# I'm 24 With Big Goals, help me start!



## emdoug (Apr 22, 2016)

Hello! First day as an official CMF member and getting a little post-crazy but I'm just excited to share/learn.

I'm 24, no kids, just bought a house, and in my first job in my field grossing $37,245. My big life goal is to be able to work only part-time by the time I am 45.
Where do I even begin to draft a plan, I know there's so many factors but I just want to be able to get a rough idea of not only how much money I will need but all the other things that come into play when you switch from FT to PT work with a mortgage. How do you even start!

To make things simpler, lets assume the following:

I want to work part-time in 21 years.
I have a mortgage of 320,000.
Monthly mortgage and utilities is $1,100.
Assume part-time income of 17,000.
Assume no consumer debt.
Assume current income of 45,000. (I know this is more than current, but eventually I will be making significantly more than I do right now as I'm an assistant)

*What are the biggest steps to get there?
What is the first priority?
What will be the biggest hurdle?*


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## Beaver101 (Nov 14, 2011)

^
1. Pay off your mortgage
2. Kill your mortgage
3. Your mortgage

Short cuts to semi=retirement or freedom 45 maybe:

1. Flip your house for a profit?
2. Getting a large inheritance
3. Winning the lottery

If not, extreme belt-tightening or practicing frugality. It's possible as for certain baby boomers / Depression-era folks (if still alive in this category).


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## 1980z28 (Mar 4, 2010)

Beaver101 said:


> ^
> 1. Pay off your mortgage
> 2. Kill your mortgage
> 3. Your mortgage
> ...


+1


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## Franky Jr (Oct 5, 2009)

As per my 3 minute calculation. 
*If* you can live on about 2000/m save 1000/m on top of that you should have over 500K in 20 years (inflation adjusted)
You could pull 20K a year off that to supplement your part time gig.(1/2 of the 20K would be from TFSA)(uses 4%swr -may not work on 50 year horizon, 3.5swr should though) 
I used 45000 income -7000 tax leaving just over 3000/m avail.

Having mortgage paid off in 20 years would reduce income required thus reducing nest egg requirement to switch to part time.

I do about 2/3 investing and 1/3 extra mortgage payments with my spare money. Each to his own. If rates were higher I would obviously really hit on the mortgage but this works for me now.

This is living on the cheaper end of society. 

Your mortgage seems really cheap what's your rate? (I'm renewing mine)


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## emdoug (Apr 22, 2016)

Franky Jr said:


> As per my 3 minute calculation.
> *If* you can live on about 2000/m save 1000/m on top of that you should have over 500K in 20 years (inflation adjusted)
> You could pull 20K a year off that to supplement your part time gig.(1/2 of the 20K would be from TFSA)(uses 4%swr -may not work on 50 year horizon, 3.5swr should though)
> I used 45000 income -7000 tax leaving just over 3000/m avail.
> ...


Mortgaged amt is 328,000, rate is 2.74, I only included the portion I will be paying as boyfriend will be paying the other 50%. Biweekly PITI is $947.61 of which I'll be paying half.


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## OptsyEagle (Nov 29, 2009)

I would plan to be able to retire at 45 and if part time work is available and you want to do it, then go for it.

The problem with part time work is the assumption that it will be available at the same hourly rate as full time work. This does happen but it is not overly abundant. The problem is that an employer either really values your service and pays you well to provide as much of it as possible (full time work) or they can get along OK with out you (part time work) or easily replace you with someone else to do some of the work, and therefore do not overly value your services and tend to pay in the area of minimum wage.

When faced with that conundrum, most people find that the route to more freedom is simply to work more hours at the highest possible income level they can obtain. This allows them to save a lot more money so that they can possibly walk away from the rat race completely, at the soonest possible date.

This may or may not happen at age 45 but in either scenario you will find that what you do right now is about the same. Be as frugal as possible. Save as much money as you can. Invest it as smartly as you can, which inevitably will include extra payments on that mortgage, RRSP contributions, maxing the TFSA, etc.

At some point in the future, you will look at your situation and the availability of part time work and will make the proper decision that works best for you. The important thing is that what you do today will provide you with the maximum number of options.


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## 0xCC (Jan 5, 2012)

Funny, I have been thinking about my financial journey over the last 20 years lately because it is mostly a blur and I'm looking back at how I actually got where I am now (and whether I managed things reasonably well).

