She’s thirty-six, single, educated and struggling. “I’m not house-horny or materialistic and I have no debt,” Linda says. “My parents taught me to keep a level head about money and I am a big saver.”
She graduated, moved to a new city and landed a teaching gig. Linda’s shiny new life was unfolding just as it was supposed to. Each day, another step ahead, her family supportive and her career unfolding. Then, tragedy.
“Five years ago, I suffered a devastating loss where an accident took the lives of four members of my family (including my mom). As you can imagine, this event pretty much obliterated most of anything I’d ever accomplished and a lot of personal relationships. I did manage to work for a while but eventually got laid off. I have pretty much spent the last three years just getting back to a good place mentally. I have been to bereavement counselling and therapy and have started feeling optimistic for the first time in years.
“I’ve used up most of my savings on living expenses. I have virtually no money left in my bank account and my living expenses are about $1500 a month. I live very frugally, I cook my own meals, don’t buy anything I don’t need and I buy everything on sale. I still have about $41,000 stashed away in RRSPs (36,000) and TFSAs (5,200). I have been actively looking for jobs but teaching jobs are few and far between. I am not looking for full-time work or even a dream job. At this point, I would really take anything I could but it is really hard to be relevant with a 3 year employment gap. I don’t feel sorry for myself, I am grateful for small things like being able to sleep through the night or that I survived the stress of the last five years. Moving home back is not an option. There is no room for me in my family’s house and I don’t want to upset the fragile family dynamic that has managed to heal from all the hurt. I fear until I find a job, though, I may have to withdraw money from my last vestiges of savings. My question is, while the growth hasn’t been substantial, my TFSAs have shown growth but my RRSPs have not. Should I withdraw my RRSPs and start stashing them in my TFSAs? Should I go back to school and get new relevant skills for this scary job market?
“I read your column a lot because I find your advice fairly parallel to my upbringing and lifestyle. Having suffered all this loss, I know things don’t make people happy, it’s usually the people you love who do. Unfortunately, you need money to live and I am quickly running out. Any advice would be appreciated. Linda.”
There’s no magic solution to surviving, Linda. You spend less, find income and make your money last as long as possible. It’s good you wrote, as I’m sure the community of this blog, as full of social deviants as it may be, will have some worthy suggestions. I have a few.
There’s no reason to cash in the remaining RSP money and put it into your tax-free account. In fact, if you were to do so, you’d lose 30% of the amount you have invested in mandatory withholding tax – precious capital you can’t afford to part with, even if you get it back as a refund a year later. Always remember if you need cash from a registered retirement account, keep the withdrawal to less than $5,000, and the amount held back for tax plunges to just 10%.
Beyond that, things won’t grow any faster in your TFSA than inside your RRSP, so it sounds like you have the wrong stuff there. Did some well-meaning banker stick you in mutual funds? I bet. Far better that you dump them, and grab a few exchange-traded funds. Or you could convert it into stable bank preferreds, and at least enjoy a 5% return – although that would yield you just $150 a month.
Seems you’ll have no choice but to live off the retirement fund for months to come until life deals you a better hand, so you might as well control this. Open a discount brokerage account, then a self-directed RSP, move in the money and reinvest it (email me and I’ll help you choose the low-cost ETFs). You can then sell units every few months and move cash into your chequing account, taking care to stay below the five-thousand limit. If the TFSA funds are growing now, leave them to do the job. That’s the last money you spend.
What about income? Don’t give up on teaching, Linda. Doubtlessly you have many lessons to impart to the children. If the ill-run school boards won’t hire you, hire yourself. Offer one-on-one tutoring, for which there’s a substantial demand in many Toronto hoods. Start with a creative web site, then use social media to expand the reach. The cost is absolutely minimal, and you have the time and intelligence to make this succeed.
If you’re still too burned out for that, try another home-based business. Like, say, dogs. If you can keep a pooch or two where you live, offer home care, by the day or for extended periods. The woman whose care I leave Bandit in while on the road is over-subscribed for the next month – taking seven hounds into her city house at the rate of $45 a day. No license required. No overhead. Just add affection, and collect two grand a week.
Mostly don’t give up. Don’t despair. Do not lose perspective. Keep reaching out. The unfairness visited upon you should not be the defining feature of your life. Your mom would not wish it so, nor the others no longer around to hold you in such moments of doubt.
Keep coming here. We may be pathetic, but we care.
Update: Shortly after this post was published tonight I received a note from the head of a private school in Vancouver, asking that Linda apply for a teaching position there. “We’re always on a lookout for level-headed teachers like Linda,” he said. Thank you.