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Discussion Starter #1 (Edited)
I recently graduated with a BA in a liberal arts program. I know this is not is not a degree that has high earning potential but I chose to study it due to personal interests.

I am currently 24 and have been working for one of the major banks making 34k gross per year. I still live with my parents so I don't have many expenses.

Net Pay is $2100 per month

Expenses:
Transportation is about $200 - 250 per month (including everything)
Student loan payment $150 per month (12,500k debt)
Cell phone $60 per month
Gym membership is $40 per month
Total expense = $500

I also spend money on entertainment, but I never really tried to keep track of that.

I have been working full time for about 5 months now have $3500 saved up. With most of my extra money I have been paying off my student loan by making additional payments.

When I was younger I read some of the personal finance books like Rich Dad Poor Dad. Now that I have my first full time job its time to make the right choices.

One of my personal goals is to travel the world for a few years. I don't intend to do this in an extravagant matter. But it is important for me to get some sort of financial foundation before I pursue that dream.

I do not know much about finance, accounting and investing. Only general knowledge from taking into courses when I was in school.

I would like some advise as to what would be the smart choice to do with my money.

I am also thinking about possibly renting a place so that I can start living on my own. I live in the GTA so rent would eat up a significant portion of my income. I am still undecided about what course to follow.
 

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Sounds like a positive step.

I think we all have our personal philosophies. Mine would be pay off debt first. Live at home as long as you can, to build a nest egg. It's always a good idea.

If you can, save 20% of your income, and put it in a RRSP/TFSA. Always get a good nest egg. Build a safety margin as well.

Do travel the world, but do it after you save some money. Seeing the world may not be the single best financial decision, but it may be a great life decision to make. And you only live once.
 

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Sounds like we have the same job.

My advice would be to:

1. Take advantage of any employee share purchase plan that is available to you (my fi offers 50% match).

2. Beat your sales targets (annual bonus can be as much as 20% of base salary)

3. Break your goal of travelling the world into smaller pieces. How much will the trip cost? How much do you need to save over the next 3 years? How much over the next year? The next month? The next paycheck?

4. Move out of your parents place. 34k is the average income in canada. You are in the 50th percentile. Time to say thank you to your family for taking care of you and move out so everyone can get on with their lives.
 

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such a sense of déja vu. Although it appears to be déja vue in both these cases.

there's an almost-identical thread nearby from yayfinances. She's also a young recent grad living at home & planning her savings program.

http://www.canadianmoneyforum.com/showthread.php?t=3058

your plan is perhaps even simpler, because of the student loan. You do know this should be paid off ASAP, right.

all of your savings should go into a tax free savings account, imho. The current ceiling is 10,000, but an additional window of 5,000 will open on january 2, 2011. Unlike a rrsp, tfsa savings can be drawn down to fund travel or apartment rent.

an exception could be shares of your bank employer, if the bank will contribute. Others here might warn you against taking on any kind of market risk whatsoever, but i am partial to canadian bank shares & see them as a forever investment for a young bank employee. The standard offer from a major bank used to be one share donated for every 2 that the employee would purchase, with a minimum holding period of 2 years. Terms may be less beneficial now.

perhaps you could think on about saving to travel the world vs renting an apartmnt of your own. Perhaps travel would be more doable if you postpone renting your own place for a year or two or even several.

there are countless low-cost ways for young people to work, study & play in foreign countries. You'd want to be doing this at your age, or at least in your 20s, when you're not encumbered with kids, schools, mortgage, serious career choices, etc. When i think about your situation & consider the relatively high student loan debt you'd want to pay off before travelling, then work/travel programs become the sensible choice.

wishing you all the best. Like yayfinances, you're amazingly well-organized & clear-sighted, so your financial well-being should prosper all the days of your life.
 

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Discussion Starter #5
My current plan is to enroll in the employe share purchase plane program. I can contribute up to ten percent ofmy income. I will contribute the full ten and use the RRSP program instead of the regular plan. Its true that the bank will put in 50 cents for every dollar that I put but only up to 1 percent of my total income.

I also have an appointment at my bank to open up a TFSA. I am just not sure what to do with the money once its in there.
 

