Canadian Money Forum banner

1 - 20 of 58 Posts

·
Registered
Joined
·
191 Posts
Discussion Starter #1 (Edited)
So i'm 30, doing alright...but i don't know what i'm going to be doing and have a hard time pulling the trigger on anything involving money or really any decision i feel i can't back out of - commitment phobic? so what do in the mean time given my situation. i know i need to invest but when confronted with options, i freeze up. No clear life goals = no clear financial objectives (other than: get rich or die trying)

I plan to use this thread to remind myself to stop procrastinating, to record any progress, and to ask others what would they do if they were me (financially speaking)

Here are my vitals:

- monthly income 5k average after tax and deductions (to pension and not including company's contribution which seems to be 1.5).

- job security is uncertain. how can you even predict this in this day and age? maybe ill be laid off in a month, maybe ill work another 30 years w/o interruption.

- no goals except to establish goals

assets:
~85k in chequing account
~90k loaned to parent (can be immediately be returned if requested)
5k in a tfsa trading account but not-invested (put the money in and just couldn't buy anything)
>40k in RRSP invested in a td balanced index fund
~50k in a public service pension (estimated off of deductions and amount company has put in)

debt:
0

net worth = assets - debt = 270k

monthly expenses (after tax):

Housing $700 (rent, includes hydro)
Food $250 (guestimate)
Cable/Landline $75
Fitness $60.00
Cell $65
Car Insur $65
Car Gas $250
Car Maint $50 (guestimate)
Clothes/Entertainment/Other $300 (guestimate)
Automatic RRSP Contributions $400 ($100 weekly)
---------------------------------
Total expenses $2215

Therefore monthly revenue 5000-2215 = 2785 .... how to allocate when aimless?

---------------------------------
 

·
Registered
Joined
·
3,936 Posts
I am in a similar situation, though I haven't saved anywhere near as much as you have. Wow $85K in the bank is incredible.

Any interest in putting that towards a house or condo downpayment? I realize that's not a good thing for someone who is commitment phobic.

Barring that, how about something like the RBC High Interest e-savings account? 1% on $85K would be better than what you are making now in a plain vanilla savings account.
 

·
Registered
Joined
·
1,516 Posts
You are doing extremely well for someone your age. I realize that there are no job guarantees but with a public sector job, you have more job security than most. You've got a great base to work from and a public sector pension gives you a little more security.

What I would suggest is not doing anything too drastic at the moment, but to read a financial book a month for the next year. Some books may give slightly contradictory advice, but that's okay. After that you should have a little firmer grasp on what investing style you are comfortable with and you will probably be able to plan a strategy. However, keep reading.

Suggestions:

The Wealthy Barber
Investing for Dummies
The Four Pillars of Investing
The Intelligent Asset Allocator
Stocks for the Long Run
The Future for Investors
Your Money or your Life
Sleep Easy Investing

All available at the library.
 

·
Registered
Joined
·
4,647 Posts
Knowing how to save is the key part and you have that mastered

Look into the couch potato portfolio. No rush really but if the market keeps tanking it might be a good time to start investing slowly by "dollar cost averaging" while the market's on sale.
 

·
Registered
Joined
·
5,464 Posts
I would disagree that you "don't know what you are doing" - you are clearly doing many things right! There are people (like Zvi Bodie, no dummy) who believe that stock market risk should pretty much always be avoided. You are risk-averse, but very competent at saving. I'd recommend adding "Worry-Free Investing" to your reading pile - and I'd also add that while there is a strong disposition towards stock market risk here in this forum, that view is by no means universal. :)
 

·
Registered
Joined
·
5,464 Posts
TRM: Bodie argues that "stocks for the long run" is oversold to ordinary people saving for retirement. Here's a brief article which says a bit more about his philosophy.

For Canadians, Bodie would argue the best way to save for retirement is using real return bonds.

I know his approach is controversial - you can just read the comments to that article I posted above to get a sense of the outrage some of what Bodie says inspires. However, at a general level, it is hard to argue with what he's proposing: to fund your retirement safely, you need to save aggressively and in safe vehicles. I've heard too many horror stories, personally, from and about people who have failed to do exactly this. I do not personally shun stock market risk but I appreciate Bodie's message.
 

·
Registered
Joined
·
2,892 Posts
You seem to have the saving part down pat.

Now you need to educate yourself to find the investing strategy that works best for you.

It is sad too see so much $ in a chequing account. When you account for inflation you are actually losing buying power.

