27 years old, Toronto, squirreling savings away to prepare for starting a family

[inbetweenworlds]

I'm 27 years old. My husband and I live in Toronto. We manage our finances mostly separately, so any figures below reflect only my own numbers. We're planning to start a family within the next year or so. For those who have families - what advice would you give someone starting out?

Here are my assets as of last month:

Cash: $8,614 - mostly sitting in an ING savings account
Non-registered stocks: $76,593 (allocation below)
Bonds in TFSA: $5068
Non-registered bonds: $386 (I know, I'm just waiting for the e-fund holding period so that I can sell them and reallocate my RRSP)
RRSP: $57,991
GICs: $38,449 - set up as a 5-year ladder with ING, ~$10k sheltered in TFSA
The house is my husband's, so it's not listed here
No debt - MBNA Smart Cash paid off in full each month

Current asset allocation: 66% equity, 12% US equity, 12% international
equity, 9% bonds, all in TD e-funds

Income: $72,664 last year (after tax; includes salary, dividends, interest, and gifts)
Savings rate: about 60-65% of net income

TFSA and RRSP are both maxed out - TFSA currently 66% GICs and 33% bonds, RRSP holds most US equities and bonds, although there are some I still have to shift over from my non-registered portfolio). I'm one of those keeners: I estimate income and RRSP contribution room at the beginning of the year so that I can invest at the start of the RRSP season instead of at the end of it, and I top it up after assessment once I know how far the $2,000 overcontribution room will take me. Someday I might switch my e-funds to index ETFs.

I have a some money set aside in GICs to cover emergency funds, seeing us through starting a family, living expenses for starting a business when I want to, and a possible sabbatical fund (it will be a year of living expenses, saved up over seven years).

I enjoy my work (I'm in IT). I like being frugal, too, so I'm happy to save as much as I can for a potential early retirement - which to me simply means the freedom to work on anything I want to do, whether or not it pays a lot. (As far as I'm concered, my standard of living is already fantastic!)

We're squirreling away whatever savings we can so that we might have the option of one of us staying home once we start a family. Our relatives don't live close by, so no free babysitting. Oh well! But I think we're in reasonably good shape.

Any advice for someone getting ready to start a family, or heading into her thirties?

[the-royal-mail]

Welcome to the forum!

Wow that's incredible. Not sure what advice I could possibly offer. You have saved an enormous amount of money. I'm jealous of what you have accomplished. Would you care to share how you came into so much wealth? Was there inheritance, lottery win or similar?

What type of dwelling do you have?

[inbetweenworlds]

Good personal finance is boring. No lottery wins, no inheritance, nothing spectacular - just regular savings, living below my means, and learning from as many people as possible.

It helps to not have any student debt. My parents paid for my schooling, and then I got a scholarship partway through university. Scholarships and research assistantships funded my way through my master's, and I even graduated with some savings. I got a job right away. Since then, I've invested all of my bonuses and refunds, and as much of my earnings as possible.

It also helps that my husband is frugal, and we both like spending time at home. He handles most of the household expenses. I handle groceries and some other expenses, but it's definitely below market rent so that there's no question about his ownership of the house. (This is his second marriage - lessons learned the hard way!) That's spelled out in the marriage contract, too.

We live in a semi-detached house in a decent neighborhood. It's walking distance from a supermarket and a library. We enjoy cooking, and we make practically all of our meals. The chest freezer's definitely a time- and money-saver!

So yeah, it is possible to make it through your quarter-life crisis with decent finances... =)

[Four Pillars]

My advice is to....ummm, keep up the good work?

I'm assuming your hubby has a similar financial profile - if he doesn't, then all your good habits will be wasted.

[hboy43]

hi:

Not much to fault here. About all I can add is to present an integrated picture with your husband's finances. After all you are on the same team.

Also perhaps revisit > $50K sitting around doing SFA in GICs. You have listed good reasons, just check if they are still real.

Also start researching life insurance for when babies start.

hboy43

[Jungle]

I think you're doing VERY well. Everything looks really good! Have you considered geting some wills done and term life insurance?

[Financial Cents]

Let's review:

Cash: $8,614 (GREAT).

Non-registered stocks: $76,593 (WOW, WOW at 27).

RRSP: $57,991 (WOW at 27).

GICs: $38,449 (Geez, major safety net = AMAZING at 27).

No debt - MBNA Smart Cash paid off in full each month (EXCELLENT at any age).

Do you really need advice?

Keep it all going maybe?

