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Discussion Starter #1
Hopefully this post is in the right place!

My wife (26) and I(32) are looking for some advice or opinions on how we're doing, where to improve and where to go with our finances. I've been checking out milliondollarjourney.com for about a year, which is when I started tracking our net worth.

Here's where we're at:

Gross yearly income: $120, 000

Assets:
Chequing and savings: $51, 000
Vehicles: $50, 000 (gold book value)
RRSPs: $13, 000
TFSAs: $20, 000
Pensions: $25, 000
Non-registered mutual funds: $35, 000

No debt. In 2007, I read the Smart Canadian's Guide to Saving Money and realized that we were $65k in debt, paying a large portion of our monthly income to debt and even worse....interest. We made a plan and fixed that problem mid 2008.

So, we have so much sitting in savings, just because we plan on buying a house soon and wanted it somewhere safe until the time we use it for a downpayment. We also have the TFSAs for the same reason, to be split between emergency and downpayment.

At first I was thinking just throw a huge chunk at our house because the prices in Alberta (in my opinion) are ridiculous, but now I've been researching and contemplating on putting a portion on our residence, and using a portion to purchase a rental property (looking at maybe Feb or Mar 2011 to ensure I have done enough research etc...).

We're also tempted to cash in those mutual funds and top up our rrsps which have at least $35k room left together. We're not sure if this is a good idea, but it seems to me like we'd get a good refund to then pay down mortgage(s) and still have the money growing tax sheltered.

Our vehicles are a 2006 Toyota Corolla and a 2009 Toyota Highlander...we hopefully won't need to replace them for a long time.

In the places we are planning to move, an average house will cost us around $350k. That blows my mind since that isn't even anything special...I'm so glad I don't live in Toronto or Vancouver! I guess the main things we're looking for is...the switch to rrsps for our mutual funds a good or bad idea? Is a rental property too much financially for us to take on? Any other thoughts or opinions?

Let me know any other questions too, I love reading advice etc on this kind of stuff...but it's always advice on someone else's situatuion...thought I'd like to see some on me :p
 

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Hopefully this post is in the right place!

My wife (26) and I(32) are looking for some advice or opinions on how we're doing, where to improve and where to go with our finances. I've been checking out milliondollarjourney.com for about a year, which is when I started tracking our net worth.

Here's where we're at:

Gross yearly income: $120, 000

Assets:
Chequing and savings: $51, 000
Vehicles: $50, 000 (gold book value)
RRSPs: $13, 000
TFSAs: $20, 000
Pensions: $25, 000
Non-registered mutual funds: $35, 000

No debt. In 2007, I read the Smart Canadian's Guide to Saving Money and realized that we were $65k in debt, paying a large portion of our monthly income to debt and even worse....interest. We made a plan and fixed that problem mid 2008.

So, we have so much sitting in savings, just because we plan on buying a house soon and wanted it somewhere safe until the time we use it for a downpayment. We also have the TFSAs for the same reason, to be split between emergency and downpayment.

At first I was thinking just throw a huge chunk at our house because the prices in Alberta (in my opinion) are ridiculous, but now I've been researching and contemplating on putting a portion on our residence, and using a portion to purchase a rental property (looking at maybe Feb or Mar 2011 to ensure I have done enough research etc...).

We're also tempted to cash in those mutual funds and top up our rrsps which have at least $35k room left together. We're not sure if this is a good idea, but it seems to me like we'd get a good refund to then pay down mortgage(s) and still have the money growing tax sheltered.

Our vehicles are a 2006 Toyota Corolla and a 2009 Toyota Highlander...we hopefully won't need to replace them for a long time.

In the places we are planning to move, an average house will cost us around $350k. That blows my mind since that isn't even anything special...I'm so glad I don't live in Toronto or Vancouver! I guess the main things we're looking for is...the switch to rrsps for our mutual funds a good or bad idea? Is a rental property too much financially for us to take on? Any other thoughts or opinions?

Let me know any other questions too, I love reading advice etc on this kind of stuff...but it's always advice on someone else's situatuion...thought I'd like to see some on me :p
I think you are doing fine. If it were me though, with your income, it would not take that long to have a house totally paid off before looking into rental properties. Some people do that stuff and something happens to their income, the renter doesn't pay, and now you are stuck trying to pay 2 mortgages. Other than that, you seem alright. Everyone can debate where to move your mutual funds, but either way, you probably don't want to just leave them in an unregistered account, at least do something with it. Get good advice if you go with an RRSP though, because it has more consequences in the future than simply "saving on taxes". There is clawbacks etc. I am not an expert on that like some people here, so I will stop there. :)
 

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I can't really say if you can handle two properties, but I would definitely suggest just buying one house to live in for now.

Get settled etc - then maybe later you can start thinking of the rental house again if it makes sense.
 

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If you think real estate prices in your area are "ridiculous," why would you want to make a speculative bet on real estate by becoming a landlord?
 

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Discussion Starter #5
Good question MoneyGal. I knew there was a lot of information and variables that I was leaving out. One is that we plan on buying the rental property in a different area. I have taken into consideration the cost of a property manager, but I need to post in the real estate forums as well to get a better idea of what to expect for expenses.

I also plan to have emergency money set aside for the rental, as well as a regular emergency fund that is advised for people to have. Also part of the reason why I am looking into next year at the earliest to start such an endeavor.