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... an appointment at your bank to open a tfsa ... oh dear.

you risk falling into the clutches of a rep who will try to sell you the bank's mutual funds. High expense ratios. To avoid. Forever. Even when U are old & rich.

if you are buying bank shares that's enuf risk for such small savings imho. Perhaps a wise idea to check around & see who's offering tfsas with highest interest rate. Check w ING. (parent bank in amsterdam is selling ING USA but keeping ING canada; there is cdic insurance; other members here have ING tfsas; it's not bad at all.)

check also the tfsa rates for 1-year GICs at several institutions including your bank.

won't your bank contribute if you purchase your bank shares in a tfsa ? do they insist their contribution go towards a rrsp purchase ? how annoying. Because offhand i'd say your savings are too small to have 2 registered accounts plus a general checquing or savings account, so in your place - and given you may be off travelling for a year or 2 - i'd postpone an rrsp unless the bank absolutely forced me.
 

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Also the taxes you will save from RRSP contributions are likely to be less than you will pay when you are retired. Leave the RRSP until you are in a higher tax bracket.

Stay at home until your loan is paid off (as long as your parents are OK with that).

Your savings rate is 3500/5=$700/mo. That leaves $900/mo that is not being tracked. Find out what that is! It seems too high to be all entertainment?
 

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Discussion Starter #8 (Edited)
I dont spend that much money on entertainement, I bought a vehicle for $2,500 so that I can get to work.

I feel the 10% that will go to the RRSP Employee Share Purchase Plan, is not alot of money. My expenses are minimal right now, so I feel that I can get an early start on retirment savings.

I am not gonna buy into any of the sales attempts from the Bank's rep. I simply want to open up a TFSA to store my funds in there until I learn about stocks and feel confident enought to put my money into some.
 

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Life,

I share some common goals with you. I have specific savings goals, careful with spending but I have a serious travel bug. To me, nothing in the world can compare to how enriched travelling has made my life. What I do is budget for a trip every year. Generally, the goal is to explore one new country every year. I budget $3000 to $3500 for everything. I firmly believe that being frugual does not stop at the grocery store.

Here is some of MHO:

#1) Max your company share purchase. This is like free money.
#2) open a TFSA, get in to a no load, low MER mutual fund and start small if you have to, $50 a pay - dollar cost averaging.
#3) Get a small Emerg Fund up. Nothing serious since you living at home, 3K to start but you should try to increase it by 1K every year going forward.

I would not move out too soon. If it is not a problem for anyone involved stay put and build yourself some security first. And it will let you save for #4, the most important of all.

#4) Get you travel fund up!!! This is great. I use a separate account for it. Once you find where you want to go, research the $h!t outa it! Planning is half the fun, and the better you plan, the better you can budget.

I have lots of tips for travelling on a budget. You can PM me if you want some.
 

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Discussion Starter #11
I went a head and checked out the ING website. I liked it, and also the rate is much better then what my bank offers. So I just registered with the ING.
 

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Discussion Starter #12
I can be extremly frugal when backpacking, I actually enjoy pinny pinching when travelling. It is sort of a test of self control. I have no problem saving for short vacations. For instance I am going to California in Sept and most of the stuff is already paid for. The type of travel that I am really looking to do is long travel, like a professional traveller. To achieve that dream I need to be in a position when I have some income producing assets. I dont want to come back to Canada after a year or two of being away and have to start from scratch.




Life,

I share some common goals with you. I have specific savings goals, careful with spending but I have a serious travel bug. To me, nothing in the world can compare to how enriched travelling has made my life. What I do is budget for a trip every year. Generally, the goal is to explore one new country every year. I budget $3000 to $3500 for everything. I firmly believe that being frugual does not stop at the grocery store.

Here is some of MHO:

#1) Max your company share purchase. This is like free money.
#2) open a TFSA, get in to a no load, low MER mutual fund and start small if you have to, $50 a pay - dollar cost averaging.
#3) Get a small Emerg Fund up. Nothing serious since you living at home, 3K to start but you should try to increase it by 1K every year going forward.

I would not move out too soon. If it is not a problem for anyone involved stay put and build yourself some security first. And it will let you save for #4, the most important of all.

