Hi rino, glad to see you participating and responding to the points being made. You're really in great shape but I need to clarify the 3-tier savings plan.
Tier 1 is supposed to be plain, pure cash (TFSA is a great place for this) and is your first line of defence in case of prolonged job loss, minor accident or other life crisis ONLY. NOT to be used to fund trips, home down payments or other non-emergency items. Goal: 6-12 months total household living expenses unaided (ie. assume the amount needed based on NO UIC or other assistance). After you pay your debt, this needs to be your FIRST savings priority.Got it, and I forsee no obstacles in achiving this goal
I guess you could think of tier 2 as an emergency fund for the home but I would go a bit broader. If your car is in a wreck and written off tomorrow, you may need some extra money to buy a new one, over and above the ins payout. Use tier 2 for this. If the roof needs work on the house, tier 2. If your kid needs $4K worth of dental work, tier 2. If your basement floods and the ins doesn't cover $5K worth of the necessary work, tier 2. NOT to be used to fund a house downpayment (esp with your income and the amount you are able to save), buy consumer goods, go on a trip or other non-essentials. Where to keep the money? Good question. I'm actually not 100% sure on this but I think a cashable GIC (NOT registered) would be a good option. Maybe get the money working for you at 1-2% but keep the GIC cashable since a flooded basement could happen any time. We could honestly start a whole new thread about where to put tier 2 money. Aim to save $15-30K for this. It's important and you will find that when you NEED this money, it won't seem quite so luxurious as it does now.
Got it, and this will be more of a challenge to obtain, but if the wife and I put some effort into it,there should be no problem
Tier 3 is retirement/RRSP and you have that well in hand. I think you should be giving us advice about saving for this fund.
Thank you for the compliment. It was the first financial book I read. The wealthy barber, pay yourself first. So I would contribute 10% of my gross pay
Please understand these funds need to be independent of each other and fully funded and maintained during good financial times. If you use one of the tiers, replenish it when you get back on your feet. Having these 3 tiers gives you pride, dignity and independence during the worst times life throws your way and allows your survival. With a wife and future family, this is ESSENTIALWell said. I am not one to go ask my family for financial help, so having money put aside is key for me. IMO of course.
Lastly, you said you wanted to have a baby in a year and a house within 1-2 years. This is great, good luck!
So these are things you can plan for. What value of house do you want?We are not sure yet. As long as the home we get has 80% of the requirements that we are looking for. Down pmt should be a minimum 5-10% PLUS moving expenses and other costs. Make a 4th fund to save for your house downpaymentI was thinking of using my RRSP to make the downpayment, is this not a good strategy?, even if the $ is in a savings account, whatever. Do NOT draw down on any of the above 3 tiers for this, since you could lose your job and wreck your car right after you move into your new house with young child. Then you won't have any money and will be in dire straits real quick.
You should also
save for the child now
Can I start an RESP?, since your wife is not yet expecting and you have time on your side. I have NO idea how much to save for this but save something so that the aformentioned 4 buckets can continue to operate unaffected by this.
If you find that you cannot save the 3 tiers AND items 4 and 5, then you need to make a decision about delaying items 4 and/or 5. Review the books and do a 3- year forecast given the finances you mentioned initially and see if this is possible.
Good luck - enjoy life!