Entering the CF and YOUR Money....

[Armymedic]

So you have your call and you've been hired on full time to come play in the Canadian Forces. Whether you career plans are for a short but good time, or plans to stay in the CF for the long haul, you will be paid a decent wage for your service. Knowing this, there is so many options for you to dispose of your income, and a whole bunch of people and places who will want your hard earned dollars.

Like time, once your dollars are wasted, they are gone. All you can do is try to earn more, but that, in our salary for time pay system, is a losing battle if money is going out faster then you are earning it.

Of my 17 yr (so far) career, the best advice I have ever received from anyone was from an Armour Sgt during my battleschool who helped our course get into a RRSP program. I started it early, and despite some setbacks (withdrawls) I have accumulated a small nest egg, enough for a real decent house down payment, or survive for a yr without wages.

In my case that sum was about $100 a month until about 7 yrs ago, and about $50 since my children were born. (We have an RESP for $50 as well) This is in addition to the Canada Savings Bonds (which can be done thru CF payroll) I have contributed to for most of my career.

The point, instead of being concern of what kit you will be issued, or how to act during the Basic training before you actually step onto the bus, take a few moments of thought about what you will do with your money. Set up a small RRSP account or savings account in which you will be able to sent a small amount of money monthly to and have saved up from service day 1. AND DON"T TOUCH IT. After yr 5 when you meet that nice girl/guy and want to buy a house, you have something to pay for it with.

My suggestion is a small amount, about $50-100, that you barely notice its gone, but large enough that over 24-36 months, you have a chuck of change saved for when you need it.

There is/was an outstanding, simple to read book authored (my copy anyway) in 1989 by  David Chilton called "The Wealthy Barber". It reads a story where the local barber discusses simple personal finanical sense to his customers. My suggestion is that you should read it before you go, or shortly after you have completed your training. It will be worth your while.



Now that my rant is done, I would wish for the mods to sticky this thread, and any and all advice, questions, and occasionally opinions to do with personal finances be discussed here.  Pay issues can be discussed elsewhere.

some links:

SISIP:  http://www.sisip.com/en/index.asp

Canadian Forces Pay Scale
(Link updated May 2009 to CF site, please advise forum staff if link is broken due to changes in CF site structure.)


Remember, its your money, only you can give it away.

 

[jswift872]

Ive had those darn pamphlets for rrsp's for the longest time, but I didn't have the motivation to put what seems like a little bit of money away every month, after reading your post there armymedic I think tomorrow when the banks are open again, I will go open one. Thanks...

 

[Strike]

I started my RRSP when I was in my 2nd year of uni.  I had been living in shack or renting until last year and was never delayed in my training so I never really got a big chunk of back-pay to be able to use as a deposit on a house.  I'll tell you, being ablt to have a few bills set aside that I could use for a downpayment was really nice.

Another note about money, I always tried to increase my contribution whenever I got a substantial raise.

Finally, remember that when you move there is usually a large chunk that is left over from your allowance.  My last move I threw it into my RRSPs.  This time around I used it to pay down the interest rate on my mortgage.

Armymedic,  good on you for starting this thread.  Hopefully some of the guys that throw some of their "extra" money into other types of investments will jump on board.  I've always been interested in stocks but have absolutely no idea where to start and I've seen how well some of the guys at work are doing simply because of this.

 

[BDTyre]

I've been doing monthly RRSP contributions of $100 for about 5 years, and my work has forced me into an RRSP program in which they take 3% of every paycheque (they also match that).  That's been going on for about a year and a half.

So, any money I get from the reserves will be extra.

 

[George Wallace]

Armymedic

Good advice.  I started my SRSP back in 1983 when I came back from overseas and started out small like you with a $100/month.  With pay raises and promotions I took the money, even before I became accustomed to having it, and upped my monthly payments to $250.  That more or less maxed me out, with usually only about $40 at the end of a fiscal year that I could put into my RSP.  By having the Payroll deductions, I never even missed the money.  It takes a while before it seems to do anything, but suddenly after about 15 years it will suddenly take off.

