Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
At 36 and 38, millennial couple Matt and Jude, a health-care worker and project manager, have been incredibly successful. They earn a combined income of more than $ 200,000 a year. They live in Montreal with one child, and are wondering if it is time for a big life change.
“My wife and I are living in Montreal, but as someone who is from Toronto, I am interested in moving back to Ontario. I would earn more money in Ontario but the cost of living for housing is higher,” Matt said.
Currently, their monthly costs surpass $ 10,000. The biggest cost is their home: a “smallish” three-bedroom semi-detached house that’s becoming a little cramped for three. This has left them with three goals to consider. One, having an extension built on their current home. Two, moving into a larger home in Montreal, or three, picking everything up and moving back to Ontario.
“I know real estate is more in Ontario, but would the increase in income offset that to ultimately lead to a better standard of living?” Matt wonders.
Both Matt and Jude are working from the office. “We bring lunch to work 99 per cent of the time,” Matt said.
On the weekends, the couple is also saving more money due a more relaxed schedule coming out of the pandemic. “We would normally have one day set aside for chores and relaxing and one day set aside for social outings, either having people over or going to people’s houses. We also like to take day trips outside of the city as we did in the week below.”
Matt adds that their decision to move from Montreal to Ontario weighs heavily on the differences in income taxes. “Income taxes are substantially different for each province,” he said.
In addition to this huge life decision, Matt and Jude would like to start preparing for a second child. They also have a mortgage of $ 560,000.
To get a better idea of their finances, we asked them to share a week in their spending.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on the couple’s goals.
Matt and Jude are contemplating a move to Ontario from Quebec that could result in an increase in his income as well as their cost of living. Matt’s after-tax income could jump by more than $ 50,000 per year. That would be more than $ 1 million of additional earning potential over the next 20 years. Tax rates in Ontario are marginally lower than Quebec at Matt’s income level — about three to five per cent less between $ 150,000 and $ 250,000 of income.
Consumer prices are only marginally higher in Ontario, but real estate prices are much higher. The average composite home price in Montreal in May 2021 was $ 496,600 compared to $ 879,100 in Hamilton-Burlington. Child-care costs are also significantly higher. Their current $ 175 per month outlay could jump to $ 1,500 to $ 2,000 per month or more, which is an important consideration with one child under two and plans to have another.
Matt is in a health-care field that would allow him to set up a professional corporation in the province of Ontario. It sounds like he has been able to maximize his RRSP contributions and even contribute to his TFSA at his current income. If a self-employed professional has extra money they can leave inside a corporation, incorporating may offer some tax deferral benefits, so this is a consideration if Matt and Jude make a move and his income rises. His corporate tax payable on profit left inside his corporation could be 12 per cent compared to 54 per cent personally.
It looks like Matt and Jude are doing a lot of the right things. They are contributing to RRSPs and TFSAs, they have insurance coverage in place, and they keep costs low where they can, like eating out and entertainment. It seems like their real estate costs will increase whether they stay in Quebec and renovate or move to Ontario. They have no car payments so will have a new car to buy soon. They will have to plan for costs for a second child, children’s activities as they age, and eventually for college or university. A Registered Education Savings Plan (RESP) is a great way to save on a tax-deferred basis for post-secondary costs and get 20 per cent matching grants from the government along the way.
In a situation like theirs, they should consider financial and non-financial factors. If they can achieve their long-term financial goals regardless of where they live, even if one is better financially, where would they prefer to live? Whether on their own or with a professional, they should do some long-term financial planning to try to model a comparison between the two financial scenarios. They should try to get a sense of the cost of an addition to their current home as well as the cost of a comparable home in Burlington or surrounding area. By projecting future income, tax payable, expenses and saving potential, they can determine how much they can afford while still staying on track for retirement.
Results: They spent more. Spending in week 1: $ 860.36 Spending in week 2: $ 3,697.53
How they thinks they did: Spending was definitely up from normal because of mortgage costs and a road trip.
“We went to Toronto,” Matt said, adding that costs were up on gas and food. Otherwise, the couple isn’t too concerned about their day-to-day spending, especially because they have a regimented schedule in contributing more than $ 10,000 to both their TFSA and RRSP accounts.
Take-aways: By coincidence, Heath’s advice on opening an RESP account for their child’s future was something the couple decided to do last week.
One thing they want now, however, is to make sure they find a truly independent financial expert. “We have trouble finding a financial planner that isn’t biased or selling for a financial institution of some kind. Do these even exist?” Jude asked.
Before making a huge life decision to move to Ontario, they want to make sure that someone can guide them without selling them anything.
One thing they’d like to learn more about is incorporation, whether or not they move to Ontario or within Quebec. “I find the comments on incorporating very interesting. We know that it is possible to incorporate in Quebec as well.”
With a new financial advisor, they’ll be comparing those options, on top of putting other cost differences like child care and property taxes in consideration before making the big decision to move.
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