job can be unpredictable and stressful at times. Sam doesn’t have vacation time but gets vacation pay added to each pay cheque, but it ends up getting treated as regular income and so he rarely takes “vacation” time. It would be nice to take a week or two off together a couple times a year.
Where Sam and Riley Want to be in Ten Years:
1) Finances:
- We’d like to have sizable, comfortable savings available for house repairs/upgrades, emergencies, car repairs/replacement, pet emergencies, etc.
- We’d like to upgrade our kitchen and maybe upgrade our outdoor gear, such as our cross-country skis and bikes.
- We don’t want to be stressed about expected or unexpected costs.
- We’d like to have a clearer idea of our target age for retirement and be setting aside extra money to allow us to retire potentially ahead of receiving our CPP, OAS, and employer pensions at age 65.
2) Lifestyle:
- In general, not too different from now.
- Hopefully, we will have a child who we will be taking to festivals and camping in the summer, and doing outdoor activities like skating and cross-country skiing in the winter.
- We’d like to travel outside our province every 1-2 years to visit friends and family.
3) Career:
- Sam should be well-established in a unionized trade job as a journeyperson. This would mean having vacation time and fairly regular hours, as well as increasing his income by $30k or more annually vs. his current income.
- Riley may be content to stay in their current position as they enjoy the work/workplace overall, the pay is decent, and there is still about $14k left of advancement on their salary band. However, they may wish to move into more policy/administrative work or other types of leadership work in their field.
Sam and Riley’s Finances
Income
| Item | # of paychecks per year | Gross Income Per Pay Period | Deductions Per Pay Period | Net Income Per Pay Period | Notes | Annual Net Amount |
| Riley’s work pay | 26 | $2,732 | govt pension (CPP): $155, income tax: $518, employer pension: $216, life and accident insurance: $7, federal employment insurance: $45, charity: $2, health & dental insurance: $69. TOTAL deductions: $1,012 | $1,720 | This is assuming full time hours; on a health leave the income is partially supplemented by disability insurance. | $44,720 |
| Sam’s work pay | 25 | $2,123 (includes vacation pay paid out) | govt pension (CPP): $118, income tax: $438, federal employment, insurance: $35, group life/disability: $27, group medical: $19. TOTAL deductions: $637 | $1,486 | $37,150 | |
| Tax return | 1 | $4,500 | $4,500 | What we expect this year. The previous year we owed a bit; there are some tax credits related to buying our home that helped this year | $4,500 | |
| Sam’s side jobs | Variable | $2500 | $2,500 | Started picking up cash side jobs last year, made $1,000 in 2022. So far have earned $500 this year, expects to be busier this year than last, but amount is an estimate. | $2,500 | |
| Sam’s Bonus (2022 amount – could vary) | 1 | $700 | Income tax: $140 | $560 | $560 | |
| Sam’s EI for 2 week lay-off | 1 | $583 | Income tax: $117 | $466 | $466 | |
| TOTAL GROSS: | $131,690 | TOTAL NET: | $88,870 |
Mortgage Details
| Item | Outstanding loan balance | Interest Rate | Loan Period and Terms | Equity | Purchase price and year |
| Mortgage | $257,160 | 5.19% | 25-year mortgage, 5 year term (4 years 9 months remaining) | $4,508 | $282K; purchased in 2022 |
Debts
| Item | Outstanding loan balance | Interest Rate | Loan Payoff Year | Monthly required payment |
| Riley’s Federal Student Loan | $7,282.06 | 0% | 2031 | $72 (both student loan payments were set when my income was much lower; gov’t recently announced 0% interest set during covid will now be permanent) |
| Loan from Sam’s RRSP (retirement account) | $7,210.56 | 2038 | We used this toward our house down payment; we have to repay the balance of $7,210.56 over 15 years ($481/year; $40.08/month), beginning in 2023 | |
| Energy Loan for Central Air | $3,828.05 | 7.70% | 2027 | We pay the $83 minimum payment; additional payments can be made any time without penalty or fee |
| Riley’s Provincial Student Loan | $1,484.00 | 0% | 2028 | $25 per month |
| Total: | $19,804.67 |
Assets
| Item | Amount | Notes | Interest/type of securities held/Stock ticker | Name of bank/brokerage | Expense Ratio | Account Type |
