My wife and I just sold our house and moved to a different city. The sale proceeds should clear the bank on Monday. This seems like a logical time to get some feedback on our financial situation and to start a diary as we work towards our goals.
The basics:
My wife and I are both 30. No kids, two dogs. Children are in the not-too distant future plans; likely a year or two.
My wife makes $65,000 per year as a social worker. I currently make $50,000 per year as an articling student, and will be making somewhere between $65,000 and $80,000 as a first-year lawyer beginning in October 2012.
I took *way* too long to get through my schooling, and as a result we have a significant amount of student debt. Our current student debt picture looks like this:
Husband's student loan = $25,963.61 (5.5%, variable; effective rate = 4.675% after tax credit)
Wife's student loan = $19,990.34 (5.5%, variable; effective rate = 4.675% after tax credit)
Husband's Scotia professional student line of credit = $59,176.90 (4.25%, variable)
= $105,130.85
We also have the following other debt::
RBC LOC = $10,000 (6.99%)
Vehicle loan = $13,815.41 (7.29%)
Credit card = $6221.46 (1.99%)
Other credit cards (pay off in full each month), current balances are approximately $3200
= $33,236.87
The total is $138,367.72, with most of it at (currently) reasonable interest rates. The two worst rates are on the RBC LOC and the vehicle loan. My wife and I are currently deciding whether to pay those two off in full with the proceeds from the sale of our house, which I'll talk more about below.
Following the sale of our house, our assets look like this:
Wife's RRSP: $14,164.80
Wife's employer pension plan: $19,150.05
Wife's chequing account: $56,179.64
Husband's chequing account: $770.03
Husband's TFSA: $679.27
Wife's TFSA: $25.00
Two vehicles worth approximately $17,000 combined
Household goods worth approximately $25,000
= 132,968.79
Our net worth is slightly negative even counting vehicles and household goods, and much more so when looking just at liquid assets. The good news is that we're a lot better at saving than you'd think by looking at our current financial picture. Over the last six months we've managed to pay down $14,467.93 in debt, while maintaining two houses, paying to fix up a home for sale then move it, and spending an average of $550/mo on gas driving between two cities.
I'll wait until we've had a full month in our new home before detailing our monthly expenses, since we dont know yet what our utilities will be or what our gas bill will look like with the new living arrangement.
Our current take home pay each month is approximately $6700 (This should go higher when I get approval from the CRA to deduct additional income at the source for my built-up tuition and education credits). I expect that between debt repayment and savings, we will be adding $3000-$3500 per month to our net worth on average between now and October 2012.
Here is the biggest financial decision we currently face: Once the cheque clears early next week and we pay our current credit card balances, we will have about $52,000 in cash that we can use several different ways. The key factor is that my wife and I want to buy another house once we've improved our financial situation a bit, probably in Spring 2013. Because of my education credits, the graduate tax rebate program in our province and our moving expenses, our tax refund will likely be north of $10,000 in Spring 2013, which is why we're looking at waiting until then to buy.
The two options that we have been debating for the cash are:
#1) Pay off our two highest interest debts, the $10,000 RBC LOC (6.99%) and the $13,815.41 vehicle loan (7.29%). Place the remaining $28,000 or so into our TFSA accounts, in either a high-interest savings account or possible a conservative form of security. Save like crazy while paying just the standard payments on our remaining debts (all student debt).
#2) Keep those two debts, and throw the entire amount of cash into savings. Save like crazy while paying just the standard payments on our remaining debts (all student debt).
I estimate that a house will cost us approximately $400,000 (we live in a relatively expensive real estate area). I would really, really like to have 20% down when we buy, so that we can avoid CMHC insurance premiums. It is more likely that we could do this if we went with #2, but I'm strongly leaning towards #1, as I'm uncomfortable with the amount of debt we're currently carrying.
There's obviously a strong argument for paying less than 20% down and attacking our debt more aggressively before interest rates inevitably rise, but I think my wife and I are on the same page that we'd like to have 20% down if at all possible. If nothing else, having the relatively short term goal of saving $80,000 plus closing costs is an easy one to get motivated for. I expect that many would suggest prioritizing debt repayment or retirement saving. There's a lot of validity to those arguments, but for reasons I can get further into if necessary we're comfortable with holding off for one more year on both.
Anyway, I'd love to hear thoughts on this decision, or on our finances in general (though it will probably be easier to do so after we get our monthly expenses nailed down this month) I'll be posting monthly net worth updates based on the info I'm already tracking.