So 20 years ago I could have posted almost exactly what you have posted here.
I was a few months short of 24 when I took possession of my first house in Waterloo (Bridgeport and Weber area if you know that area).
I was actually still in school when I bought the house, only one year left though. I basically had the entire house financed, about half the house was funded by a loan from my grandfather and the other half was a mortgage from a bank. Renting out rooms in the house and working part time allowed me to pay the mortgage while in school. Renting the rooms wasn't too difficult in a University town.
I got a FT job in my field around a year after taking possession of the house (and about 3 months of being done school). FT gross income was about 1/3 of house value (i.e. mortgage was a little less than 3x annual salary).
After around 15-16 years (and after moving twice, the first move was into a house that cost twice as much as the first house only 3 years after buying the first one) the mortgage was paid off. I think I had the family loan paid off after 7-8 years but I would have to look that up to be sure.

Now here at about 6 months shy of 44 me and my wife's investment portfolio generates enough before tax income to fund our month to month living expenses (but not big ticket items like home renos and car replacements and things like that). Funny thing is that the investment income is actually a little less than my first FT salary.

All of the bonuses and raises we got went into investments. We only financed our first car, cars after that were bought with cash. The first car I think was a '94 that was bought in '97 or '98 and then sold in 2004 when we got a 2002 car that we drove until 2015.

As you are just starting out I would suggest that you start tracking your expenses. I used a spreadsheet to track our expenses and also plan out how to knock down the mortgage and family loan (the other half of the mortgage) as quickly as possible. Knowing what you are spending your money on will allow you to figure out if you are spending your money where it makes the biggest impact.


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## DollaWine (Aug 4, 2015)

0xCC said:


> Funny, I have been thinking about my financial journey over the last 20 years lately because it is mostly a blur and I'm looking back at how I actually got where I am now (and whether I managed things reasonably well).
> 
> So 20 years ago I could have posted almost exactly what you have posted here.
> I was a few months short of 24 when I took possession of my first house in Waterloo (Bridgeport and Weber area if you know that area).
> ...


That's incredible!


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## 0xCC (Jan 5, 2012)

DollaWine said:


> That's incredible!


Thanks, like I said it has been a bit of a blur.

One thing to note is that we don't have any kids. I would expect that having kids would have extended our time line by at least 5 years, if not more.


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## 0xCC (Jan 5, 2012)

After seeing your post in the diaries section there are some things I think you might want to consider.

As I said above figure out a way to track your spending. I used a spreadsheet for this (and I can provide a template if you want) but that isn't the only way to do it. The important part is that you understand your cash flows.

You should consider a couch potato investment strategy. My wife and I probably would be in a slightly better position today if we had used a couch potato strategy all along (we aren't doing that now and we are probably making a mistake by not doing it). Those RBC funds you are holding have average costs for what they are (actively managed funds) but they are much more expensive than index funds. I wouldn't buy any more of those funds. Look into www.canadiancouchpotato.com to get started. With your portfolio size and monthly contributions the Tangerine funds probably make the most sense for you. If you don't already have a Tangerine account PM me for and Orange Key that will give both of us a little bonus if you open an account.

You should probably be doing most of your investing in a TFSA since your current income puts you in a fairly low tax bracket. It could make sense to contribute to an RSP but since you are in a fairly low tax bracket you would need to do some math to figure out how much benefit there would be to doing that.

As your income increases try to get your investment contributions up to 10% of your gross income. I know that sounds like a totally reachable goal right now but keep it in mind, you will be able to get there eventually.


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## MoreMiles (Apr 20, 2011)

I think your dream may not be realistic. With all due respect, $37,245 is not a lot. Even with more raises, most people cannot retire early unless they make a 6-digit salary or have a fat pension.

The only way I see that happening is that you eat ramen noodles, take public transit, and stay single.


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## Pluto (Sep 12, 2013)

buying a house is a great idea. You principle residence offers tax free capital gains. 

If you can rent part of the house out it adds up over 20 years and a portion of your expenses becomes a tax deduction. 

Owning your own home and renting out part of it is better than an RRSP in my view. Remember what Peter Lynch wrote in advice for young folks wanting to invest: how about buying a house? (instead of stocks).


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## peterk (May 16, 2010)

I agree with MoreMiles, the only way to achieve your goal is to make much more money. Nobody makes below average income and retires early.

