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Discussion Starter · #1 ·
Hello,

Please treat me as if I were your own son (even though some of you are younger then I am hehe) when you think about replies.

Introduction (about me): I am 39 years old and have made some bad decisions in the past. My parents divorced early and my mother was never really in my life (she is a bipolar alcoholic). My dad on the other hand is a very hardworking electrician. He is very good at his job, but he doesn't know much about money management. His philosophy is work as much overtime as you can and put it into a savings account. Thus, you can see that I never had a mentor or someone to explain to me how money works, etc.

That being said, my father recently sold his house and has enough foresight to reduce his "estate" - should something suddenly happen (he had a heart attack 3 weeks ago) - to reduce potential taxes against his estate before his heirs (his three children, myself among them) get the rest. He is therefore giving us each $200,000 on December 1st which is just after the closing date.

I have 0 debt whatsoever. My rent is $800 a month plus 50% utilities (my brother and I rent an apartment together). I own my car outright and pay $120 a month in car insurance. I lost my last job due to Covid and am starting a new one at 17 dollars an hour x 40 hours a week (with overtime possibilities which I am not factoring in at this time).

I have 0 in a TFSA and 0 in an RRSP. I did play a little with individual stocks, but cashed out. The amount was only a few grand anyway- just to get my feet wet.

What I would like to do is invest the money in a way that I can generate dividends to supplement my income. So I am thinking of maxing out my TFSA which would be $81,500 next year and maybe buy three of the big Canadian banks. I'd also like to have an emergency fund in a HISA in cases of emergencies. My 2006 Saab is old but still peppy and I don't feel that now is the time to buy another newer used car (I wouldn't buy brand new- this is just me).

I also want to avoid paying as much tax as possible, so I know I should probably contribute a bit to my RRSP each year.

I'm just wondering. If I was your son, and I wanted to maintain my capital as much as possible, while accumulating regular dividends to supplement my income, and avoiding taxes, what would be your advice for me to do with the $200k (setting aside maybe 5k so I could go on a vacation in a year or two, since I've never been on a vacation - not even a cheap one to Cuba or the Dominican Republic).

I appreciate all your insights and help as I am completely out of my depth here. Thank you all for helping people like me. :)
 

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This completely depends on where you live as well as me assuming several other factors, but...
Buy a house with income- rent a basement, duplex/ triplex. Is your brother going to get his own place when he gets his share and stick you with 1600/ month plus utilities? You're too young to be taking dividends out of investments- they need to grow. There's tons of work out there right now- become an electrician.
 

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Discussion Starter · #3 ·
This completely depends on where you live as well as me assuming several other factors, but...
Buy a house with income- rent a basement, duplex/ triplex. Is your brother going to get his own place when he gets his share and stick you with 1600/ month plus utilities? You're too young to be taking dividends out of investments- they need to grow. There's tons of work out there right now- become an electrician.
I live in Markham, Ontario but will be living in North York. I am not at all a tradesman. I have a diploma from Seneca in Library and Information Technology, and completed 2 years of a 4 year degree in Classical Studies at York University before realizing that this would be useless career-wise. Although at this point I should probably finish the damn degree part-time. I am currently working and studying Quality Assurance at Centennial College. I need some dividend income to supplement my income until I can get my income up - through education and experience. And, no, my brother will not ditch me after he gets his partial early inheritance. He is a drug addict and alcoholic and is going to rehab- if he comes out and remains clean and employed he will get 25k per year on his birthday for 4 years, and if he is good (clean and working) then he will get the other 100k. Our rent is 1800 plus utilities (my brother is a welder and makes more than I do and has a much larger bedroom).
 

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Introduction (about me): I am 39 years old and have made some bad decisions in the past. My parents divorced early and my mother was never really in my life (she is a bipolar alcoholic). My dad on the other hand is a very hardworking electrician. He is very good at his job, but he doesn't know much about money management. His philosophy is work as much overtime as you can and put it into a savings account. Thus, you can see that I never had a mentor or someone to explain to me how money works, etc.
It seems to me you are blaming your parents for your own ignorance. However, you cannot change your past. So, let's move on.

If I were in your position, I would buy slowly the following ETFs and forget that I have this money for the next 10 years. You can buy free ETFs from Questrade, National bank and Wealthsimple brokerages. You don't need to buy 50k worth of ETFs at once.

ZRE - 50k
XEQT - 50k
ZEB - 40k
ZUT - 40k
EQ Savings account - 20k
 

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Discussion Starter · #5 ·
It seems to me you are blaming your parents for your own ignorance. However, you cannot change your past. So, let's move on.

If I were in your position, I would buy slowly the following ETFs and forget that I have this money for the next 10 years. You can buy free ETFs from Questrade, National bank and Wealthsimple brokerages. You don't need to buy 50k worth of ETFs at once.

ZRE - 50k
XEQT - 50k
ZEB - 40k
ZUT - 40k
EQ Savings account - 20k
Completely unacceptable response that I am blaming my parents for "my own ignorance". I simply wasn't born into a family that knew about money. And I said as much.