The best advice I ever got before joining was from a RSS Sgt.  He advised me to buy a house on every posting, and in the end of my Service I would own a house.  Many of us older guys remember those old SSMs, RSMs and Officers who lived in PMQs and had all kinds of big toys, who when they retired landed up working on Base as cleaners because they had to buy a house and couldn't afford it on their pensions.  At first, being single, I enjoyed living in the shacks, but when I got married and then posted to Kingston, I was forced to buy a House as there were no PMQs free at that time.  The best move I made.  I sold that house for a bit of a profit, something you can't do if you rent, and bought in Petawawa.  In Pet I was able to get my mortgage down to $5,000 and when my wife, who had got a job in Ottawa was loosing her apartment, all my suggestions that a mortgage was cheaper than rent paid off.  We bought a house in Ottawa, and remortgaged the house in Pet.  Now I have two mortgages, which keep my pockets kind of empty, but in a couple of months when I Retire and sell the house in Pet, I will be able to use all that cash to pay off the house in Ottawa.  That advice from that Sgt paid off and I will own my house on Retirement.

When buying a house, I would advise you to take out a mortgage and make weekly payments.  That way you actually cut down on the time it will take to pay off your mortgage, you will save in the range of $100,000, and you will know that every week you will be missing so much from your account.  By paying weekly, or even bi-weekly, you are actually paying for 13 months in a year.  That extra month really knocks down your mortgage.  Another thing, if you have extra cash, make an Anniversary Payment and knock your mortgage down even more, as that is paid against the Principle and there is no Interest deducted.  If you reallyhave extra cash, some banks allow you to pay more than what your mortgage paymen; ie:  if your mortgage payment is $100/week, you may be able to up it to $105 and that extra $5 goes directly against the Principle, and it has no affect on what you can pay for an Anniversary Payment.

Stocks and Bonds.  Canada Savings Bonds are a waste of time and money these days.  If you want to get into that GICs are usually a good idea and most Banks can help you out there.  When you have some "Fun Money", money that you can loose and not affect your finances, and you want to play with Stocks and Mutual Funds; shop around.  I had some Fun Money years ago and went to a Broker, who sold out to Midland Walwyn and I was doing OK, but they were bought out by Merrill Lynch, who decided that they were not making enough money in Canada, and sold out to CIBC.  Well, now, I am not a big investor and with the stock crashes, I have under $10,000 invested with them.  CIBC has a management fee of just under $150 annual to manage the money you invested, don't forget buying and selling fees, on accounts under $10,000.  They are recouping their fees by selling my stocks and lowering my account even more.  Don't you just love the big Banks for Service Charging the "little guy" to death?  I would advise that if you do want to start playing with Stocks etc. that you shop for an Independent Broker and only do so if the money you want to play with will not cause you financial grief down the road.

Independent Brokers are a good thing.  They usually deal with more than one family of Funds, Stocks, etc.; where the Banks and large firms like Merrill Lynch sometimes do not deal with Stocks or Funds outside their "Family".  

Independent Insurance Brokers are also good to find for Car and Home Insurance.  They will shop around and find you the cheapest, or best Insurance for your needs.

I'll take a rest and let someone else give some good advice.

Gw

 

[Sundborg]

I find GIC's are great to put some money into when you don't need it.  It's a garenteed investment at a low interest rate which makes it a whole lot better than just sitting in your bank account getting .005% for example.  What I have done lately is purchased some low risk Mutual Funds at the RBC, the Monthly Income Fund to be exact.  I've only had the money in there for around 2 to 3 weeks and I've already made $130 off of it, it's great!  That's like $40 a week.  That's enough to keep your car goin with regards to gas.  But of course I wouldn't touch the money for a while, it's a great way to look at what kind of money you are earning from these funds.  It's a whole lot better than just sitting in your savings account getting little to no interest at all.  The only bad thing about these funds is that one can lose money too, but since it is a low risk fund, one wont lose all that much if one does.  But over time the funds usually do go up with percentages of like 5-18% in a year.
I also do have some RSP's that are kicking around aswell as a few GIC's.  I find having all of these kinds of investments puts my money over a broader range of areas and allows myself to earn a little more money that just sitting in my bank account.