| Riley’s Employer Pension Plan | $25,000 | Currently 8% income is deducted and employer matched. I just learned I can elect to contribute an additional 2% (not employer-matched). Contributions reduce my taxable income, and reduce my RRSP contribution limit for the following tax year. At retirement I can elect to transfer my balance to 1. a life insurance company to purchase a lifetime annuity; 2. a Life Income Fund (LIF) or 3. a combination of these. Earliest retirement 2037. | Pension Plan Details | Retirement | ||
| Savings Account 1 | $9,634 | Emergency fund – currently increasing this as much as we can each month | 1%; 5.25% on new deposits to this Account until July 31, 2023. | Tangerine | N/A | Cash |
| Chequing Account | $4,017 | This fluctuates from about $2000 – $5000 as pay comes in and bills get paid/money transferred to savings | 0.01% | Tangerine | N/A | Cash |
| Sam’s RRSP 1 | $3,778 | GIC | Assiniboine Credit Union | Retirement | ||
| Savings Account 2 | $2,901 | Annual expenses – we try to put about $350 here monthly and take out as needed for annual/quarterly expenses | 1%; 5.25% on new deposits to this Account until July 31, 2023. | Tangerine | N/A | Cash |
| Total: | $45,330 |
Vehicles
| Vehicle make, model, year | Valued at | Mileage | Paid off? |
| Mazda 5, 2010 | $4,500-$5,000 | 174,000km | Yes |
Expenses
| Item | Amount | Notes |
| Mortgage | $1,544 | |
| Groceries | $926 | Includes consumable household supplies (such as toilet paper, toiletries) as well as pet food and supplies. |
| Medical (health co-pays, prescriptions) | $365 | this includes Riley’s supplements, co-pays for acupuncture, massage, dental, etc. |
| Spending money | $363 | includes restaurants/fast food, personal purchases such as books, and spending on our nephew for eating out, toys, activities |
| Dog sitter and daycare | $252 | |
| Property Tax | $213 | |
| Home items (decor, non-consumable supplies, tech items) | $200 | |
| House Insurance | $198 | |
| Gas (car) | $177 | |
| Home repair/maintenance | $160 | this is a very rough estimate since we only have 10 months of home ownership experience; we like to do what we can ourselves so that helps keep costs down |
| Hydro | $153 | |
| Eggs and Meat CSA | $117 | |
| Car Insurance | $116 | |
| Car maintenance and repairs | $100 | |
| Christmas gifts & decor | $96 | |
| Vet visits/pet medical expenses | $92 | |
| Clothing | $88 | |
| Energy loan repayment | $83 | |
| Cellphones | $81 | PC Mobile and Koodo |
| Water and Waste | $75 | |
| Bus fare | $73 | |
| Federal student loan repayment | $72 | |
| Spiritual Companioning | $70 | |
| Summer camping and festivals | $68 | |
| Donations | $65 | |
| Car coop | $45 | |
| Gifts (birthdays, other holidays) | $45 | |
| Alcohol/Kombucha | $45 | |
| Internet | $42 | Can com |
| RRSP loan repayment | $40 | |
| Subscriptions | $34 | |
| Veggie CSA | $33 | |
| Gardening | $33 | this doesn’t account for any savings by eating our produce. decorative flowers are the biggest expense of this category |
| Grain CSA | $26 | |
| Provincial student loan repayment | $25 | |
| Haircut | $20 | Sam cuts his own; this is for one haircut every couple months for Riley |
| Parking | $7 | |
| online yoga annual membership | $6 | |
| Costco membership | $5 | |
| Credit card fee | $3 | |
| Monthly subtotal: | $6,156 | |
| Annual total: | $73,872 |
Credit Cards
| Card Name | Rewards Type? | Bank/card company |
| PC Financial Mastercard | Earn points for buying gas and groceries; use points to reduce grocery costs | PC Financial |
| MBNA Mastercard | We have only used this for balance transfers to pay off debt quickly | MBNA |
| RBC Visa | We keep this for the insurance coverage that applies to our car-coop membership, and because it’s the one Riley’s had the longest. The amount we spend on it doesn’t equate to much in terms of rewards. Only card with a fee – $39/yr | RBC |
Anticipated Social Security & Pensions
| Item | Annual Amount | Year and age you’ll begin taking SS |
| Riley’s CPP | $13,666 | 2052, age 65 (amount is estimate if working till age 65) |
| Sam’s CPP | $13,666 | We haven’t looked into Sam’s CPP and OAS amounts yet but will likely be similar to Riley’s |
| Riley’s OAS | $8,250 | 2052, age 65 (amount is estimate if working till age 65) |
| Sam’s OAS | $8,250 | CPP and OAS would be less if we stop working before 65 |
| Riley’s CAF Pension | $2,441 | 2047, age 60 |
| Annual total (starting in 2052): | $46,273 |
Sam and Riley’s Questions for You:
-
Apple pie filling – preserves from our apple harvest Is it financially possible and prudent for Riley to go back to complete their MSW this fall, even while we are trying for a baby?