I'll have to see where we are at that time, as Four Pillars suggested, see where buying our residence puts us financially every month. And thanks specialk, I will look for some RRSP advice...I'm sure other variables like which funds they're in and where it would be moved to would be details people would need to give definite answers. I'm more just looking for some ideas to bounce around from people who know a lot more about this stuff than I.
 

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Would it be a good idea to move those mutual funds into their TFSAs until the TFSAs have no more contribution room, and then move any more that won't be needed for the house into the RRSPs? I don't understand why you wouldn't want as much of your investments in tax sheltered accounts as possible?
 

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Would it be a good idea to move those mutual funds into their TFSAs until the TFSAs have no more contribution room, and then move any more that won't be needed for the house into the RRSPs? I don't understand why you wouldn't want as much of your investments in tax sheltered accounts as possible?
Their TFSA's are maxed out.
 

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To the OP:

WOW!!!

That is AMAZING! You should be giving us lessons on savings and frugality. Care to share with us your methods of how to save so much money?

I'm really starting to sound like a broken record, so I ask those who read my posts regularly to forgive me once again. But do you have the 3-tier savings concept in mind? You can see some of my old posts where I explain it. In your case, you have ALL of the money PLUS your down payment money already saved. So it will be a very simple exercise for you to create a simple spreadsheet with 3 sections (tiers) and can simply type the figures in each tier manually. This will allow you to keep track of how well fortified with cash each of those buckets are. It will allow you to see where money needs to be replenished after the bucket it used for something.

If you decide to take this advise, please come back and let us know if the simple exercise revealed anything about your finances that you didn't already know.

And you can have a 4th tier for something specific, such as house downpayment or new car purchase etc.

Make sense?
 

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I think it's sensible what you're doing in general. I would have maxed out my RRSPs for the income tax return benefits.

It makes no sense if you think the housing market is overvalued. I would work out the numbers to see if your rental property would make money or not. But you'd have to crunch the numbers. Even in the most heated markets, there are always buying opportunities. You just need to find them out.
 

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Discussion Starter #11
I remember reading something about the 3-tier savings concept on here and had planned on looking into it. I will for sure check it out as I'm always looking for ways to improve my situation.

As for the secret to saving? Our current situation helps a lot, we are both working and haven't started having kids yet. We live in a a prescribed northern zone with housing at an extremely low rent ($400/month for a 4 bedroom bungalow). Although it is an old house and not very energy efficient...the low rent more than makes up for the extra utilities. The tax break for living here helps as well, plus we have pretty much zero access to shopping or amenities, so we save a lot there. The downfall is that we have to travel so far to do anything which makes our travel budget pretty high, and groceries generally cost much more due to the lack of competition...actually...most things cost more...good thing for online shopping now.

Besides that, I guess the main thing was making a budget. There hasn't been even one month where we were under budget on everything that I can recall, but the main thing is that we see where our money is going.

Getting rid of the debt was key. When I read Pat Foran's book and realised our state, we were paying close to $1700 a month minimum to our debts with likely $400ish going to just interest. I was disgusted that I was paying $4800 a year just to owe someone money. We started the common "pay minimum on all debts but maximum on one" strategy. We were going to do the highest interest first, but went with the debt with the biggest monthly payment. That debt was $550/month. It took a little bit to get rid of it, but that snowball effect was awesome. Once that debt was gone, and the next debt went from receiving $350/month (this was the highest interest, which should have been paid first in my opinion, but as long as you are using the strategy, it is good) to receiving $900/month...it dropped so quick...and so on through the 5 debts we had.

After that, every extra cent we have goes to savings. We really aren't all THAT frugal. We think about most things before we buy, to check whether it is a need or a want...but we still buy a good number of wants. Not having access to a Tim Horton's etc really helps (closest Timmy's is 3 hours away).

Another place I am happy to save is on bank fees. There are no fee accounts and all kinds of things now, but when I started, I didn't know much about them. I just knew that it was silly to pay $150 a year to get at my own money and that there must be some way around it. So the wife and I went with CIBC's regular account that has a $3.90/month fee, but is waved if you keep $1000 bucks in there. What's that equal to, close to 5% or something a year? Anyway, we then got a dividend card and started buying everything on it. Groceries, gas, a pack of gum, work expenses...everything. We pay our insurance yearly so we can put it on there too. We also paid the max amount we could on our Highlander with it. We never spend more than we can pay off right away. The interest day for the card is the 6th of every month...so around the 3rd, I always top it up, plus throw a few hundred extra just in case we buy something...we'll spend it soon anyway.

Every December, CIBC gives us the 1% back. Which is usually able to cover a large portion of the Christmas shopping. In 2007 I paid interest once when I missed the date...$37, but considering that I get back $400 or more for Christmas every year, and haven't been hit with interest again...that's pretty good in my opinion. We are able to transfer money to the credit card as much as we want, so we don't even use the 5 transactions per month on our chequing accounts. We almost never use cash, so we just make sure we each have a little in our pockets for emergencies or when machines are down etc.

As the numbers show, we really aren't too frugal if we're spending $40,000 a year on stuff, but that number is boosted by money we get back, such as dentist bills, and hotels/meals that are reimbursed from work, etc.

Before I write a whole novel, I'd better stop here. I'll start checking out the frugality forums, and post there if I can think of anything for you the-royal-mail, but most of my ideas and ways of saving are taken from books and forums that I have read. A fortunate situation at the moment is the main secret I guess...babies and a mortgage will slow it down much more I'm sure, which is why I was thinking about rental property...to hopefully boost the income.
 
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