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Discussion Starter #1
Hi, I am at a point in my life where I am not sure how best to proceed. I am not the greatest in investing, and would say I have a pretty low risk tolerance. Having said that, I only invest my RRSPs at this point and I have placed most of that in equity - I am confident what I have put in my RRSP would not be taken out before retirement.

I am a 32 y/o single working professional, living in Vancouver. Saved money by staying with parents until late 20s (parents preferred it), felt like I missed out on the housing rush since I did have enough for a down payment, but life got in the way and I was left a bit in the cold. Nevertheless I did end up purchasing a condo in the city, and it has since appreciated.

In the recent 2 years, I have concentrated on socking away a significant portion of my savings into RRSP. Now that it has grown to a pretty sizeable amount, I think I will switch to TFSA and use up my contribution room. I would like to have the flexibility of taking the money out for another downpayment, or a larger downpayment if I ever have a chance to upsize.

This is what my net assets look like at the moment. Ever year, I am able to put $25-30K into savings after making my mortgage payments.

Assets:
Cash (mostly in Tangerine with 2.5% interest) - $92,800
TFSA (mostly in TD E-series) - $2,000
RRSP (combination of Group RRSP funds, TD stock, Oil ETF and TD E-series) - $106,500
Car (best guestimate) - $6,000
Condo (based on sale price of the unit directly above that sold recently) - $750,000

Liabilities:
Credit card (paid off in full every month) - $2,000
Mortgage (2 year fixed @ 2.04%, ending in August 2018) - $437,500

Net Worth: $517,800

I include my condo because that is what everyone does, but I think it's a bit misleading as I need to live in it. I am considering selling it due to nearby construction obstructing my view and therefore affecting my standard of living, but it will have to come back out (and possibly more) in order to purchase another property to live in.

My goal now is to figure out how and what to invest the cash I have on hand. I am aware that I need to get this money working for me in order to save for a comfortable retirement.
Any recommendations on what I should do? I think I will call in to my bank in order to maximize my prepayments for my current mortgage, as my 2 year fixed mortgage is coming up for renewal in 5 months and the rates have definitely increased since I bought my place!
 

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Discussion Starter #2
This is what my net assets look like at the moment. Ever year, I am able to put $25-30K into savings after making my mortgage payments.
It seems like I am unable to edit my posts; I've had a second look at the past year and I think I'm saving closer to $40K a year.
 

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Hi saver, looks like you're doing a great job! 518 K net worth for a single 32 year old is simply amazing.

If it was me, I'd focus on paying down the mortgage. I don't think it makes sense to accumulate a huge amount of investments when you have a big debt at the same time. This is a personal preference though, because I enjoy being debt free.
 

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Nice numbers.
Housing in Vancouver is such a quagmire with all the moving parts right now there's no definitive right or wrong choice IMO.
The key thing IMO, is to just continue socking away like you have been and keep things simple in terms of investment.
 

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Also, some ideas in case you want to calculate a more conservative number for your overall net worth:

1. RRSPs will incur taxes in the future, so listing it as 107 K over-states it. There's no way to know how much you'll later pay in taxes, but some people mark down their RRSP to roughly account for this. I mark my RRSP (about same size as yours) down by 25% for this reason and value it at 75%. Not everyone does this and there are arguments against doing this too. Consider, though, that it's much easier to start tracking your net worth this way from the start then to suddenly adjust for this later in the future. Your RRSP is going to get much bigger over the years and this effect (over-valuation distortion) will start to become very significant.

Also see an earlier thread and debate we had on this:
http://canadianmoneyforum.com/showthread.php/93106-Marking-down-RRSP-to-0-85-in-net-worth

2. I think listing your condo at the sale price of another unit is a bit overly optimistic. There are many costs in selling a home. You might want to bake in the anticipated costs... or maybe you've already done this. Take a look at this article on costs to sell a home.

You've done very well and I don't mean to create grief, but I really think it's better to value net worth slightly pessimistically, and acknowledge costs that you will inevitably pay. Plus: these adjustments will bring you down below half a million, giving you a chance to once again cross over the 500 K mark. It's a chance for another celebration :)
 

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Discussion Starter #6 (Edited)
An update from March:

Assets:
Cash (mostly in Tangerine with 2.5% interest) - $91,800
TFSA (mostly in TD E-series) - $4,875
RRSP (combination of Group RRSP funds, TD stock, Oil ETF and TD E-series) - $106,500
Car (best guestimate) - $5,000
Condo (based on sale price of the unit directly above that sold recently) - $725,000

Liabilities:
Credit card (paid off in full every month) - $5,200
Mortgage (2 year fixed @ 2.04%, ending in August 2018) - $438,200

Net Worth: $489,775

Feeling poor at 32 y.o., to be honest.
Paying for flights for a family trip with my parents and brother - going to be around $5,000 in total, a big chunk are already on my credit card.
Already got my bonus and tax return for the year (~$4,000), but not enough to cover off vacation costs as well as annual car insurance (~$6,750).
I earn $100K a year but it's really feeling like it's not enough to grow my wealth properly :(
Going to work on earning more..
 