There are no doubt a number of current 40-50 year olds that have success stories that start off like yours. Made 30k at the beginning of their career (in the early 90s), bought a house (for 100k-200k that is now worth 500k-1M), had their salary get up to a modest 70k by their 40s/50s, and went part time/retired early, becoming a consultant/independent and taking their reduced pension. "It worked out just fine for me and my family", they'll say... Do not be fooled into believing that any such thing is repeatably or adequate for a successful life as an early 20s person in 2016. It is not, and if that is all you strive for you will suffer financial hardship for your entire adult life. To succeed today it take smarts, adaptability, and an eye out for what is coming in the employment market to avoid a potential career catastrophe. 

A note on frugality. It comes at a cost, and is in no way the most important factor in creating wealth and a successful life. Spending 24k instead of 36k (as a young single person, for example) is not a "free" 12k/year in savings. There is a real, tangible, detrimental cost to living a lower expense life. That is not to say that you should be reckless with your spending, or not search for a good deal in your purchases. Just remember that money spent on something that can add value (efficiency, experience, knowledge, happiness, etc.) to your life is not money wasted. The correct application of funds above and beyond your basic necessities can be instrumental in propelling you into a successful life of excess wealth, health, and happiness. Those focusing excessively on frugality, and aiming for financial targets that rely excessively on frugality, are missing the big picture, and are setting themselves up for failure. The Mr. Money Mustache crowd and early retirement seekers (of which I used to be a participant) are taking big, big risks with their future well-being. Particularly the 20 year olds who are going on the assumption that life will work out similarly to as it has for 40 year olds.


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## Eclectic12 (Oct 20, 2010)

True ... though there is a lot of variation in "cost".

I didn't see substituting a regular, self-brewed coffee for a fancy StarBucks coffee to have over $2k after-tax dollars to re-deploy as "detrimental".


Cheers


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## none (Jan 15, 2013)

peterk said:


> I agree with MoreMiles, the only way to achieve your goal is to make much more money. Nobody makes below average income and retires early.
> 
> There are no doubt a number of current 40-50 year olds that have success stories that start off like yours. Made 30k at the beginning of their career (in the early 90s), bought a house (for 100k-200k that is now worth 500k-1M), had their salary get up to a modest 70k by their 40s/50s, and went part time/retired early, becoming a consultant/independent and taking their reduced pension. "It worked out just fine for me and my family", they'll say... Do not be fooled into believing that any such thing is repeatably or adequate for a successful life as an early 20s person in 2016. It is not, and if that is all you strive for you will suffer financial hardship for your entire adult life. To succeed today it take smarts, adaptability, and an eye out for what is coming in the employment market to avoid a potential career catastrophe.
> 
> A note on frugality. It comes at a cost, and is in no way the most important factor in creating wealth and a successful life. Spending 24k instead of 36k (as a young single person, for example) is not a "free" 12k/year in savings. There is a real, tangible, detrimental cost to living a lower expense life. That is not to say that you should be reckless with your spending, or not search for a good deal in your purchases. Just remember that money spent on something that can add value (efficiency, experience, knowledge, happiness, etc.) to your life is not money wasted. The correct application of funds above and beyond your basic necessities can be instrumental in propelling you into a successful life of excess wealth, health, and happiness. Those focusing excessively on frugality, and aiming for financial targets that rely excessively on frugality, are missing the big picture, and are setting themselves up for failure. The Mr. Money Mustache crowd and early retirement seekers (of which I used to be a participant) are taking big, big risks with their future well-being. Particularly the 20 year olds who are going on the assumption that life will work out similarly to as it has for 40 year olds.


^ Nice post Peter - insightful & wise.


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## fraser (May 15, 2010)

Work hard. But most important...work smart. Learn to recognize opportunities that others do not or that they pass over.

1. Spend less than you earn

2. Build up your asset base-short and long term assets

3. Avoid debt other than home mortgage and even then keep it at a manageable level within your budget. Never succumb to consumer debt.

4. Make life long learning and improving your employment skills a habit

5. Marry smart

6. Don't follow the crowd. Buy when everyone is selling, sell when people are buying. Follow your gut sense.

7. Give back to your community in some form.


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## tygrus (Mar 13, 2012)

Just a little tip for the OP and anyone else.

There is no way to save yourself rich or even into an early very frugal retirement, unless you want to eat KD and just watch netflix for the rest of your life living in some town north of 60. All those money moustach and couch potato guys are chopping wood out in the boondocks and growing gardens. They aint living in downtown TO and visiting europe every year.

The only way to get rich or retire early is to acquire a asset(s) highly influenced by inflation or something that you can pay off in 20 years that provides alternate income.


