# Mid-twenties in need of a plan



## chadwc (Feb 1, 2011)

So I've been a lurker for a little while, learning here and there about investment tips and strategies and I think it's about time that I speak up and look for some personal advice for my life situation.

I'm 24, recently found myself in a steady, well secured job at a municipality in BC. I have a few things that I need to consider in upcoming years. I have a bit of debt from a past relationship (which I'm forever thankful that I'm out of) of approximately 9k from a joint line of credit from when we were together. However, the LOC is still joint between myself and the ex because of the fact that her credit won't permit for her to apply for her half of the debt. So I'm stuck with having to pay for the mininum payments and saving up until the day that she is credit-able to split up the LOC between the two of us. I'm realistically thinking that we will be able to resolve this 2-3 years from now, a time in which I would like to have 9K liquid to pay off my half of the debt.

I own a condo in downtown Vancouver, mortgages (I have two mortgages) are up for renewal after a 1 year term (smaller mortgage) and a 2 year term (larger mortgage) at January 2012 and 2013 respectively. I'll be renting the unit out for the first year atleast, possibly year and a half so I'll have the opportunity to renew after making a lumpsum payment to my outstanding mortgage before renewal to reduce the principal.

Due to my expenses from my investment property, travelling expenses to work and the girlfriend expense, I'll be able to save approx. $1100 per month. I'd like to figure out the best way to apply my monthly savings during the year. As of now, $800 is being put aside into a simple savings account and $150 is being biweekly deposited into a dividend paying TFSA mutual fund account through Fidelity (Dividend Plus fund, invests in trust accounts and REITs). I like the idea of having dividend paying options in my TFSA but not sure exactly how I should allocate my funds from the get-go as I don't have lump-sum amounts to deposit into a single company (ie. RioCan).

Anyways in short here is my situation:
-Debt: LOC 9K to paid off in lump sum in approx 2 years (ex girlfriend is joint to the account, so I cannot discharge the LOC until she is ready to take responsiblity for her end)
-Mortgage: 2 mortgages, smaller mortgage set for 1 year term, larger mortgage set for a 2 year term. Currently tenanted for 1 year, will possibly keep him for an addition 6 months.
-Savings: $1100 monthly, would like to grow savings in a TFSA and have the option of withdrawing for debt/mortgage lump sum payment after 1-2 years.
-Income: Limited to monthly savings, no basket of cash in savings but looking to put away cash each month to benefit my 1-2 year plan

Any advice would be appreciated


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## Dana (Nov 17, 2009)

chadwc said:


> I have a bit of debt from a past relationship (which I'm forever thankful that I'm out of) of approximately 9k from a joint line of credit from when we were together. However, the LOC is still joint between myself and the ex because of the fact that her credit won't permit for her to apply for her half of the debt. So I'm stuck with having to pay for the mininum payments and saving up until the day that she is credit-able to split up the LOC between the two of us. I'm realistically thinking that we will be able to resolve this 2-3 years from now, a time in which I would like to have 9K liquid to pay off my half of the debt.


Have you protected yourself by making sure the financial institution has frozen the LOC to prevent your ex from accessing it further? As long as it is joint you will be responsible if she accumulates more debt. You can advise the FI to freeze it or ask your ex to change the account to make it two signatures for withdrawal. 

Other than that, I would suggest to focus on using your monthly savings to accumulate an emergency fund in the event your income drops or your tenant stops paying rent. 

The Royal Mail gives good advice on the 3 tiers of savings. His advice can be found here. 

Good for you for planning for your financial future and getting your financial life in order at such a young age. Knowing what your goals are and having a plan is more than half the battle.


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## Pigzfly (Dec 2, 2010)

Hmm - looks like you've got things more or less sorted out.

Do you have enough TFSA space to continue to add to it throughout the year?

Do you have the flexibility to pay off the 1 year remaining mortgage starting now? (I assume not, but if so, you will save interest costs. You can compare the after tax interest savings to the after tax rate of your dividends/return; maybe it's better, maybe it's not.)

Same applies to prepayment options on the 2nd mortgage - compare the return rates after tax and maybe that's a good place to put your money. This might not be what you want to do as the other debts will mature first and those are your priorities.


Your time frame = lower risk investments, unless you've got some wild side and/or it is acceptable that when the time comes, you may not have the money.

I don't know anything about the fund you're in, but check the MER and the return rate, there may be better places for your cash. People here are fans of the TD e-series stuff and some ING stuff. 

Does having/not having your tenant dramatically affect your ability to save, when the time comes? Can you still accomplish your goals w/o or will you need to change some things to do so?

Not much investment advice there, but a few more questions in case you haevn't already asked them of yourself.


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## chadwc (Feb 1, 2011)

Dana said:


> Have you protected yourself by making sure the financial institution has frozen the LOC to prevent your ex from accessing it further?
> 
> The Royal Mail gives good advice on the 3 tiers of savings. His advice can be found here. .


I have basically maxed out my LOC so that there's no cash to withdrawl. Monthly payments are interest only so there will never be any cash available for withdrawl. Thanks for the lookout though. That article is really good, I've never heard of such a thing before but it's a good guideline to follow. Seems fairly conservative but a good guideline



Pigzfly said:


> Do you have enough TFSA space to continue to add to it throughout the year?
> 
> Do you have the flexibility to pay off the 1 year remaining mortgage starting now? (I assume not, but if so, you will save interest costs. You can compare the after tax interest savings to the after tax rate of your dividends/return; maybe it's better, maybe it's not.)
> 
> ...


My TFSA space is huge, I basically have full contribution room from the startdate of TFSAs coming into effect so I'll be maximizing this as of now. As for my mortgage, my interest is already fixed for the course of my term(s), so making a lumpsum deposit at the end of the term is my only option.

After you mentioned TD e-series, I checked it out and signed up immediately. I didn't realise my MER was so high with Fidelity (more than 2%???) compared to e-series indexes at around 0.4%. Thanks for the tip! It sounds like I'll have more control over when and how much I want to contribute as well, I'm excited to see how everything pans out by the end of the year


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## Jon_Snow (May 20, 2009)

Kudos to the recent influx of twenty-somethings who have come to this site for some financial advice. I wish I had my act together at a similar age. I don't think I clued in until my early 30's....


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