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Net Worth: $489,775

Feeling poor at 32 y.o., to be honest.
Paying for flights for a family trip with my parents and brother - going to be around $5,000 in total, a big chunk are already on my credit card.
Already got my bonus and tax return for the year (~$4,000), but not enough to cover off vacation costs as well as annual car insurance (~$6,750).
I earn $100K a year but it's really feeling like it's not enough for grow my wealth properly :(
Going to work on earning more..
Good. You can always work smarter, harder, make more money and do better.. Don't buy into this "There's no increase in happiness above 70k/yr" baloney.

Well done so far, though. :)
 

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Discussion Starter #9
Also, some ideas in case you want to calculate a more conservative number for your overall net worth:

1. RRSPs will incur taxes in the future, so listing it as 107 K over-states it. There's no way to know how much you'll later pay in taxes, but some people mark down their RRSP to roughly account for this. I mark my RRSP (about same size as yours) down by 25% for this reason and value it at 75%. Not everyone does this and there are arguments against doing this too. Consider, though, that it's much easier to start tracking your net worth this way from the start then to suddenly adjust for this later in the future. Your RRSP is going to get much bigger over the years and this effect (over-valuation distortion) will start to become very significant.

Also see an earlier thread and debate we had on this:


2. I think listing your condo at the sale price of another unit is a bit overly optimistic. There are many costs in selling a home. You might want to bake in the anticipated costs... or maybe you've already done this.

You've done very well and I don't mean to create grief, but I really think it's better to value net worth slightly pessimistically, and acknowledge costs that you will inevitably pay. Plus: these adjustments will bring you down below half a million, giving you a chance to once again cross over the 500 K mark. It's a chance for another celebration :)
These are very valid points. Thank you for the advice and encouragement!
I have revised the selling price of condo to $725K to be more conservative and take into account selling costs.
 

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Discussion Starter #10
I wouldn't feel poor with close to half million dollar net worth....try to be happy what you have.
It just feels like my wealth is growing very slowly even though I'm not really spending much! I think it's just the tragedy of comparing myself to my friends/ peers.. :(
 

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Discussion Starter #11
Almost 8 months later.. time for an update. Lots have happened, especially in Vancouver.
I will be starting a new job soon, which will hopefully translate to a 20% increase in income after bonuses (which I will realize in a little over a year).
This will translate to more savings.. and hopefully not too much stupid spending.
I am lucky that I don't need to budget my spending as I am naturally somewhat frugal and make enough money for myself.

I renewed my mortgage at variable, and paid down $37,500 off principal.

Here is where I'm at now with the stock market downturn and housing prices slowdown in Vancouver:

Assets:
Cash & GICs (earning 2.5-3.33% interest) - $52,400
TFSA (mostly in TD E-series) - $12,000
RRSP (combination of Group RRSP funds, TD stock, Oil ETF and TD E-series) - $109,600
Car (best guestimate) - $5,000
Condo - $680,000

Liabilities:
Credit card (paid off in full every month) - $1,850
Mortgage (2 year fixed @ 2.04%, ending in August 2018) - $395,000

Net Worth: $462,150
 

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It just feels like my wealth is growing very slowly even though I'm not really spending much! I think it's just the tragedy of comparing myself to my friends/ peers.. :(
I try not to compare vs friends / peers. Eventually as you age your net worth will grow and one day your worth will intimidate or frustrate a friend / peer. Just make sure you are not too focused on cash and beating others - its not a great personal trait.

Lastly, this year will be a lemon for investors. So, dont let that deter you from being disciplined and working towards goals. Acknowledge that not every year will be stellar.... if anything let this realization be a motivator for next year...

Save more, plan carefully, and forage ahead !!!
 

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Discussion Starter #15
It just feels like my wealth is growing very slowly even though I'm not really spending much! I think it's just the tragedy of comparing myself to my friends/ peers..
I try not to compare vs friends / peers. Eventually as you age your net worth will grow and one day your worth will intimidate or frustrate a friend / peer. Just make sure you are not too focused on cash and beating others - its not a great personal trait.

Lastly, this year will be a lemon for investors. So, dont let that deter you from being disciplined and working towards goals. Acknowledge that not every year will be stellar.... if anything let this realization be a motivator for next year...

