Financial advices

[b_foot]

Hi There,

I'm new here and hoping to hear some investment advices and/or savings goal. Here is the background:

- couple in 30's (35 and 32) with a 1 year old boy (hoping for another baby in 1-2 years)
- recently paid off the mortgage and looking for ways to invest
- net monthly income is about $8800 (combined income) and could save about $4K per month
- no company pension

Assets:
- house: 300K
- 120K of registered investment portfolio that is filled with bank stocks, prefs and a few other companies. The breakdown by industry are: 65% financial; 15 Telecom; Resources 15%, 5% others.
- 45K cash outside of RRSP

Liabilities:
- 20K Staff Loans

From what I can gather, if I save about $55K a year, I should be able to achieve $2M target in about 20 years (I intentionally exclude the house, thinking that the house can be used to fund children post secondary education). Hoping the $2M will yield 5% and will bring us about 75K of net income per year (after tax). As soon as $2M goal is achieved, we will stop working all together.

Here is my questions:
- is the $2M goal achievable or is it being too naive?
- since I'm hoping for only a 5% yield, my portfolio should be fairly conservative. I'm looking for investment ideas.

Thanks.

[steve41]

To do this properly, I would want to know both gross salaries, and an indication of how you might expect those salaries would grow over time. Plus, is the "we can save $4000 a month" wishful thinking, or is it a real month over month, year over year reflection of your ability to save?

Also, do you have a realistic retirement age in mind?

[Jon_Snow]

Hi There,

I'm new here and hoping to hear some investment advices and/or savings goal. Here is the background:

- couple in 30's (35 and 32) with a 1 year old boy (hoping for another baby in 1-2 years)
- recently paid off the mortgage and looking for ways to invest
- net monthly income is about $8800 (combined income) and could save about $4K per month
- no company pension

Assets:
- house: 300K
- 120K of registered investment portfolio that is filled with bank stocks, prefs and a few other companies. The breakdown by industry are: 65% financial; 15 Telecom; Resources 15%, 5% others.
- 45K cash outside of RRSP

Liabilities:
- 20K Staff Loans

From what I can gather, if I save about $55K a year, I should be able to achieve $2M target in about 20 years (I intentionally exclude the house, thinking that the house can be used to fund children post secondary education). Hoping the $2M will yield 5% and will bring us about 75K of net income per year (after tax). As soon as $2M goal is achieved, we will stop working all together.

Here is my questions:
- is the $2M goal achievable or is it being too naive?
- since I'm hoping for only a 5% yield, my portfolio should be fairly conservative. I'm looking for investment ideas.

Thanks.

Wow... you are doing great. My wife and I are able to save about the same amount per year (50-60k). Having no kids, I think I can "get by" with a portfolio of about 1.5 million.

[OhGreatGuru]

(I intentionally exclude the house, thinking that the house can be used to fund children post secondary education).

I don't understand that remark. Do you plan to re-mortgage your house to pay for the post-secomdary education? Seems to me RESPs should be part of your strategy.

[Cal]

No mention of TFSA's...not sure if that is assumed to be included in your registered accounts.

Not sure on what the 45K is sitting in cash for. Is that what you feel you would need in the form of emergency funds.

Registered monies seem heavily weighted in financials. Would consider adding some energy sector weighting, and perhaps a REIT.

It is a great start that the two of you are off to. Also great to see someone who is not hosue rich, cash poor.

2M seems like a reasonable goal. At 5% it appears you will be able to live off of the income easily.

[b_foot]

To reply a few questions some have raised:

- In my spreadsheet, I had a 2% savings increase year over year in recognition of salary increases.
- My gross income is $110K (bonus, pension supplement included) and wife's gross income is about $50K.
- $4K savings is an actual number. We used to pay about $4300 on our monthly mortgage, now we're mortgage free, we redirect the mortgage payment into savings. Our mortgage payment + additional savings was about $55K a year. Our expenses are higher recently after the baby has arrived, but i think $4K/month is still a reasonable amount.
- my realistic retirement age is about 55 (20 years from now)


> I don't understand that remark. Do you plan to re-mortgage your house to pay for the post-secomdary education? Seems to me RESPs should be part of your strategy.
- I'm hoping the house can be used to fund children post secondary education, in additional to RESP. If RESP alone is sufficient, that's great. Let's treat the house as a bonus. I'm trying to be more conservative.

- Sorry, I did not intentionally left off TFSA. We max'ed the TFSA. My wife's 10K is in savings account; my 10K portion is currently sitting in questrade account waiting to be invested. I would like to use this 10K to go after highly speculative stocks for the tax free capital gain. A few gaming companies are on my radar.

- My wife is super conservative and would not consider anything other than bank prefs. 80% of her portfolio is sitting either in GIC or high interest savings account. That explains the 45K cash.

- Yes, I know my portfolio is heavily weighted toward financial industry. At some point, I would like to rebalance it. For the time being, it serves me well. I loaded up a lot of canadian bank prefs with 7% yields as well as Citi bank stock with average cost around $1.70.

I guess I'm looking for a systematic way to invest the $50K/year savings. Thanks.

[b_foot]

Since this is a dairies thread, just an update on the numbers since I last posted.

Assets:
Liquid Asset/Cash: 86,361
Investment 196,217
House 300,000
Car 15,000

Liabilities:
Staff loans (0%) 18,500
Mastercard (0%) 17,000

Net worth 562,078

We managed to save $50K in 2011 and according to the plan for 2012, we should be able to save about $52K in 2012.

We have two children now, youngest is 6 weeks old. My wife is on mat leave till end of 2012. Imagine when wife goes back to work, our budget will not improve much due to the daycare cost. It is the single biggest expense we had in 2011.

We accumulated larger amount of cash because my wife is very risk adverse. My portfolio consists of a lot of common and prefs on CDN and US banks. I'm waiting for CITI bank stock to go back to $40 -- my average cost is around $2.80. It may take a long time though ;-)

This year I would like to put a industry concentration limit on my portfolio. I'm over exposed in financial sector.

Any other suggestions?

[Four Pillars]

- I'm hoping the house can be used to fund children post secondary education, in additional to RESP. If RESP alone is sufficient, that's great. Let's treat the house as a bonus. I'm trying to be more conservative.

This still doesn't make sense. How does one use a house to fund education? Will you sell the house? Is this your house or are you talking about a 2nd investment property?

Congrats on the 2nd kid.

[b_foot]

This still doesn't make sense. How does one use a house to fund education? Will you sell the house? Is this your house or are you talking about a 2nd investment property?

Congrats on the 2nd kid.

Let's think of the house as a cushion. If we have enough, we will keep the house, if not, we will sell the house to fund kids' education. I guess in my wildest dream after the kids go to university, my wife and I would travel and stay at a warmer place and come back to visit them in the summer months. We will rent if we have to.

[Montrealer]

Here is my questions:
- is the $2M goal achievable or is it being too naive?
- since I'm hoping for only a 5% yield, my portfolio should be fairly conservative. I'm looking for investment ideas.

Buy real estate, buy it early and hold on to it and I bet you have the potential to be worth more than $2,000,000.00 once it's all said and done.