Personal Finances

Show Me The Money

This topic is a work in progress for us; we are still feeling our way and could make changes down the road if circumstances warrant. Certainly, being retired simplifies our financial needs considerably, since all we really need is secure and consistent access to our money. Our CPP/OAS is direct deposited to our Canadian bank accounts, which we access with our debit cards. In addition, we supplement our income with occasional transfers from our investments as needed. This system works effectively most of the time, however, there have been a few hiccups.

Once, early on, we used an ATM branded with our bank in Canada, which has a visible profile here. The machine debited my account but didn’t give me any money. It took a few weeks to get the debit reversed but, ultimately, it worked out fine. Turns out servicing the ATM is outsourced locally and only the signage pertains to our bank. We haven’t used that machine since.

A couple of times, an ATM has ‘eaten’ our card. While this is anxiety-provoking, we have been able to have a new card couriered from Canada within a few days. When this happens, I can move money between accounts online and we make sure to avoid situations where both cards go AWOL simultaneously.

Living on a cash basis after many years of debt serfdom is both exhilarating and challenging. It requires a discipline to live within budget that had been missing during the era of the great ‘home equity line of credit sinkhole’. By the time we moved, it had become (as my friend Hutch used to say) “a pile of debt that would frighten the French”! With the high cost of living in Canada, it would have been impossible to retire that debt without a significant downgrade in lifestyle.

ATM charges can vary widely (as much as 300%), so we use machines with lower fees wherever possible and usually take our daily maximum. With a large number of gringos in the area paying cash for everything, the ATM’s run out of money regularly. Sometimes they arbitrarily reduce the amount that can be withdrawn, which makes the available funds go farther and also earns more fees for the bank. We’ve learned to go on Friday rather than Monday!

The ATM based approach works well for most things, however, there is a practical limit to the size of cash transactions. A new car, for example, can cost $500,000 (Mx) or more. Money laundering regulations prevent you from paying cash or using a credit card for this purpose. Apart from these types of cases, however, Mexican people are as enthusiastic as the Greeks when it comes to the cash economy!

We had a similar situation when we put in the pool, which cost about $30,000 ($500,000 Mx). The contractor wanted to be paid in 3 or 4 installments over the course of the six week build. It would have been difficult to run that much money through the ATMs in such a short time frame. Instead, we had funds transferred from our bank in Canada directly to the contractor’s account in Mexico. It was not that cumbersome and, fortunately, doesn’t happen very often.

Interest rates in Mexico are much higher than in Canada; bank accounts and GIC’s can pay up to 5%. The bad news is that financing for cars, mortgages and credit card debt is more restricted and expensive. I’m still trying to determine the extent to which this lack of consumer credit contributes to the lower level of affluence relative to Canada. On the positive side, the car may be 10 years old and the house may have taken 10 years to build, but they’re both paid for!

At this point, our current banking arrangements meet our requirements and we don’t see the need to open bank or investment accounts here. Many expats do, and there is a thriving local industry serving these clients. Without a Mexican bank account, however, we can’t pay bills online. The solution is Oxxo, a national chain of convenience stores, as ubiquitous to Mexico as Tim Horton’s is to Canada! You can pay most bills there for about 10 pesos each.

Our assets are principally comprised of our house in Mexico and investment accounts in Canada. Up to now, we have been Canadian residents for tax purposes, however, that may change this year. We will need to either become non-residents or deemed residents in Canada. If I understand our accountant correctly, it will be slightly more advantageous for us to be deemed residents, given the extent to which the lower cost of living in Mexico has allowed us to reduce our income. We will sort it out in April when we file our next returns!

Because we have the house in Mexico, we were advised to get Mexican wills complete with beneficiary designations and POA agreements. Failure to do so would have resulted in nightmarish bureaucracy and protracted delays in the eventual settlement of our estate. Since we are not citizens and Mexican law is not concerned with assets outside Mexico, we also retained our Canadian wills for assets there.