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## none (Jan 15, 2013)

fraser said:


> 6. Don't follow the crowd. Buy when everyone is selling, sell when people are buying. Follow your gut sense.


This is terrible advice. Ignore your gut and be humble enough to realize your gut generally is unable to differential between good intuition and wishful thinking.

By when you have money regardless of what is happening in the market and follow a plan appropriate to your risk tolerance. That's it. The biggest enemy to successful investing is yourself.


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## fraser (May 15, 2010)

Gee, I don't know. We cashed our 15/21 dollar options out at 51/53 when everyone was saying the stock is a no brainer for $75 and potentially an even higher target 12 mo price... including the investment gurus. Stock went to 54 a few weeks later, then down to $22/20 over the next 10 months. My gut told me to cash out and protect our retirement. Soo glad I followed my gut.

We sold our large home in Calgary in late 2012 for a very good dollar. It needed lots of work and it was too big. Everyone said hold on, market is going up. Then they said buy a condo right away. One place we looked at @629K is now $515. and will probably sell for less than $500K. So glad we followed our gut and decided to travel, then rent. We may buy this winter, but certainly not before since prices are still downward elastic....despite what the real estate board says and what their inaccurate stats point to. The ROI on the equity from our house sale, after tax, is paying our rent and funding part of our travel budget.

We decided to travel in Europe when the economy was in the tank and people were advising against travel to Greece and Turkey. SO glad we did. Cruise prices were at their lowest, as was the cost of land travel. Same for our trip to South Africa when the rand dropped.

We bought our first home in BC in the early 80's when interest rates were 16.75 and coming down. Some people thought that we were nuts but we had little of our own money in the game. We did a variable mortgage. Rates came down to 10 within about a year. Our house went up in value substantially thanks to lower interest rates and proximity to Skytrain. 

When the market crashed in 2007/8 we decided to move more money into equities from fixed in order to pick up some good buys. So glad we did. The prices were low because so many people were panic selling. Resulted in some very nice gains in our investment portfolio. Fortunately our investment advisor was on the same track as us.

I don't recommend being a contrarian for that sake of being one. Just that the 'herd' is not always right. Clearly one has to follow a plan and do what they feel is prudent, given their personal situation.


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## My Own Advisor (Sep 24, 2012)

0xCC said:


> Now here at about 6 months shy of 44 me and my wife's investment portfolio generates enough before tax income to fund our month to month living expenses (but not big ticket items like home renos and car replacements and things like that). Funny thing is that the investment income is actually a little less than my first FT salary.
> 
> As you are just starting out I would suggest that you start tracking your expenses. I used a spreadsheet to track our expenses and also plan out how to knock down the mortgage and family loan (the other half of the mortgage) as quickly as possible. Knowing what you are spending your money on will allow you to figure out if you are spending your money where it makes the biggest impact.


+1 and kudos to 0xCC. 

When the income from your capital exceeds your expenses - you're in a great place.

To the OP: congrats on your house and job.

If you want to work part-time at age 45, I would recommend the following:

1. Kill your mortgage long before age 45.
2. Save >20% of your salary every year for the next 21 years.
3. Max out your TFSA every year.
4. Contribute to your RRSP when your income exceeds about $50k per year.

Your biggest hurdle will be not giving into lifestyle inflation or not paying off your mortgage as soon as you can so you can increase your investments after your mortgage is paid. 

Good luck!!


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## CalgaryPotato (Mar 7, 2015)

I hate to be negative, and I have no idea what your future earning potential is in your field, but your goal might be more unreasonable than ambitious. 

You earn a very small salary in relative terms, I think the average family income these days is over 100K. You have a relatively affordable mortgage for today, but it's still not an insignificant amount. It's awesome that you have no other debt at this young stage of your life, but it doesn't sound like you've really started to get into the expensive part of life either.

It really depends on how minimalist of a life you can lead and whether it's worth it to achieve this goal. If you want to get married some day are you going to have a bride who's willing to go with an affordable wedding because the average wedding these days is about a full years take home salary for you. Are you planning on having kids, because the cost of having children is often more than you can imagine.

Will you find you need to upgrade your house at some point? Will you need to buy new vehicles? Want to do any travelling?

You have to remember that you need to put enough away to support yourself from 45 all of the way through 90+ taking into account inflation and the ups and downs of the market. Yes there may be some part time work in there, but sometimes getting part time work at a full salary is easier said than done. 