So for now your basic goal is to have your money grow. Yet to figure out the how.

What % is the loan to a parent at?
Do you have unused RRSP contribution room?
Do you want to set some $ aside for a down payment for a property?

At you level, good start by keeping the RRSP in a low mer indexed balanced fund. Good Start.

While you figure out a few of these things, I would move the $ into at least a higher yielding savings acct, and maybe top up the TFSA contribution, again at least put the TFSA $ into a high yield while you decide on how/where to invest it.
 

·
Banned
Joined
·
407 Posts
You're doing very well

You're well ahead of most people your age. Staying out of debt and living within your means are the basis of personal financial security, and you've mastered that.

You say you have no financial goals except to "get rich." You need to quantify your goals. What's "rich"? And what time frame are you willing to accept to become rich? The answers to those questions will dictate your asset allocation i.e. how much fixed income vs equity.

Spidey's advice is very good - increasing your investment knowledge can go a long way in reducing your indecision. I would add A Random Walk Down Wall Street to that list. Few people, aside from a few academics, take the efficient market hypothesis seriously, but the advice from the book is still valuable. Behavioral finance has skewered one of the fundamental tenets of efficient markets - that people make rational monetary decisions.

Speaking of behavioral mistakes, financial prognosticators/professors/"market insiders" are no less susceptible to these errors than anyone else. One of the errors is to overrate recent experience. I've seen much of that. In the 1990s the S&P 500 grew at almost 20% per year. People expected that rate of return constantly. If people didn't make 15% on their mutual funds, they switched or dropped their advisors. People forgot history and a basic principle: investment gains (or losses) revert to the mean. When the DOW hit 10,000 a decade ago, I remember a prescient article that forecast a very long climb to 20,000. The article looked at past mlestones on the DOW and found a pattern. Milestones were often met in bull markets; subsequent euphoria almost always overrated the prospects of the DOW advancing quickly. Bear markets usually decreased the DOW, which meant a long time before the next milestone was surpassed. I was taking a personal finance course at that time, and we discussed the article (this was before the tech bust). The article was almost universally panned by my class. The sentiment among CNBC, financial advisors, and the media was euphoric at the time. Silly books like DOW 100,000 were taken seriously.

After the 1990s, market returns, inevitably, reverted to the mean. The past decade for the S&P 500 has been the worst in history - a decade-long return of zero while the preceding decade was the highest return in history, almost 20% per year for a decade.

I repectfully submit that basing financial decisions on the past decade of well below average returns is as foolish as basing decisions on the well above average returns of the 1990s. Yet we see some financial gurus doing exactly that.

No matter what you decide, investing dispassionately at the lowest possible cost (index funds, ETFs etc) will serve you well.
 

·
Registered
Joined
·
191 Posts
Discussion Starter #10
Well, I have finally done something. I've opened up a HISA account with Ally and moved 60k from chequing account to it. It's CDIC insured based on my readings, is this correct for sure?

Also maxed out my TFSA, and now I have 10k sitting in the online brokerage account. Still trying to figure out a strategy for how to invest it: bonds, stocks, ETFs?

Got some books and reads to better educate myself based on the suggestions here.

I know I don't want to go the complete Zvi Bodie route, that seems awfully conservative, and while I am risk adverse, I do want to take some calculated risks.

Still don't have life objectives to frame my financial objectives with. A bit concerned about my crown corp becoming privatized and possible layoffs, so it's been a bit of a challenge figuring out what I am going to do given the uncertainties.
 

·
Registered
Joined
·
1,170 Posts
Well, I have finally done something. I've opened up a HISA account with Ally and moved 60k from chequing account to it. It's CDIC insured based on my readings, is this correct for sure?

Also maxed out my TFSA, and now I have 10k sitting in the online brokerage account. Still trying to figure out a strategy for how to invest it: bonds, stocks, ETFs?

Got some books and reads to better educate myself based on the suggestions here.

I know I don't want to go the complete Zvi Bodie route, that seems awfully conservative, and while I am risk adverse, I do want to take some calculated risks.

Still don't have life objectives to frame my financial objectives with. A bit concerned about my crown corp becoming privatized and possible layoffs, so it's been a bit of a challenge figuring out what I am going to do given the uncertainties.
Well done! You are right where I was at your age. Life is full of uncertainties. There is no such thing as a permanent job any more. You are young and have time and skills on your side. In other words, you are rich in human capital. Over time, you will be able to turn your human capital into financial capital. I suggest you add Moshe Milevsky to your author list. He's a finance prof at York University in Toronto and he writes in very understandable terms about this subject, about insurance, etc. I recommend a recent book of his: Are you a Stock or a Bond?
 