Save more, plan carefully, and forage ahead !!!
Thanks, I definitely try not to do that.. and most of the time I don’t. Sadly I know a lot of Type A people in business who likes to compare with their peers, sometimes outwardly.. which makes it difficult to ignore.
 

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Discussion Starter #17 (Edited)
5 month update! Tax refund came in, and typically in Q1 I tend to have an influx of funds.
I'm thinking I will work on maxing out my TFSA for a bit, for liquidity purposes in case I want a down payment for a bigger house.
I have been contributing to RRSP first because my marginal tax rate is 41%, and I don't expect to have a tax rate close to that when I am no longer working.
I've also stopped investing into e-series and switched to ETFs on Questrade, as my portfolio grows.

*For this update I took off 22% of my RRSP to take into account future taxes when I take it out at retirement. Doing that to my last update in November for comparability, it would've been approx $438K then.

Assets:
Cash (HISA) - $49,100
TFSA (mostly in TD E-series) - $18,600
RRSP/ DCF Pension (combination of TD E-series and ETFs) - $131,800
Car (estimate) - $4,000
Condo (estimate) - $680,000

Liabilities:
Credit card (paid off in full every month) - $1,850
Mortgage (3 year variable @ 2.95%) - $388,200
Future taxes from RRSP income - $29,000

Net Worth: $464,500

Question for those who happen to read this: Should I take into account my home equity as part of my portfolio? Rather than an estimated fair value of the asset minus the remaining balance on the mortgage. In my case, it would the more conservative approach.
 

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Looks to me like you are doing amazing. What 33 year old has that much money put away for their future!
Great idea to focus on growing TFSA since it appears you have lots of room. I would still contribute to RRSP to take advantage of that 41% marginal tax rate.
Have you considered opening a non registered account? Well done.
 

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*For this update I took off 25% of my RRSP to take into account future taxes when I take it out at retirement. Doing that to my last update in November for comparability, it would've been approx $435K then.


Question for those who happen to read this: Should I take into account my home equity as part of my portfolio? Rather than an estimated fair value of the asset minus the remaining balance on the mortgage. In my case, it would the more conservative approach.

Do you mean home equity based on your purchase price? I'm not sure why you'd do that when you have property which has a certain present value, much higher than purchase price. If you want to be conservative, instead of just "accurate", for whatever reason, I'd chop 5-10% off the estimated value of the house and call it that.

I don't love the approach of devaluing the RRSP, especially for us young people (I think we can cling to that title for a few more years, thanks :) ). It's an investment account, like any, and 30+ years from now it's cashflow will become part of retirement income and a complicated tax calculation with pensions, RRSPs, unregistered, government payments, spousal splitting, credits, and other investments. It's not clear that the RRSP is a significant burden any more than other types of assets, or even if it is, by how much.

I also don't agree with the amount of 25%. You'd required a 100k pension income (in today's dollars) to have an average tax rate of 25%, which is a very high retirement income for your profile. 20% is more realistic. Finally, if you still want to report it like this, I'd list the RRSP in-whole in the assets column, and the future RRSP tax bill in the liabilities column, to make it more clear what you're showing
 

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Discussion Starter #20
Do you mean home equity based on your purchase price? I'm not sure why you'd do that when you have property which has a certain present value, much higher than purchase price. If you want to be conservative, instead of just "accurate", for whatever reason, I'd chop 5-10% off the estimated value of the house and call it that.

I don't love the approach of devaluing the RRSP, especially for us young people (I think we can cling to that title for a few more years, thanks
). It's an investment account, like any, and 30+ years from now it's cashflow will become part of retirement income and a complicated tax calculation with pensions, RRSPs, unregistered, government payments, spousal splitting, credits, and other investments. It's not clear that the RRSP is a significant burden any more than other types of assets, or even if it is, by how much.

I also don't agree with the amount of 25%. You'd required a 100k pension income (in today's dollars) to have an average tax rate of 25%, which is a very high retirement income for your profile. 20% is more realistic. Finally, if you still want to report it like this, I'd list the RRSP in-whole in the assets column, and the future RRSP tax bill in the liabilities column, to make it more clear what you're showing
I was thinking of taking in account what I put into my place only because my net wealth fluctuates significantly based on that what I guess the approx fair value of my place is.. which arbitrarily changes the value of my net wealth which creates noise in my tracking?

I put income of $55K in a tax calc which gave me average 22% tax rate. I put in 25% be slightly more conservative. Nevertheless I appreciate the advice and revised the calcs to 22% instead and showed it in 2 lines instead of netting it.

Thanks for the feedback! Always trying to learn and see what other people are doing 🙂
 
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