# Looking for guidance @ age 26



## gyoza (Jan 9, 2012)

Hi all, 

I have lurked the forum for a few months and have tried to absorb as much as possible. I feel like I am in a good position financially, but know I am not utilizing my savings as well as I could. I was hoping for some guidance from the experts on this forum.

I am 26 years old and have always been a decent saver. My current job is relatively stable, with base pay of 56K (plus a variable amount of OT). I am contributing to a defined benefit pension (indexed).

For a long time, the extent of my non-cash investments was a high-MER mutual fund and some very risky stocks (all purchased on the advice of my parent’s financial advisor when I was younger, and all performing terribly). Last year I realized I needed to get my investments in order and started researching online. I found articles about the “Couch Potato” style portfolio and decided it would be a good fit for me.


*Assets*
Cash - $90,000

Non-registered - $34,000
•	$7,000 TD e-series funds (25% CAN Index, 25% US Index, 25% Int’l Index, 25% CAN Bond)
•	$12,000 Trimark mutual fund (2.61% MER)
•	$15,000 stocks

TFSA - $12,000 (contribution room: $3,750)
•	$11,000 TD e-series funds (25% CAN Index, 25% US Index, 25% Int’l Index, 25% CAN Bond)
•	$1,000 stocks

RRSP - $0 (contribution limit: $24,690)

DB Pension (indexed) – unsure how to put a $ value on this

*Debts*
None

*Net Worth = $136,000 *


*Monthly Budget*
Rent - $1,200
Living expenses (utilities, groceries, gas, car insurance, etc.) - $700
Discretionary (I usually spend less than this) - $500
Savings - $1,000

If I stick to this budget, I should have at least $12,000 each year to save/invest.

*Investment Goals*
•	Keep a liquid downpayment fund available to purchase a home in 2-5 years
•	Maintain a solid emergency fund
•	Build assets for retirement
•	Build other long-term investments that are not necessarily for retirement, but could be drawn on before

*Tentative 2012 Plan*
•	max TFSA ($3,750 contribution room left)
•	Invest some of my “extra” cash. I was thinking I would move about 10K my non-registered account (or perhaps start doing RRSPs instead?)
•	sell Trimark funds and put proceeds in e-series (either non-reg or RRSP)

Does all this look like a reasonable allocation + plan? What would you do, or change, if you were in my position? Any thoughts/advice from you folks would be most appreciated.


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## the-royal-mail (Dec 11, 2009)

Another new ID - welcome!

That actually sounds pretty good. It looks like you have it all figured out!

I agree with your goals and plans and I don't see any harmful money leaks in your budget/expenses. You have lots of cash and this is terrific. Not really much I would change here other than to keep saving and perhaps structure your finances (on paper only) in a tiered method and set goals for each of the tiers.

As for the DB, you should get an annual statement that tells you how much the pension is worth in terms of the dollars you contributed. I put these numbers into my excel file every year along with a column to add up the figures. A friend suggested I count this as part of my tier 3 (retirement funds) so I do it that way now.


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## m3s (Apr 3, 2010)

Nice work saving. Saving is really all there is to it imo, but I think there is still a lot you could do to refine your investments to avoid some taxes and fees. Over the long run a few %'s can really add up and you have lots of time!

I'm generally neutral on RRSP's (especially for those who have a DB pension like ourselves) but I don't think you should neglect it entirely! It's good to have some because it gives you the option to "defer income taxes" to a lower tax bracket and also because you can avoid withholding taxes on some foreign investments. Consider that you can contribute a lump sum to RRSP to get the tax sheltered investment but save/spread out the refunds into the future. You may not want to max out RRSP's forever or take all the refund in 2012, but it certainly doesn't hurt to use some of it! I would move some foreign dividends there are keep Cdn dividends/US growth in non-regs.

I agree about moving away from the Trimark funds and working towards some kind of self-directed couch potato. I would consider ETFs as well because at a certain size they can be cheaper than eSeries I believe. Consider that you can save some taxes by carefully selecting which account for each investment (Cdn divs in non-reg, foreign divs in RRSP, Cdn growth in TFSA for example) The other most underrated fee to avoid imo are currency exchange. One thing to be aware of with the couch potato is "currency hedged funds" which may needlessly have currency costs over the years. Watch out for needless automatic currency exchange when you trade stocks.


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## gyoza (Jan 9, 2012)

Thanks for the replies so far!

*t-r-m*: I like the idea of savings tiers that are dedicated to specific goals. I will definitely have to give this some thought.

*mode*: 

I agree that I haven't fully considered the impact of taxes - at some point I will have to reorganize these investments into their correct "buckets"
ETFs are something I will definitely look at once my e-series allocation gets higher
I have the non-hedged e-series funds, which have lower fees than their hedged counterparts
I am still struggling with the choice of non-registered vs. RRSP and will need to research this further. Do you think RRSP should be the priority before buying any more non-registered?


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## m3s (Apr 3, 2010)

gyoza said:


> *mode*:
> 
> I am still struggling with the choice of non-registered vs. RRSP and will need to research this further. Do you think RRSP should be the priority before buying any more non-registered?


I think once you research RRSP you will want a balance of it. The only reason not to is if you save this aggressively for a long time and therefor can't withdraw in a lower bracket, or it claws back benefits, or if income taxes increase in the future. Still no reason not to use some of it at least for foreign divs


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