- When is the best time for Sam to pull the trigger on switching careers?
- Should we wait until after having a kid/finishing parental leaves to keep his income stable until then? What if we aren’t able to have a baby or it takes a while to conceive?
- We’re eager for Sam to switch so he can get to the increased pay that will be just a few years away, and to be paying into a pension sooner. But, we’re also nervous about the temporary income decrease.
- Where do we start to get on track with getting a clearer picture of our retirement possibilities and starting to work toward them?
- We haven’t made intentional efforts in this area yet since we’ve been focused on saving for the house and paying off debt.
- Should we pay off the energy loan (our only debt with interest right now) or keep making minimum payments to keep more cash available until we figure out school/baby/Sam’s career change?
- Should we keep saving to our emergency savings account until we have a 3-6 month expense amount? Then what? Should Riley start making the optional additional 2% contribution to their employer pension – or should that also wait until after baby/school/Sam’s job?
- We know we can pull in our spending a bit more, where would you suggest we try to focus our efforts on that front?
Liz Frugalwoods’ Recommendations
I commend Sam and Riley for pulling all of this information together and taking a pause to iron out their next steps. I think it’s noteworthy they’re doing this type of in-depth financial–and life–analysis on the precipice of so many potential life changes. Very well done! Alrighty, let’s jump right in.
Sam’s Question #1: Is it financially possible and prudent for Riley to go back to complete their MSW this fall, even while we are trying for a baby?
I’m of several minds about this, but what keeps popping to the forefront for me is that if they really want to have a baby, they should just start trying. Fertility doesn’t exactly improve with age–nor does one’s energy for parenthood–and I’m always hesitant to suggest that someone in their late 30’s delay starting to try. Plus, I don’t think there’s ever a ‘perfect’ time to have a baby. There are certainly less optimal moments, but Sam and Riley are in a stable financial position, have a loving marriage and, most importantly, a strong desire to become parents. What more could an infant want?
→My real questions here center around Riley completing their MSW:
1) Is there a direct, measurable, known salary increase/advanced job position/new career option that’ll become available once Riley has an MSW?
It wasn’t clear to me if this is the case. If it’s not the case, why do the MSW? I am the proud owner of a master’s degree that I’ve never once used or needed and I wish I’d done this meticulous calculation before the blood, sweat and tears (LOTS of tears) of going to grad school while working full-time. If you don’t have to do this, why do this to yourself? If you’re not going to see an immediate and directly correlated salary increase, why do it?
On the other hand, if there is a measurable difference, go for it! It sounds like Riley’s completed credits will expire if they don’t finish the degree soon, so it seems like it would make the most sense to finish it now. I will say that going to grad school while parenting an infant AND working doesn’t sound tenable (at least, not to me), so I caution against assuming that’ll work. If, however, Riley can complete their MSW before a baby is born, that would definitely be a mark in favor of getting started ASAP.
2) How much is the financial burden?
Sam wrote that Riley’s employer would reimburse a portion of tuition after the MSW is done and that Riley’s income would remain the same during school. In light of that, I’m curious what the actual total cost for the remainder of the degree will be? They have the financial flexibility to pay for this degree–depending on how much it’ll cost.
Sam’s Question #2: When is the best time for Sam to pull the trigger on switching careers?
Since there’s a direct pathway to an increased income and more stable career path, it seems like Sam should get started on this transition right away. While it’s not ideal to make a bunch of changes at once, it’s also true that there’s no time like the present. Since this is a years-long process, delaying it for an “easier” time doesn’t seem possible. It’s not going to be easier when you have an infant. It’s not going to be easier when you have a toddler. It’s not going to get easier at any near-term future point, so might as well dive in now.
To the question on the potential for reduced income, the good news is that Sam and Riley can manage this by reducing their expenses. Let’s explore how they might make that happen!
Sam’s Question #4: We know we can pull in our spending a bit more, where would you suggest we try to focus our efforts on that front?
Anytime a person wants to spend less, I encourage them to define all of their expenses as Fixed, Reduceable or Discretionary:
- Fixed expenses are things you cannot change. Examples: your mortgage and debt payments.
- Reduceable expenses are necessary for human survival, but you control how much you spend on them. Examples: groceries and gas for the cars.
- Discretionary expenses are things that can be eliminated entirely. Examples: travel, haircuts, eating out.
