Just over a year ago I thought I was in a pretty good financial spot. I had purchased a pre-construction town home, had a growing Tax-Free Savings Account (TFSA) and had a number of investments, which were all linked to my husband.
Fast forward a year, we’re separated, and everything has changed. I am in the process of selling my portion of our home, and I have shut down 2 of the 3 investment accounts I had previously invested with. My interview with Dave McGann, Director of Tangerine Investments came at the optimal time. I had ‘re-evaluate my finances’ on my to-do list for quite some time, a task that likely would have been postponed for months had I not been given this assignment. It was time to put on my big-girl pants and take off the blinders I had been wearing.
I think there is general consensus, when it comes to millennials, that we don’t want to spend a lot of time looking at our finances. It is stressful, at times depressing, and flat out overwhelming. Years ago, my sister encouraged me to get a TFSA, which I set-up and arranged direct deposits from my pay-cheque each month, and that was that. I didn’t really understand the investment product I had bought into, but I didn’t really care because I love and trust my sister who worked in the finance industry. I think a lot of people are in the same boat as me; someone recommends something and you do it, and forget about it. Not cool. Life changes, and salaries fluctuate. I am in the process of selling my home before it’s complete, and I will be looking to invest the proceeds I make for a few years. Major life changes require you to re-evaluate what you are doing with your money, and I don’t just mean creating a budget and cutting back on your pumpkin spice lattes!
“So where do I go from here?”
Dave’s initial question for me was, “What is your time horizon”, or quite simply “How long until you will need access to this money”. I told him I wanted to save my house proceeds for about 2-3 years until I was ready to jump back into the real estate market. Since I don’t have the luxury of a long runway he suggested I should be looking at high interest savings accounts or GICs. The investments in my current TFSA are quite volatile, as I began it years ago when I was working with a much longer time horizon. The longer the time horizon, the more risk you can allow since the market has many years to recover in the event of a pullback. Dave told me my first step, when I receive my cheque from the home is to max out my TFSA contribution in cash savings vs. more risky investments. He pointed out that for my situation, I’m able to contribute up to a maximum of $52,000 in a TFSA, and this is a big deal because any interest earned or gains from my investments will be tax-free. He asked about the current TFSA I have, and suggested it may be a bit too volatile considering how soon I will need access to the funds. Dave walked me through the process of using the Portfolio Selector tool on Tangerine’s website. Within 5 minutes of answering simple questions I was told exactly which TFSA I should be choosing (the Tangerine Tax-Free Savings Account for my cash vs. the Tangerine Tax-Free Investment Account). Now I know my first move once this cheque clears.
“So my house proceeds are one thing, but what about my retirement?”
RRSPs- Something I’d imagine you don’t have to think about until you hit your thirties. Wait, I just turned 30, dammit! “Dave, tell me about RRSPs”. He had some good news for me. Since I have never made a contribution to my RRSP he told me to take a look at my Notice of Assessment (the slip you receive from the government after you file your taxes). This notice shows me exactly how much I can contribute to my RRSP. Generally it is 18% of the income you made the previous year, but you are also allowed to carry over any unclaimed income from previous earning years. Now that I know the amount I can invest, after weighing the options the Portfolio Selector tool helped me identify that the Tangerine Balanced Income Portfolio is the best fit for me for my RRSP. It is a fund heavily invested in Canadian bonds, with a low to medium risk. While we know RRSPs are designed to save for retirement there are also programs that allow you to access these funds for things such as the ‘Home Buyers Plan’, which fortunately I am still eligible for (since I am taking my name off the house prior to it closing – according to my accountant). This makes it a great investment for my current situation in addition to the cash in my TFSA. This program allows you to withdraw up to $25,000 for an eligible home, under the condition that you repay this within 15 years. RRSPs also allow for a bigger tax refund from CRA, nice icing on the cake if you ask me.
My biggest takeaway from this whole conversation was that re-evaluating my options was not as scary as I thought. Millennials feel the need to judge and compare themselves to one another, and truth is, we are all in different situations, so it’s a waste of time. Dave proved to me that you could review your finances in as little as one hour per year and that focusing on how to make your money work for you (rather than the other way around) is easy with Tangerine Investments. Think of it like going to the doctor for an annual physical- not fun to do, but something you never regret doing. Tangerine offers both telephone and online support to help you find the best investment fit for you. Life is busy and sometimes making an appointment with the bank to speak to an advisor just doesn’t fit into your schedule, which is why their online option is so convenient and easy for those of us who are on the go. I was able to chat with Dave over the phone in my track pants and felt great doing it. The future is not so frightening after all!