While preferable to Canada in many respects, Mexico does tax capital gains on residential real estate. Before you laugh too hard, I guarantee it’s coming to a town near you! There is a base level on which tax does not apply and different rates for principal residences vs investment property or seasonal use. In our case, having the Mexican wills is beneficial in terms of inheritance; it doesn’t eliminate the tax problem entirely, but it helps.

For all intents and purposes, there is no mail delivery in Mexico. When we moved down, we got a mailbox address at a chain store in Canada and assumed we would make a similar arrangement here. While that is what eventually happened, it wasn’t quite so simple. Due to customs regulations in Mexico, the local mailbox store maintains an address in Laredo and brings the mail down from Texas themselves. As a result, the cost on this end is actually more than in Canada!

Every couple of months, I had the mail from Canada couriered to Laredo. The first couple of times it worked well. The third time, the package was lost (by a prominent, global courier, no less!) and was never found. Normally that would not be a big deal, however, this package contained renewals for my wife’s drivers license, health card and car registration. Merde!

The last time, the courier contacted me to inquire about my immigration status in the US. I said, “I have no immigration status in the US”. They said, “US Immigration wants a scan of your passport”. I said, “To deliver an envelope of mail in Texas. Are you kidding me? Send it back”. Which they did. Since then it has been sent through the regular mail; it takes about two weeks but it works.

From the outset, our bank insisted on having our actual physical address on file. I assumed it was in case they had to send out a search party for some reason, like Stanley and Livingston in Africa. However, despite sending statements to the Canadian mailbox address, they also sent duplicates to the physical address. We would receive them about 2 months later when someone would stuff them in a hole in the wall down by the gate to the development and the caretaker would bring them up and stuff them in our wall! I finally managed to get this stopped.

Recently, I have been working to eliminate the mailbox in Canada. When I looked at the content of the mail shipments, more than 90% of it was bank statements and investment statements. While it was much more difficult than their advertising would suggest, eventually we were able to get these converted to online statements in both cases. Going forward, we will only have the address in Laredo for Canadian mail purposes.

Despite the fact that one of our cars is Ontario plated, we need Mexican car insurance for both. This was quite easy to obtain and, in the case of the Canadian vehicle, cost about half as much as in Canada. In fact, the price is so low that we pay the premium annually rather than monthly (remember, like in the ‘olden’ days!).

Car insurance is mandatory in Mexico but some people still don’t have it. You are somewhat fortunate if the person who runs into your vehicle is insured! Later this year, we will need to get Mexican drivers licenses before our Canadian ones expire. The driving manual is now available in English and the test can be written in Chapala, rather than having to go to Guadalajara.

Most Mexicans don’t have house insurance and, at this point, neither do we. The rationale is as follows; there is hardly any wood in it so it won’t burn and the physical security against break-in is good. The biggest danger is mudslides and earth tremors due to seismic instability, but this coverage is costly and difficult to obtain. The arroyos (drainage ravines) on either side of our property keep us fairly safe. Still feels a bit weird and exposed to my Canadian psyche, though!

Changing the subject; our son came down from Canada for a visit over Christmas. He had been on assignment overseas when we moved in 2020, so we hadn’t seen him in about two and a half years. We had a great time; went out for lunch every day and lounged by the pool in the afternoons. Went to visit the town of Tequila, where he and my wife both got snoggered at the tasting after the distillery tour. It made for a quiet drive home, but a good time was had by all!

I read online that Mexico rescinded the last of their pandemic restrictions for travelers on New Years Day. There are now no testing, vaccination or quarantine requirements on this end. Internal restrictions can vary by state but are generally much lower than the US or Canada. In Jalisco, for example, capacity limits on attendance at concerts were brought in last week in response to Omicron. Otherwise, it’s as close to normal as you’ll find anywhere. Absolutely no reason not to ‘Come on Down’. Unless, of course, you want to go back!