Thanks FP for the reply. I think what I was getting drawn into was the tempation as you mentioned. I just really wanted to pay it off quickly, but I guess there's not much of a gain for a few months faster.
In terms of your question on why have an EF when you have any debt, I had to work through this my self. At least here was my justification, the requirements for EF is based on cash flow, and risk environment of th individual.
Normally, I am a big advocate of emergeny funds, even when there is debt. The reason is that even if your mortgage is lower by the amount of the emergency fund, in a case of job lose, your cash flow is about the same even if you have a slightly lower mortgage. The fact that there could still be more than one year on the mortgage still has a risk involved (the longer the remaining mortgage, the larger the risk added to the profile). Consumer debt is the same if not worse. The fact someone has consumer debt, may be an indication of the risk that they are unable to manage their finances under normal circumstance, and are comfortable debt, therefore in emergency times, with out an EF will more likely get into more trouble.
In terms of my case on why I considered it, was that by paying off the mortgage COMPLETELY with my EF, it would reduce my cashflow requirements if a job lost were to occur. Also, the timeframe in which I would have my EF rebuilt (with my tax refund), would only be about 7 months. I am usually able to determine the stabiliy of my job, and my spouses contracts in at 6 month intervals. Also, based on the other risk factors in my life, I would be at a relatively low risk. That's why I was able to consider the justification of not having an EF, though it would bring more risk.
Last edited by Plugging Along; 2012-07-15 at 02:15 AM.
Reason: Grammer and stupid autocorrect
I thought I would take a little time to provide an update, and articulate my plans for 2013.
First, not much of an update since last time. The major points were somehow our accountant missed a t5 or two, so we got reassessed and ended up having to pay back almost $5k in taxes. Also, we were asked to help out our parents just recently, so had to lend another $5k to them. They are just waiting for some investments to mature, so I know we will get the money back next December.
Spouse has decided to stop consulting and go back to climbing the corporate ladder. He took a position that is really great for him. We will lose a lot of flexibility from no longer being self employed. I am still really enjoying my work, and have been presented with some great opportunities assuming I can pull off this big project. That will change my direction of my career. I will continue consulting on the side, but will see how this other project pans out. It is quite exciting for me.
In terms of finances, the payback to cra and loan to family will mean that I will just have to continue holding course on paying off vacation property mortgage. My original goal was to have it paid off by July, that may have to wait nit I get my money back in dec, but I am going to see if I can still pay it off early. I may now dip in the EF.
I will have my rrsps maxed by February, and will need to reduce my monthly contributions so I do not over contribute for 2013. I plan to take the amounts and start putting it towards my unregistered accounts. That should be when we receive our taxes I will know the exact amounts. Tsfa will be maxed Jan 2. Also plan to put my raise directly into savings that will go into my unregistered accounts.
For spouse, still working on maxing rrsps. We will continue on track, and may increase it a little once we figure his new work contributions. Tsfa will be maxed jan 2, however, right now it's all in cash, so I need to find some buying ops for $25500. I have been waiting to see what happens with the cliff.
For the kids, we are continuing on course with their rrsps. However, they now have enough saved in their personall hisa accounts that it may be worth teaching them investing, well at the least the oldest. She was pretty excited to see she made $92.74 this year just by having the money in the bank. I would like to start some sort of couch potatoe for them. Te shortest time frame is 11 years. I am a little nervousness, as I always go through my advisor for other things, and tend to take huge risks with my personal money. It seems different with the kids mney. They will each have about $8 k to invest, plus what ever they get for gifts through out the year, and a monthly $150 contribution from us.
I think our main goal this year is just really building a solid unregistered portfolio. I also kind of want to save for another rental. I do like real estate, and this has always been our plan.
Any thoughts, especially on the kids accounts or Tsfa investment accounts would be great.... Or guess the non registered accounts too.
Okay here's my summary for 2013
1. Figure out how to invest TFSA - $25500 for spouse, about $9K for me
2. Figure out how to invest kids In Trust accounts about $8-9K each to start
3. Pay of that darn mortgage on rec property
4. Reallocate money that used to pay off mortgage to non registered account, along with raises.
5. Forgot... we are saving for a replacement vehicle. We will buy when we find the right one. We can't decide of bringing another one in from the US or buying here. Need to figure out this strategy. I think this will replace number 4
Last edited by Plugging Along; 2012-12-29 at 07:42 PM.
Reason: Typos, and summary.
I am actually pretty happy to be able to make some major updates in a short time.
1. Figure out how to invest TFSA - $25500 for spouse - I did one big buy of BCE for the whole amount, so I am happy to see that we're up $1800 in the month, but I'm not counting that for every month.
B) about $9K for me - still haven't found what I am looking for, but am waiting for maybe CPG to drop
2. Figure out how to invest kids In Trust accounts about $8-9K each to start - still haven't figured this one out either 3. Pay of that darn mortgage on rec property - Hurray.... this is the best update, as of midnight tonight, we are totally mortgage free and debt free on all non investment debt. I took the plunge, and sold all my CP shares, then paid off the mortgage.
4. Reallocate money that used to pay off mortgage to non registered account, along with raises. After this week, I have already set up an automatic transfer of the whole mortgage payment into our investment/savings account.
5. we are saving for a replacement vehicle. - Decided that we will wait until next year, as we can get at least one more year out of our vehicles, and can use the mortgage money saved perhaps towards this
We had a few unexpected expenses, like our fridge dying and our freezer nearing it's death, so will be buying one of those, plus one of our private equities has an opportunity to buy more, so we may take some of our extra cash, and drop it in.
I hear that once the mortgages are done, then the real savings begins, so let's see if that's true. Yeah!