 

[George Wallace]

Don't forget the TAXMAN......If you make any money on your investments, you will have to pay taxes on your Capital Gains.

GW

 

[Long in the tooth]

One rule when you enrol - unless you absolutely need a car don't have one.  Take the equivilent amount of payments, gas and insurance and invest it.  It's amazing the number of guys I interviewed after their first BE who had nothing to show for it.  After three years of living in the 'shacks' with no kids and no car, I had $30,000 for a down payment on a condo.  During those three years of investing I still had almost $500 a month to blow on whatever I wanted.  An incredible amount of disposible income that I wish I had now... (two cars three kids).

 

[George Wallace]

One rule when you enrol - unless you absolutely need a car don't have one. Take the equivilent amount of payments, gas and insurance and invest it. It's amazing the number of guys I interviewed after their first BE who had nothing to show for it. After three years of living in the 'shacks' with no kids and no car, I had $30,000 for a down payment on a condo. During those three years of investing I still had almost $500 a month to blow on whatever I wanted. An incredible amount of disposible income that I wish I had now... (two cars three kids).

Which brings us to Marriage.......I, as a young single soldier, had a nice bank account building up.....then came marriage.....it disappeared real quick.  Now that both of us have good incomes, there are no problems, but it took a lot of work on both our parts to get to where we are today. 

It always puzzled me to see all those guys graduate from TQ3 and race home to marry their High School sweethearts.  The pay isn't bad for a single soldier, but it sure isn't that great for a single income family.  Once you reach the heights of Cpl, then you will have more "room" to do such things.

GW

 

[Armymedic]

Which brings us to Marriage.......I, as a young single soldier, had a nice bank account building up.....then came marriage.....it disappeared real quick.   Now that both of us have good incomes, there are no problems, but it took a lot of work on both our parts to get to where we are today.  

Marriage and postings. I got married and moved. Wife had a full time provincial gov't job in NB before, and nothing for a yr afterward. We planned to try to buy a house, but the difference in the old wages to the significant drop in family income, with added expenses as Ont car insurance etc,  put us in the hurt, despite the wife taking min wage jobs. Thats when I had to dip in to the CSBs and RRSP, especially when #1 child is born and the wife is not eligable for mat leave benifits.

Anyway, it turn around about 5 yrs ago and its been growing again since.

About cars, if you do buy a car, buy one a yr or two old. A new car depreciates in value by 40%+ the moment you drive in onto the street. Also, a car is not an investment...it drains money: car payments, insurance, gas, etc, etc.

 

[Morgs]

is it also my understanding that you can make a 1 time tax free withdrawal on an RRSP for a wedding or a downpayment on a house?
I could be wrong but this is what i understood.

(Edit: When i said RRSP i meant GIC, duh)

 

[Strike]

You can make a withdrawal on your RRSP to buy a house.  It is suposed to be a one time thing but, if you have been renting for several yrs you have the option of doing a withdrawal without penalty to buy again.  I think it is something like 10 yrs.  My pareants did this after numerous years of renting.

 

[Griswald DME]

Since we are speaking about money I have a question about qualifying for a mortgage.  I haven't been in contact with IRP yet, and certainly I will be asking them these same questions.

My wife currently works a fulltime government job and a part time on call job so she makes a decent buck.  I am a civvy electrician and reservist Ed Tech, so I make a decent buck as well.  We live in a large, expensive city where a small box to live in costs 200,000.  We own one such box and want to rent it out and purchase a house at my new posting, where the houses are dirt cheap compared to where we are now.  As part of our retirement plan, we want to diversify and include some rental income in our portfolio, and this is a good chance for us to start.