Fire away.
The basics:
My wife and I are both 30. No kids, two dogs. Children are in the not-too distant future plans; likely a year or two.
My wife makes $65,000 per year as a social worker. I currently make $50,000 per year as an articling student, and will be making somewhere between $65,000 and $80,000 as a first-year lawyer beginning in October 2012.
I took *way* too long to get through my schooling, and as a result we have a significant amount of student debt. Our current student debt picture looks like this:
Husband's student loan = $25,963.61 (5.5%, variable; effective rate = 4.675% after tax credit)
Wife's student loan = $19,990.34 (5.5%, variable; effective rate = 4.675% after tax credit)
Husband's Scotia professional student line of credit = $59,176.90 (4.25%, variable)
= $105,130.85
We also have the following other debt::
RBC LOC = $10,000 (6.99%)
Vehicle loan = $13,815.41 (7.29%)
Credit card = $6221.46 (1.99%)
Other credit cards (pay off in full each month), current balances are approximately $3200
= $33,236.87
The total is $138,367.72, with most of it at (currently) reasonable interest rates. The two worst rates are on the RBC LOC and the vehicle loan. My wife and I are currently deciding whether to pay those two off in full with the proceeds from the sale of our house, which I'll talk more about below.
Following the sale of our house, our assets look like this:
Wife's RRSP: $14,164.80
Wife's employer pension plan: $19,150.05
Wife's chequing account: $56,179.64
Husband's chequing account: $770.03
Husband's TFSA: $679.27
Wife's TFSA: $25.00
Two vehicles worth approximately $17,000 combined
Household goods worth approximately $25,000
= 132,968.79
Our net worth is slightly negative even counting vehicles and household goods, and much more so when looking just at liquid assets. The good news is that we're a lot better at saving than you'd think by looking at our current financial picture. Over the last six months we've managed to pay down $14,467.93 in debt, while maintaining two houses, paying to fix up a home for sale then move it, and spending an average of $550/mo on gas driving between two cities.
I'll wait until we've had a full month in our new home before detailing our monthly expenses, since we dont know yet what our utilities will be or what our gas bill will look like with the new living arrangement.
Our current take home pay each month is approximately $6700 (This should go higher when I get approval from the CRA to deduct additional income at the source for my built-up tuition and education credits). I expect that between debt repayment and savings, we will be adding $3000-$3500 per month to our net worth on average between now and October 2012.
Here is the biggest financial decision we currently face: Once the cheque clears early next week and we pay our current credit card balances, we will have about $52,000 in cash that we can use several different ways. The key factor is that my wife and I want to buy another house once we've improved our financial situation a bit, probably in Spring 2013. Because of my education credits, the graduate tax rebate program in our province and our moving expenses, our tax refund will likely be north of $10,000 in Spring 2013, which is why we're looking at waiting until then to buy.
The two options that we have been debating for the cash are:
#1) Pay off our two highest interest debts, the $10,000 RBC LOC (6.99%) and the $13,815.41 vehicle loan (7.29%). Place the remaining $28,000 or so into our TFSA accounts, in either a high-interest savings account or possible a conservative form of security. Save like crazy while paying just the standard payments on our remaining debts (all student debt).
#2) Keep those two debts, and throw the entire amount of cash into savings. Save like crazy while paying just the standard payments on our remaining debts (all student debt).
I estimate that a house will cost us approximately $400,000 (we live in a relatively expensive real estate area). I would really, really like to have 20% down when we buy, so that we can avoid CMHC insurance premiums. It is more likely that we could do this if we went with #2, but I'm strongly leaning towards #1, as I'm uncomfortable with the amount of debt we're currently carrying.
There's obviously a strong argument for paying less than 20% down and attacking our debt more aggressively before interest rates inevitably rise, but I think my wife and I are on the same page that we'd like to have 20% down if at all possible. If nothing else, having the relatively short term goal of saving $80,000 plus closing costs is an easy one to get motivated for. I expect that many would suggest prioritizing debt repayment or retirement saving. There's a lot of validity to those arguments, but for reasons I can get further into if necessary we're comfortable with holding off for one more year on both.
Anyway, I'd love to hear thoughts on this decision, or on our finances in general (though it will probably be easier to do so after we get our monthly expenses nailed down this month) I'll be posting monthly net worth updates based on the info I'm already tracking.
Fire away.