Kidding aside, outstanding work. Most 27-year-olds would be extremely fortunate to be in your shoes. Heck, most 37-year-olds would.

http://www.myownadvisor.ca/

[HaroldCrump]

Folks, pay attention to the following, this is perhaps the key to success:

Savings rate: about 60-65% of net income

This is indeed an awesome achievement and deserves unqualified praise.
Very well played, hats off to you!

[the-royal-mail]

Wow.

Do you own cars? How much is your house worth? These two things probably account for the biggest money drain. If you got your house a long time ago and at a bargain, and don't own cars and stay in, I guess that could do it, but saving 60-65% of net income is a remarkable achievement. Seriously. Wait until Addy sees this.

[inbetweenworlds]

the-royal-mail: Hubby owns a car, I don't. I mostly work from home (hooray for IT!) or take the subway into the office. The weather's starting to warm up, and I'm looking forward to biking to work again. The house is his as well, so I don't consider it part of my net worth. He's doing okay too - fairly frugal, no consumer debt, and making steady progress on a mortgage.

Saving a large portion of one's net income is easy when you don't have a lot of fixed expenses, you don't have ridiculous interest rates from consumer debt, you're a contrarian who doesn't like getting advertised to, and you get your entertainment from the library and the Internet. Although I do spring for the occasional opera ticket - COC's Opera for a New Age program gives discounts to people younger than 30 years old, and there's community opera too.

I know I'm really lucky to be in this kind of situation, so I'm saving as much as I can in order to take advantage of compounding interest and to prepare for any changes.

Jungle, hboy43: I currently carry minimal insurance, but I'll get term insurance when we've got kids. Hubby has life insurance to cover his daughter, the mortgage, and other things if something happens to him. We'll prepare new wills and redo the marriage contract when we have kids. (Might be a good idea to financially recognize a stay-at-home spouse's contribution, etc.) We self-insure our pets.

hboy43: Yup, we're on the same team, but we like keeping our finances separate (at least for now). We're both reasonably good at managing our books, and we split major expenses. Besides, focusing on my numbers alone helps me avoid getting dazzled by combined numbers. =) I can remind myself: "I'm 27, I'm just getting started, I'm going to try to live like a student as long as possible." We've already made some concessions on the student front - recently started buying organic food! - but the more I can resist the hedonic treadmill, the better.

Four Pillars: Yup, hubby and I are on the same page. I track my finances more closely than he does, so I do more of our accounting (and I actually enjoy preparing our tax returns - I know, weirdo!). He's better at doing the research to make sure that we get good value. It all works out.

hboy43: I used to have 5 years of basic living expenses saved in GICs (starting a family and/or business) plus some capital, and I've moved some of the money to investments instead. If we drop both of our incomes and use those savings to fund all our living expenses, the burn rate would be higher, so I don't mind keeping all that around in something that's only slightly above inflation. I may reallocate once we start a family and figure out what our cashflow/plans are like, so this is more of a temporary holding pattern.

Financial Cents: Hey, getting - and actually applying! - all that advice was what got me to where I am now. I've read a ton of personal finance books (thank you, library), but there are still things that I'm curious about. Parenting is a big cloud of uncertainty, for example. I've been reading about the impact on career/earning potential for women who take time out of the workforce. Scary stuff! But if I manage finances well and maybe even start my own business, it will probably work out. It's annoying that money's such a taboo topic, and it's such a relief to be able to discuss things here.

I'm still figuring out a lot of things. For example, I like making RRSP contributions as a lump sum at the beginning of the tax year instead of at the end of the tax year or instead of dollar-cost-averaging it in through the year. I remember reading somewhere that the longer time spent compounding tax-free offsets the risk of a lump sum, and I'm DCA-ing my non-registered investments anyway. So - should I DCA my retirement-earmarked savings into e-funds, then sell them near year-end so that I can move the money into registered e-funds or ETFs? Should I keep the earmarked contributions in cash as an extra buffer? I tell myself the difference is probably insignificant, but I'm sure someone out there has thought about the recommended strategies if you've got the ability to do lump-sum investments at the beginning of the tax year.

It's like that for many other personal finance decisions. I can find plenty of books teaching people how to get out of debt, but there aren't that many books on what's next - and that's what I'm interested in. My favourites are "Your Money or Your Life" and "I Will Teach You to be Rich". I like the life trade-off calculations from "Your Money or Your Life" and the negotiation tips in "I Will Teach You to be Rich". Any other recommendations?