Starting all over - what would you do?

[GreenAvenue]

Since 2010 things have gone south financially for my family. As a combination of loosing our jobs, wrong decisions (trusting the wrong people) and perhaps the economy we lost pretty much most of our invested money. I try to look back to this period without emotions but that is hard because financially we had almost reached the point that we could feel confident we could retire. But, we lost it all.

First of all, I read about people that have been in similar situations like this and I'm wondering how they picked up their lives again.


Currently we have LOC of $ 47,000, mortgage $ 147,000.00 (refinanced 1 year ago, 26 years to go), a DRIP and RESP for our 3 children. Income is monthly $2,800. My spouse and I just took the jobs we could find and no we try to manoeuvre around our kids school & daycare schedule. We try to be as frugal as we can by eliminating costs of cable television, drive one car, etc. Questrade TFSA $1,600.

The car that we have is lease that ends 01/2013. Obviously we need a new car but we don't want to take out a new lease. We can raise the LOC instead of taking on a car loan although a car loan would give us the car in the end.

We can sell the house and see if we can find jobs in Alberta, make more money there but the house we live in is perfect and we prefer not to do that.

Second, what would you do in a situation like this? Would you end the RESP and put that money towards LOC or use money to buy a car?
What other suggestions would you have? I would love some feedback.

[Jim9guitars]

I can only address one of your ideas here, you should research the cost of housing in Alberta before giving anymore thought to that idea. The last I heard it was prohibitive even with the higher wages, and scarce. When I was there 6 years ago I saw a billboard from Walmart offering new employees a $200.00 signing bonus if they got hired and I read in a newspaper that MacDonalds employees in Calgary were the highest paid MacDonalds employees in Canada. Both of these things point out the high cost of living there(to me anyway). I hope things take a turn for the better for you soon, I just joined this forum and it looks like there are some very qualified people here that may be able to help you with your overall situation.

[Spidey]

I can relate somewhat as my job recently became obsolete due to outsourcing. However, considering that you have children in daycare you are much younger than I am - which has advantages and disadvantages. The disadvantages are that this has happened when you have a mortgage and a young family to provide for. The advantages are that you have plenty of time and flexibility to start over and once you come to terms with it, may even find that prospect exciting. You don't say what your skill sets are, but if you could land jobs in Alberta or another market, then I would definitely consider it. It would be advisable to try to obtain employment before leaving your current jobs, even if this means using your vacation for a trip to Alberta or wherever for interviews.

If obtaining suitable employment will mean moving, I would probably sell your home ASAP, pay off the LOC and mortgage and rent for the time being. This will give you the flexibility to move without the potential of having to sell your home on short notice - or worse not be able to sell it and have to continue a mortgage and possibly find suitable tenants when you will have enough on your plate with the move. You could use some of the proceeds for a newer car, if this is necessary.

You don't say the type or amount of RESP. There are sometimes penalties for early withdrawals. My tendency would be to leave it intact, if at all possible, as you will lose the grant portion by taking an early withdrawal. However, I would suspend any further contributions for the time being.

Other than that it appears that you are doing everything right - you've cut expenses down to necessities and are asking the right questions. I realize that this is a stressful time, but sometimes the opportunity to make a big change can be very exciting and present opportunities that wouldn't have otherwise been available if you hadn't lost your jobs.

[crazyjackcsa]

You don't mention what your monthly balance sheet looks like. With 200k in debt, I can't see it being positive.

It depends on what you really want, start fresh somewhere else, or stay where you are. Moving to Alberta is risky, it could work, or it could fail, could you handle that?

Both involve selling the house and renting/downsizing. Would that remove the debt?

A mode of transportation is required, buy something small and used when the lease is up.

Put the investing (DRIP RESP) on hold. Use the UCCB and the The Canada Child Tax Benefit to cover monthy bills if need be, that could be up around $600 a month.

Does that get you back to cash flow positive? If so, then there you are, then it's a slow slog back out.

[Berubeland]

All I can say is that is you can't save your face and your ass at the same time. Your first priority is to stop the bleeding.

Now cutting expenses is valid but I have learned the to win you must have a good offense and a good defense. You must make more money and also keep it from leaving your pocket to create wealth.

So if all you can find in your area is crap jobs that pay peanuts, it's time to leave. I come from a small town in Northern Ontario so I'm quite familiar with this scenario. I grew up across the street from a lake that our family had private use of. I suppose I could have got a nice job at the Country Style.

It's time to have a very real look at your finances, and let the unvarnished reality guide your actions. It does really suck but like ripping off a bandaid the faster you do it the less it hurts.

[Mall Guy]

Couple of questions:

Your ages and children's ages?
Do you have equity in your house?
How much of the RESP is contribution (money you put in vs. growth)?
Interest rate on the LOC and mortgage?
Have you run the numbers on buying out the lease early (maybe by with-drawling the RESP contribution and cash from the TFSA)
Are there jobs in your field available in Alberta? You should also explore the same thing in NL, NS and NB, (and yes I know how strange that sounds)
What is the cost of daycare vs what either one of you earn (is it worth the expense vs taking in other peoples children)?

So . . . going to school is expensive (by which I mean have you learn from this experience?) and time does cure all (by which I mean learn the lessons, put a plan in place, and don't stress in the short term, gains come from the long run). Many years ago, on the verge of becoming financially independent interest rate went from 11% to 18% virtually overnight, and bing botta boom . . . bankruptcy loomed . . . new plan required, planned and executed . . . moving to a lower cost province helped!

[marina628]

Count on $3000 a month for rent in Alberta and I agree NL may be an option ,many jobs there and cost of living still lower than rent of country IMO.

[Sampson]

Depends on where in Alberta.

Rents in Calgary are NO WHERE near $3000 per month even for a newish (2005+) 2400 sqft house with 3+ bedrooms and 2+ baths. You can easily rent a 2 bedroom apartment for anywhere between $1200-$1800 depending on size, age and location.

Fort Mac is expensive, but we don't know what field the OP is in. An accountant or office worker should move to Calgary or Edmonton, a labourer, safety officer, or rig-pig, Fort Mac.

[Four Pillars]

There are lots of little things you can do which will not make much of a difference, but should help (ie stop RESP contributions).

With that income and an already fairly frugal existence - I think you have to be prepared to tread water for a while until your costs drop significantly (ie daycare) and/or your income increases.

I don't see how you can put together any kind of meaningful debt repayment plan at the moment. Just pay what you can.

The two big things I would do if in that situation are:

1) Try to increase income - work more hours, keep trying for better jobs. Keep at it and eventually you should be able to make more money.

2) Keep in mind that your daycare costs will go down over time. At that point you can take some or all of the savings and start a reasonable debt repayment plan.

Don't give up - I don't think your situation is that bad and you just need a break (ie increased income) and you will be in good shape.

[Spidey]

One other point is that I don't know that Alberta should be the only option. The OP doesn't say what their professional backgrounds were or where they currently reside - but there could be work in their field in other provinces than Alberta. Important to keep all options open. I also agree that the house shouldn't necessarily be sold unless moving looks inevitable.