Sam & Riley’s current annual take-home pay: $88,870
– Their current annual expenses: $73,872
= $14,998
This is a great savings rate and it’s allowed them to build their emergency fund back up after buying a house. However, if Sam’s income reduced by more than that difference, they’ll need to reduce their expenses. The good news is that they have a lot of discretionary line items, which means they have a lot of flexibility in where/how they make up the difference.
| Item | Amount | Notes | Category | Proposed New Amount | Notes |
| Mortgage | $1,544 | Fixed | $1,544 | ||
| Groceries | $926 | Includes consumable household supplies (such as toilet paper, toiletries) as well as pet food and supplies. | Reduceable | $826 | Hard to know how much can be reduced here since household supplies and pet food are lumped in.
Between their groceries, three CSAs and the Alcohol/Kombucha line item, they’re spending $1,147 a month on food. |
| Medical (health co-pays, prescriptions) | $365 | this includes Riley’s supplements, co-pays for accupuncture, massage, dental, etc. | Reduceable | $365 | While technically a “reduceable,” I’m leaving this amount the same |
| Spending money | $363 | includes restaurants/fast food, personal purchases such as books, and spending on our nephew for eating out, toys, activities | Discretionary | $0 | An area ripe for reduction if they need to. |
| Dog sitter and daycare | $252 | Reduceable | $152 | Are there opportunities to reduce this? | |
| Property Tax | $213 | Fixed | $213 | ||
| Home items (decor, non-consumable supplies, tech items) | $200 | Discretionary | $0 | Another line item that could be reduced if needed. | |
| House Insurance | $198 | Fixed | $198 | ||
| Gas (car) | $177 | Reduceable | $100 | ||
| Home repair/maintenance | $160 | this is a very rough estimate since we only have 10 months of home ownership experience; we like to do what we can ourselves so that helps keep costs down | Reduceable | $100 | |
| Hydro | $153 | Fixed | $153 | ||
| Eggs and Meat CSA | $117 | Reduceable | $0 | Between their groceries, three CSAs and the Alcohol/Kombucha line item, they’re spending $1,147 a month on food. | |
| Car Insurance | $116 | Reduceable | $116 | I’d shop this around if they haven’t done so recently. | |
| Car maintenance and repairs | $100 | Reduceable | $100 | ||
| Christmas gifts & decor | $96 | Discretionary | $0 | Another line item that could be reduced if needed. | |
| Vet visits/pet medical expenses | $92 | Fixed | $92 | ||
| Clothing | $88 | Discretionary | $0 | Another line item that could be reduced if needed. | |
| Energy loan repayment | $83 | Fixed | $83 | ||
| Cellphones | $81 | PC Mobile and Koodo | Reduceable | $25 | Canadian readers: are there any cheaper MVNOs available? |
| Water and Waste | $75 | Fixed | $75 | ||
| Bus fare | $73 | Reduceable | $73 | ||
| Federal student loan repayment | $72 | Fixed | $72 | ||
| Spiritual Companioning | $70 | Discretionary | $0 | ||
| Summer camping and festivals | $68 | Discretionary | $0 | ||
| Donations | $65 | Discretionary | $0 | ||
| Car coop | $45 | Discretionary | $0 | ||
| Gifts (birthdays, other holidays) | $45 | Discretionary | $0 | ||
| Alcohol/Kombucha | $45 | Discretionary | $0 | ||
| Internet | $42 | Can com | Fixed | $42 | |
| RRSP loan repayment | $40 | Fixed | $40 | ||
| Subscriptions | $34 | Discretionary | $0 | ||
| Veggie CSA | $33 | Reduceable | $0 | ||
| Gardening | $33 | this doesn’t account for any savings by eating our produce. decorative flowers are the biggest expense of this category | Discretionary | $0 | |
| Grain CSA | $26 | Reduceable | $0 | ||
| Provincial student loan repayment | $25 | Fixed | $25 | ||
| Haircut | $20 | Sam cuts his own; this is for one haircut every couple months for Riley | Discretionary | $0 | |
| Parking | $7 | Reduceable | $0 | ||
| online yoga annual membership | $6 | Discretionary | $0 | ||
| Costco membership | $5 | Discretionary | $0 | ||
| Credit card fee | $3 | Discretionary | $0 | ||
| Monthly subtotal: | $6,156 | New Monthly subtotal: | $4,394 | ||
| Annual total: | $73,872 | New Annual total: | $52,728 |
To be clear, I’m not advocating for this budget or implying that they SHOULD make all of these reductions. Rather, it’s an illumination of the room they have to reduce their spending if they must in order to enable Sam to change careers, to take parental leave and/or to pay for Riley’s MSW. The point of this exercise is to illustrate how much flexibility they have in their monthly spending, which is a good thing! Where and what they decide to reduce/eliminate is entirely up to them. This spreadsheet gets them started on identifying where they can cut.