Your answer also doesn't address my desires. I want to invest wisely and earn dividends to supplement my income while preserving capital and avoiding unnecessary taxes.

You need not reply to this.
 

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Turning this back positive, the OP has the right general idea to generate 'investment income' in the near term to supplement employment income as a bridge to finding something better on the employment side....and then start re-investing the distribution stream from those investments via DRIP back into the investments 5 years from now when employment income is much better.

I would fill out the TFSA first, and it could contain $20k of HISA as emergency fund plus it could contain something for future capital growth like XEQT because that is what the OP needs to start doing, i.e. growing net worth. Once the TFSA is filled, put most of the rest in a non-registered account with Cdn eligible dividend income for the tax credit (potentially no tax owing at OP's level of income). Something as simple as a single holding of XIU or XDIV. I don't think one needs to do any further slicing and dicing, aka ZUT, ZEB, etc. but those could be options.

Contributions to an RRSP may make some sense in the future, but I am not sure it makes sense in the lowest 15% Federal tax bracket. The OP clearly needs to take some practical education or a vocation to improve employment earnings. Anything less than $25/hr on a full time basis won't provide for much of a retirement.
 

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It seems to me you are blaming your parents for your own ignorance. However, you cannot change your past. So, let's move on.
As far as I'm concerned, I too, think this comment is out of line.

Moving on.
You're investing in yourself- good job.
You're asking for help- again, good job.

I see where you're coming from now I think. I would start with laying out your monthly budget to see how much of a supplemental income you need to stay balanced while building your career.
 

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I see 2 good options with what to do with the money.

1) Put it all (OK, maybe keep that 5K out for a vacation) into VGRO or something similar. Let it grow till retirement.

2) Invest in your education. But before you do this, you'll want to be very certain that you know what you'll want to do. Invest the time to job shadow someone doing the jobs you may potentially want to do. Then find out what training you need to get that same job.
 

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Discussion Starter · #9 ·
As far as I'm concerned, I too, think this comment is out of line.

Moving on.
You're investing in yourself- good job.
You're asking for help- again, good job.

I see where you're coming from now I think. I would start with laying out your monthly budget to see how much of a supplemental income you need to stay balanced while building your career.
Thanks Alta and FairTrade. I thought maybe I was wrong to seek advice here. I love my parents, but my Mom has issues, and my dad is a tradesman who provided for us as children but can't provide any advice on investments etc because that's not something he ever was interested in or got into. I'm not blaming them for anything. I was just being proactive in coming here and asking for advice from people who know far more than I do. I wish I had come here 10 years earlier! I would have learned a lot more, a lot sooner.
 

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General Suggestion: Next time, leave most of the family drama out of it. All that really matters in a financial forum is life got in the way up to this point for a number of reasons, and what you do going forward is what matters most. You will have a $200k gift to launch your future.
 

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Hello,

Please treat me as if I were your own son (even though some of you are younger then I am hehe) when you think about replies.

I have 0 debt whatsoever. My rent is $800 a month plus 50% utilities (my brother and I rent an apartment together). I own my car outright and pay $120 a month in car insurance. I lost my last job due to Covid and am starting a new one at 17 dollars an hour x 40 hours a week (with overtime possibilities which I am not factoring in at this time).

I have 0 in a TFSA and 0 in an RRSP. I did play a little with individual stocks, but cashed out. The amount was only a few grand anyway- just to get my feet wet.

What I would like to do is invest the money in a way that I can generate dividends to supplement my income. So I am thinking of maxing out my TFSA which would be $81,500 next year and maybe buy three of the big Canadian banks. I'd also like to have an emergency fund in a HISA in cases of emergencies. My 2006 Saab is old but still peppy and I don't feel that now is the time to buy another newer used car (I wouldn't buy brand new- this is just me).

I also want to avoid paying as much tax as possible, so I know I should probably contribute a bit to my RRSP each year.

I'm just wondering. If I was your son, and I wanted to maintain my capital as much as possible, while accumulating regular dividends to supplement my income, and avoiding taxes, what would be your advice for me to do with the $200k (setting aside maybe 5k so I could go on a vacation in a year or two, since I've never been on a vacation - not even a cheap one to Cuba or the Dominican Republic).

I appreciate all your insights and help as I am completely out of my depth here. Thank you all for helping people like me. :)
What a wonderful gift from your father! Though I appreciate some context in your family, it serves no relevance as there is no point looking back as you can't really change anything, just looking forward.

You asked for what advice I would give my kids. So you get this as my kids would:

  • This money should be for your long term future, not your immediate future. You have no home or retirement assets. That only leaves you about 26 years to get some real savings. Even if you preserve you capital and spend your dividends, $200K when you are 65 is not going to be enough to retire off of. Your goal should be increase your retirement savings (or house)
  • You don't need to be supplementing your income with dividend income. You need to make more income. Do it quickly. $17 an hour isn't great. I know you want the dividends to supplement, I would see if there are ways to increase your earnings immediately and finish school in an area that will help you further. You have bounced around a bit, I suggest taking some time to really think what a reasonable education/career for you. As my son, I would having a lot of these conversions with you, this is where the biggest benefit will be.