My question is has anyone here done this?  I'm curious if the financial institutions take the rental income from the condo we leave behind into consideration for the amount I would qualify for.  If not, me being Cpl (basic), theres no way I would be able to qualify to cover both mortgages, even with the houses at the new posting being dirt cheap.  I believe Cpl (basic) makes about 44K/yr, which means roughly 100K - maybe around 130K maximum mortgage, which isn't much if you have to cover two places.

Anyone here have a similar experience and can offer me some insight?  I do know I get a real estate incentive for NOT selling my place, and it will be somewhere around $8,500. which should help out a bit.

Thanks,

DME

 

[Garbageman]

We own one such box and want to rent it out and purchase a house at my new posting, where the houses are dirt cheap compared to where we are now.   As part of our retirement plan, we want to diversify and include some rental income in our portfolio, and this is a good chance for us to start.

The bank will want to see a larger downpayment (i.e. 25%+) if you're going to try to float two mortgages.

They will look at rental income as a source of income if you can provide them with a letter from your tenant stating how much they are paying each month (which requires having a tenant already in place).

I'm sure there are other restrictions around having a place that's not your primary residence, but best bet is to just phone your bank or mortgage broker.

 

[Garbageman]

You can make a withdrawal on your RRSP to buy a house.   It is suposed to be a one time thing but, if you have been renting for several yrs you have the option of doing a withdrawal without penalty to buy again.   I think it is something like 10 yrs.   My pareants did this after numerous years of renting.

Home Buyer Plan:

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/withdrawals/hbp/menu-e.html

You can take out a maximum of $20,000 from your RRSP tax free the first time you buy a home.  Read through the link for the details, but there are ways that you can take advantage of this more than once (rent for a few years, have the home purchased in someone else's name, etc).

 

[Morgs]

Whilest we are on the subject of money i have a question about back pay. I have been hearing a numerous people on this forum saying the CF owe them back pay. Does this only account for Reserve force, or are Reg force personnal affected by this?

cheers.

 

[Armymedic]

Whilest we are on the subject of money i have a question about back pay. I have been hearing a numerous people on this forum saying the CF owe them back pay. Does this only account for Reserve force, or are Reg force personnal affected by this?

Pay issues, as such, are discussed in the Admin site.

This thread is to talk about money, where to direct it before and after it hits your bank account.

 

[Sundborg]

Does anyone currently own some mutualy funds at RBC?  If so, what one(s) are you in and how has the perfromance been on that fund in the past little while?

 

[Long in the tooth]

On purchasing a new home while renting out another... checked into this years ago as I was exactly the same boat.  The banks are very, VERY Picky about this.  Your renter could take off at any time leaving you high and very dry quickly, with two mortgages.  The last thing the banks want is a repo.  At a different time I had a reliable friend renting my basement.  When he left his replacement was not.  The couple of hundred I was used to getting each month 'for free' turned into thousands lost after cleanup.

Next point - taking out RRSPs to pay for your down payment.  Been there.  Wouldn't have done it.  They allow you 15 years to pay back your RRSP (and you don't get the deduction again, of course) or it is considered taxable income.  As most of us will see our incomes go up due to inflation without comensurate changes in tax brackets, a higher percentage is paid in taxes.  It's a pain in the a** at tax time as well.

 

[Griswald DME]

Thanks for the heads up on renting out the old place.  You're actually the first person who said the banks are very picky about this, what bank did you deal with, out of curiousity?  It does make sense about them being picky though as they need to look after themselves.  I wonder if it has to do with the current market?  Where our condo is the vacancy rate for rentals is near zero, so I'm hoping they will give me some leeway on the application, but we'll see... it may not make an ounce of difference.

Side note, I deal with mortgage brokers only, not directly with one bank.  It highly increases my chances of getting a decent interest rate and decent approval limits.  My friends (he's Cpl same as me) just received 4.5% interest rate on his, not bad at all.  Plus I've had really bad experiences with major banks (one in particular asked me three times if I want life insurance for my car loan, I told her NO very clearly and she ended up adding it to the application anyways) so I refuse to deal with banks directly.  Gotta love brokers!

DME