And don't forget when you factor in CPP for example, that you won't get full CPP when you hit 65 if you retire that early and don't pay fully into it, during your potentially highest earning years.


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## Emjay85 (Nov 9, 2014)

CalgaryPotato said:


> You earn a very small salary in relative terms, I think the average family income these days is over 100K.


I don't know about that. I may be wrong but, Average household income in Ontario is around the 70k mark. If a spouse is involved with a matched salary, they are pretty close to the average. That being said, I think a lot of the other things mentioned in the previous post carries a lot of merit and is on the realistic side of things.


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## CalgaryPotato (Mar 7, 2015)

I can't find the recent household one but: Per Person in Ontario $49,088 is the 2014 average (per the below link). So the OP is significantly below that. Of course they are at the very start of their career, but the average person these days will need some strong financial planning to retire at 65, let alone 45. 

http://careers.workopolis.com/advic...earning-the-average-canadian-wages-right-now/


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## janus10 (Nov 7, 2013)

Somewhat tangential but you may find this September 2015 article from G&M interesting. 

http://www.theglobeandmail.com/news...ssing-themark/article26431270/?service=mobile


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## james4beach (Nov 15, 2012)

peterk said:


> A note on frugality. It comes at a cost, and is in no way the most important factor in creating wealth and a successful life. Spending 24k instead of 36k (as a young single person, for example) is not a "free" 12k/year in savings. There is a real, tangible, detrimental cost to living a lower expense life. That is not to say that you should be reckless with your spending, or not search for a good deal in your purchases. Just remember that money spent on something that can add value (efficiency, experience, knowledge, happiness, etc.) to your life is not money wasted. The correct application of funds above and beyond your basic necessities can be instrumental in propelling you into a successful life of excess wealth, health, and happiness. Those focusing excessively on frugality, and aiming for financial targets that rely excessively on frugality, are missing the big picture, and are setting themselves up for failure. The Mr. Money Mustache crowd and early retirement seekers (of which I used to be a participant) are taking big, big risks with their future well-being. Particularly the 20 year olds who are going on the assumption that life will work out similarly to as it has for 40 year olds.


I think this is good advice and I wanted to draw more attention to this post.

Quick example (something that jarred me today) - I was bicycling through a low-rent neighbourhood and saw a ton of police vehicles, and officers searching for something on the ground. Apparently people in two cars had engaged in a shoot-out, one man got shot in the face, and the police were looking for shells on the ground. (This is in the USA, Monday broad daylight).

I _could_ move to a cheaper neighbourhood and reduce my cost of living. No thanks. I'll stay in the expensive neighbourhood.


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## ValMiks10 (Aug 25, 2016)

I agree with some people here, it’s better to have full time job because at the end of the day, it’s likely that you are going to earn similar figure, but the other benefits as mentioned by others above will be cut. Also, it’s strange why don’t you go for full time?


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## borisdavenport (May 20, 2016)

my advice is about that mortgages, It sucks brother. It seems you are having a good credit score. Try to maintain or improve it. Keep it above 850.
Limit your wants, limit unnecessary luxuries and be deterministic.


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## borisdavenport (May 20, 2016)

janus10 said:


> Somewhat tangential but you may find this September 2015 article from G&M interesting.
> 
> http://www.theglobeandmail.com/news...ssing-themark/article26431270/?service=mobile


"Nearly half of Canadians define themselves as middle class, even if they’re not, and another chunk aspires to get there. Politicians know this is the hard-working, solid-living, Canadian-as-poutine group to win over." I believe nearly 60% of Canadians falls to this category.


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## borisdavenport (May 20, 2016)

borisdavenport said:


> my advice is about that mortgages, It sucks brother. It seems you are having a good credit score. Try to maintain or improve it. Keep it above 850.
> Limit your wants, limit unnecessary luxuries and be deterministic.


please take a look on this. http://www.billfixer.com/credit-score/how-loans-affect-your-credit-score/


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## MrMatt (Dec 21, 2011)

My Own Advisor said:


> +1 and kudos to 0xCC.
> 
> When the income from your capital exceeds your expenses - you're in a great place.
> 
> ...


3. Max out your TFSA every year.
2. Save >20% of your salary every year for the next 21 years.
4. Contribute to your RRSP when your income exceeds about $50k per year.
- Contribute to your RRSP when you have room, claim the deduction when your marginal tax rate gets sufficiently high.
1. Kill your mortgage long before age 45.


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