In terms for investing now, I would
  • Max TSFA $81500 in growth ETF's or some of the funds mentioned already
  • Max RRSP's, even though you are in a low tax bracket, you can always claim later
  • Figure out how much you need for education
  • $10k -$20K emergency fund in HISA, $10K is probably enough, but I say $20K because that in a few years you will want a new used car. Some say invest the money, that's up to you and your risk tolerance
  • Rest in a non registered accounts. Again, similar tax effective funds.
 

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Discussion Starter · #12 ·
Thanks, these are great suggestions. I am definitely going to work towards increasing my work income. The company I work for offers unlimited overtime, has profit sharing, and has a retirement matching plan, too. As an aside, this is only partial inheritance. I expect to inherit an additional 100-200k when my father passes away (which I am not hoping for any time soon. He is only 80). I will never marry nor have any children. Maybe a few dogs though cause I love dogs. I was thinking of taking the TFSA and maxing it out and putting it in Extendicare or Pizza Pizza as these are high dividend paying stocks. Maybe equal distribution 33.33% PZA, 33.33% EXE, and 33.33% CIBC.
 

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I would suggest put a chunk of your inheritance into vre. It's an etf by vanguard and it is a basket of the big reits in canada. The yield could be better but it is paid out monthly which is probably what you want. Also because you are buying quite a few reits you will not be at risk if one of them does not do well in the future.

Another chunk I would put into xef or vfv. Xef is developed market fund (ex north america) and vfv is s&p500 companies in the states. These etfs do pay out dividends but not often but they would be good to have for future growth.

I would ask you to do more research on extendicare and pizza pizza before you put that much money into them. Are they companies that are going to be around in the future?

Cibc is a good choice for a stron bank with dividends. I am personally with bns and know that they have expansion going on in Latin America which is good for future prospects. Td is also a strong bank and they currently have more branches in the states than Canada now.
 

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Discussion Starter · #14 ·
I would suggest put a chunk of your inheritance into vre. It's an etf by vanguard and it is a basket of the big reits in canada. The yield could be better but it is paid out monthly which is probably what you want. Also because you are buying quite a few reits you will not be at risk if one of them does not do well in the future.

Another chunk I would put into xef or vfv. Xef is developed market fund (ex north america) and vfv is s&p500 companies in the states. These etfs do pay out dividends but not often but they would be good to have for future growth.

I would ask you to do more research on extendicare and pizza pizza before you put that much money into them. Are they companies that are going to be around in the future?

Cibc is a good choice for a stron bank with dividends. I am personally with bns and know that they have expansion going on in Latin America which is good for future prospects. Td is also a strong bank and they currently have more branches in the states than Canada now.
Thanks Jugger. I'm pretty sure PZA isn't going anywhere anytime soon, EXE might be a riskier play longer term but the aging population will need housing/beds/care. I am looking at Vanguard and Blackrock IShares funds, but rather than invest one lump sum at the market highs right now, wouldn't I be better off, after maxing out my TFSA, to hold the rest in a HISA and periodically invest smaller amounts - on a regular basis - biweekly maybe as per John Bogle's advice?

I'm going to print out this entire thread when it's exhausted and really go over all the advice. Thank you all.
 

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I completely understand where the OP is coming from and quite enjoy understanding the back story. Understanding the motivation, experience and desire is of utmost importance. We have someone who has struggled and a family that has had a difficulties in childhood. Trying to make good decisions now moving forward. Addict brother that may or may not be a risk. Understanding those aspects are important as opposed to a blanket "here's what to do with $200k."

Scorpion_ca had great advice with "If I were in your position, I would buy slowly the following ETFs and forget that I have this money for the next 10 years."

100% this. Forget you have the money. BUT! I might add to keep $10-$15k in savings and try to maintain that balance for a few years. It's there if you need it, but try not to need it. Your monthly expenses are low which is excellent. Investing everything and trying to use the dividends to help are the wrong way of looking at them at 39 years old, I think. I'm 42 years old I'm also tempted with the dividends. But instead, I opt to DRIP them and reinvest. But it's so cool seeing the money get deposited into a cash account thinking... "That $350 dividends cheque from company xyz 4 times a year is sweet!"

But in my opinion, you need them to grow. Don't rob the tree of its fruit when it can barely produce. Let that tree grow!

In terms of what to invest in, there's been other advice which is good.

I would vouch for a simple Couch Potato and Definitely max out the TFSA. The RRSP... Meh... If tax avoidance (not evasion) is your goal, you don't earn enough for it to make any kind of dent in your taxable income. That said, perhaps the tax you pay on the inheritance can be offset by a lump sum contribution to your RRSP's? I don't know the answer to that.

Good luck! A $200k in a good "help up" if you're able to be disciplined. Practice discipline and the rest will follow.
 
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