When they have Sam’s new salary in hand as well as Riley’s MSW costs and any potential IVF fees, they can comb through their expenses and decide what they’d like to eliminate or reduce.
Don’t Take On More Debt
One thing I caution Sam and Riley against is taking on debt to cover any of these upcoming costs. It seems this may have been a habit in the past and it’s an easy one to fall back into. But it’s not sustainable, safe or wise. Riley mentioned using a line of credit for their IVF costs and, while I don’t know the parameters or interest rate associated with that, I instead encourage them to reduce their spending in order to pay cash for what they need. This brings me to my next suggestion to:
Pay Off The Energy Loan for Central Air
This loan is only $3,828.05, but it has an interest rate of 7.7%!!! If Riley and Sam reduced their spending per the above for just 2.5 months, they’d save up enough cash to pay this off in full! Just do it.
Since Riley’s student loans as well as Sam’s RRSP loan are at fixed, permanent 0% interest rates, there’s no reason to pay those off ahead of schedule. But, it absolutely makes sense to dispense with the energy loan as soon as possible.
Sam’s Question #3: Where do we start to get on track with getting a clearer picture of our retirement possibilities and starting to work toward them?
1) Fill the Emergency Fund First: $16,552
Sam is spot on that they should first fill up their emergency fund to a full three to six months worth of their spending. Between their three cash/checking accounts, they already have $16,552 saved up, which is wonderful! At their current spending rate of $6,156 per month, they should target an emergency fund of $18,468 to $36,936. However, if they decide to reduce their spending, they can commensurately reduce their emergency fund total.
2) Then Save More Cash
While Sam is correct that they should begin to save and invest more for retirement, they’re at a true juncture right now with many potential changes on the horizon. And one thing that makes changes easier? Having a cash cushion. Sam and Riley are potentially facing:
- Costs for conceiving a child
- Costs associated with pregnancy/birth/an infant (they’re notoriously unreliable and expensive)
- Costs for Riley’s MSW
- Reduced income for Sam while he changes careers
That’s a lot of balls–financial and otherwise–to have in the air at once! If it were me, I would start spending a lot less every month and stash that money in a high-yield savings account. That way, I’d be able to deal with any and all of the above expenses.
3) Next, Save for Retirement
Once these four variables settle out and Sam and Riley have a solid grasp on their new expenses and life with their baby, they can turn their attention to increasing their retirement investments.
I encourage them not to wait too long for this since they’ll want to reap the benefits of remaining invested in the market for many decades before they need to withdraw the money to live on in retirement.
Summary of Recommendations:
- Determine the financial basis for Riley completing their MSW:
- If it is indeed going to lead to new career opportunities–and a higher salary–go for it and don’t delay so that you don’t lose any of your existing credit hours.
- If Riley’s career and salary will remain the same, consider very carefully if it’s worth the time, stress and expense.
-
Tomatoes from our garden If you want to be parents, get started right away:
- Fertility is not one of those things that improves with age.
- Have Sam look into starting his career transition training now:
- No time like the present, especially if you are willing to…
- Reduce Expenses and Save The Cash:
- You have a lot of discretionary and reduceable spending categories, which means you have a lot of options for reducing your monthly expenses.
- Trimming here and there will enable you to easily live on a reduced income, fill up your emergency fund and have the cash to pay for other major expenses, such as IVF.
- And remember: you don’t have to eliminate/reduce these expenses forever. Just for now as you navigate this transition period.
- Pay off the Energy Loan:
- You could have this paid off in under 3 months if you reduce your spending per the above recommendations.
- Don’t Take on More Debt:
- You are SO CLOSE to being debt-free (other than the 0% student & RRSP loans and your mortgage). Don’t let yourself slip back into a debt/payoff/debt cycle again. Save up the money to pay cash for IVF and whatever else you might need.
- Invest More For Retirement:
- Once things have settled down in terms of becoming parents, Riley’s MSW and Sam’s career change, start saving and investing more for retirement.
- Keep your extra money in cash for now as you navigate all of these changes.
- Keep us Posted!
- Among other things, we demand baby pictures.
Ok Frugalwoods nation, what advice do you have for Sam and Riley? We’ll all reply to comments, so please feel free to ask questions!
Would you like your own Case Study to appear here on Frugalwoods? Apply to be an on-the-blog Case Study subject here. Hire me for a private financial consultation here. Schedule an hourlong or 30-minute call with me, refer a friend to me here, schedule a free 15-minute call to learn more or email me with questions ([email protected]).