#4) Get you travel fund up!!! This is great. I use a separate account for it. Once you find where you want to go, research the $h!t outa it! Planning is half the fun, and the better you plan, the better you can budget.

I have lots of tips for travelling on a budget. You can PM me if you want some.
 

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Great advice from everyone.

I recommend living at home for the time being if everyone involved is OK with it. The money you save now will buy you much more flexibility later.

Save up money and then use it to travel. The life experience and memories you will have will be well worth the cost.
 

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Discussion Starter #14
I just realized the I can get LOC at prime + 1 % (Bank employee rate), while my actual student loan rate is prime + 2.5%. I am gonna open up this LOC at my bank so that I can save some money on interest.
 

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I'm confused, you guys are telling him to avoid his bank's mutual funds because they have high MERs, but you're also telling him to store his money in a HISA until he decides what to do with it? Correct me if I'm wrong, but even mutual funds with a typical 2% MER will still make him more money than a HISA, will they not? Why not just put his money in the mutual funds, then when he becomes more knowledgeable about investing he can look into moving it out of there and into TD e-funds or ETFs.

A balanced portfolio of high-MER MFs is still a lot better than earning 1.25% in a typical savings account, isn't it?
 

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A balanced portfolio of high-MER MFs is still a lot better than earning 1.25% in a typical savings account, isn't it?
No, not at all!
A mutual fund can (and usually does) lose money.
Depending on his entry point, if there is a market correction soon afterwards, he could be underwater for months (or years) to come.
A savings account, on the other hand, will never lose nominal value (ignoring inflation).
Mutual funds, esp. ones based on equities or bonds, are not a good holding place for short term cash.
Any monies needed in less than 5 years should not be in mutual funds.
 

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Discussion Starter #17
I dont think I am going to end up paying down my student loan with the loc because I just realised that the interest that is paid on the student loan is tax deductible.

I want to build up a good credit history, will my credit history be good if I have a credit card and LOC but dont use it? or do I need to use it actually?
 

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The credit card and line of credit only report to the bureau on months where there is actual activity on them. However, having them open and not using them still helps your score because you get a lower utilization ratio (amount of credit you use vs. amount that is available to you) which helps your score.

Why are you doing 10% into the share purchase program if they are only matching the first 2%?

You are better off throwing the extra 8% of pay into your tfsa or using it to pay down debt.
 
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I suggest forget the RSP until you earnings are higher; forget all those investment schemes for now; live at home for as long as you are tolerated and help out with the expenses ... and put your extra cash into a daily interest savings account for the next year or two ... so, how does one travel the world while holding down a $34K/yr job?
 

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I am not sure if anyone has said this yet but I guess I will go ahead and say it...

1. I assume you have already heard people say constantly, PAY OFF DEBT ASAP. Well I will reiterated.... DO IT ASAP. Debt sucks and is one of the biggest wastes of money around, honestly thats the best utilization of your cash currently.

2. The next thing to do would be to build up an emergency cash fund incase you lose your job or if you get sick etc. Usually this should be 3 - 6 months pay, and this should either be put into a HISA or later on a cashable GIC so it can grow.

3. The next thing you could do is start building a decent chunk of money for travel now you could also pair this with growing your nest egg. Say a % to a travel savings account and a % to an investment account for later on (start with a TFSA until you begin maxing that out, depending on how much you save because if need be you can withdraw that TFSA cash and recontribute it the next year).

4. Now pertaining to the renting a place, yes the GTA is probably on of the MOST exspensive places to live in Ontario, my mother has lived in and around the GTA all her life and has always complained about how exspensive it is in Ontario to rent/buy property.

My suggestion would be to find out how much renting will really cost you and base your choice on whether it would be a good idea to rent or if you want to settle to buy a house. Now I understand that buying a house is a big thing and renting may be the best decision until later on in life. It really depends on how you view the world and what your expectations/opinions are.

I hope some of my comments helped, now this is just based on what I would do after higher education. Admittedly this is what I am looking at doing after I graduate from College or Uni, depends where I go haha!

Good luck and remember, travelling is probably the best idea before you get too old! :D. Although I have to admit my parents are always travelling...and they are old :O.
 
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