·
Banned
Joined
·
26 Posts
Highly taxed Bonds and GIC's go into the RRSP....

The brokerage TFSA should be used to buy equities that would normally would incur high capital gains...

have a non-registered account to buy preferred/dividend paying shares where their tax credit comes into play....

question....instead of putting money IN the bank at 2% interest...why not buy shares OF the bank basically becoming an owner and collect higher dividends? My BMO shares are paying me over 5%! Pick a bank....they are all about the same. Oh, and my 5% of dividends is taxed alot less than your 2% interest...

good luck....
 

·
Registered
Joined
·
191 Posts
Discussion Starter #14 (Edited)
Highly taxed Bonds and GIC's go into the RRSP....

The brokerage TFSA should be used to buy equities that would normally would incur high capital gains...

have a non-registered account to buy preferred/dividend paying shares where their tax credit comes into play....

question....instead of putting money IN the bank at 2% interest...why not buy shares OF the bank basically becoming an owner and collect higher dividends? My BMO shares are paying me over 5%! Pick a bank....they are all about the same. Oh, and my 5% of dividends is taxed alot less than your 2% interest...

good luck....
Okay thanks, that strategy makes sense. What worries me about buying shares is just not knowing what and when to buy. Being a naturally pensive person, I'm not confident enough evaluator to buy stocks. I've looked at a number of stocks I've liked like FTS, BNS, TA, ENB but shied away from buying.

What about buying into Canadian Dividend ETF like CDZ? Would that be an option if I'm not comfortable with purchasing dividend paying stocks? Are the tax implications the same or different if I do it that way?
 

·
Registered
Joined
·
12,723 Posts
CDZ is not a bad idea. The tax implications are essentially the same. CDZ has some income trusts mixed in, so some of the current distributions will be taxed as income (as they are not eligible dividends) or as a capital gain, but this will change in January as nearly all income trusts will convert back to corporations paying eligible dividends as a result of a change in federal tax law.

You should probably take a gander at claymore's site for cdz:
http://www.claymoreinvestments.ca/en/investment-options/exchange-traded-funds/fund-details/fund-summary?ticker=CDZ

You can see what companies and sectors comprise the fund. Unsurprisingly, it is dominated by financials (banks and insurance) and energy stocks.
 

·
Registered
Joined
·
191 Posts
Discussion Starter #16 (Edited)
Well for the sake of doing something and seeing how it goes:

I took $5k (outside of TFSA) and put into BNS, $2.5k into MCD, and 5K into CDZ with the latter two being in the TFSA. I could lose it all and I'd be pissed but it wouldn't kill me so I can live with it.

I figure these are pretty conservative companies and going with that ETF also fits in with that to an extend *maybe*. After a year, I'll reconsider but for now, I'm going to ignore it.
 

·
Registered
Joined
·
191 Posts
Discussion Starter #18
IMO the MCD is bet held inside your RRSP, to avoid paying the withholding taxes on dividend payments.
Yeah I didn't realize that until after. Should have done my due diligence. Oh well. This is just an experiment, I'll see what happens in a 1 year or so. Lesson learned.
 

·
Registered
Joined
·
191 Posts
Discussion Starter #19
I looked over some other threads and saw people setting goals of being a millionaire by a certain age.

I wanted to know how realistic it would be for me....

My current net worth tabulation is like this:

86k Loan *immediately returnable
63k Savings
13k Chequing
10k Unreg-Investments
11k TFSA-Investments
46k RSSP
53k PSSA
-4k visa *will paid when due
----
278k

Given that, if my calculation is correct I would need at least an net growth rate of 15% or greater to reach the goal of a million by age 40 (in 10 years). That doesn't seem realistic given the expenses that may come during that time frame.
 

·
Registered
Joined
·
5,464 Posts
1. Have you included (the discounted value of) your pension in that calculation?

2. Unless you actually want to retire at 40, your human capital is like a long bond which will pay out over your entire working life. It, too, has a present value that can be calculated. In fact, if you include the (discounted present value of) your human capital in your calculations, I'm sure your total net worth is over $1m right now. ;)
 
1 - 20 of 58 Posts
Top