# Mortgage paid off - Now what?



## Amanda (Apr 3, 2009)

My partner and I recently paid off our mortgage and so now we have 4000$ or so per month to decide what to do with. We are in our late 20s, and other than contributing to RRSPs through with to take advantage of company matching, we are new to the world of investing. 

I work for the feds, so I have a pension, but my partner does not. We have yet to contribute to TFSAs and I dont have much room to contribute to my RRSPs.

I read through David Foster's books a few years ago, so I have a basic understanding of what investing is, but now that I'm at a point where I am ready to start, it all seems so daunting! I'm not sure where to begin. Can anyone help?


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## jamesbe (May 8, 2010)

I'd suggest filling up the TFSA first. Even in a high interest account if nothing else while you educate yourself.

Congrats on paying off the mortgage at such an early age! Now don't get the urge to move on up eh .


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## Amanda (Apr 3, 2009)

The urge is certainly there! But I'm going to work against it as we've only been in our house for 2 years and its more than enough space for us for years to come. 

Would you recommend talking to a financial advisor? I've heard a few times that they are working for their comission and so they will likely lead us towards investments that will make them the most money. Any truth to this? Any advice on finding a good one?


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

Congrats on your milestone reached! It's not often we hear of this happening these days.

Definitely do not talk to a "financial advisor". This is their season where the banks start gearing up to upsell to their clients. They'll probably phone you by the RRSP deadline at end of FEB. I would recommend not taking the appt as jamesbe suggests. They are actually mutual fund salesmen and will build a portfolio for...them. Fees. They want as many of your dollars as possible signed up to make fees for them.

I would fill up the TFSA. Lots of room there and any cash you deposit is in high interest savings of around 1-2% these days. Between you and your other half that's about $50K you can deposit right now. As well, if you have not already done so I would recommend using this opportunity to create a non-investment emergency fund. You never know what could happen. Only those investors who know what they are doing and spend a lot of time at it (ie. while you are at work) can get solid returns to make it worth their while. For the rest of us, cash is king until we educate ourselves and learn the ropes. But don't take investment/equity risk with your emergency funds and don't listen to the rhetoric that cash is "just sitting" in a savings account.

I figure that will keep you busy for a few years.


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## supperfly17 (Apr 18, 2012)

So Amanda, what is your secret to be able to pay it off in your 20s, if you dont mind me asking?


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## Four Pillars (Apr 5, 2009)

It can be hard to switch from paying off debts to investing. We paid off our mortgage last year and I can't say we've saved very much of the extra cash flow...

http://www.moneysmartsblog.com/debt-free-now-what/


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## Amanda (Apr 3, 2009)

Interesting article Four Pillars. I can see my partner and I spending a bit more freely now that the mortage is paid off, but I hope to curb this by having an automatic transfer continue into a high interest savings account as soon as I figure out how to go about doing this. Have you set up an automatic transfer at all? I think if I do this, we wont miss the extra cash in our account because it will continue just as it had before. We do not ever feel that we are going without our wants and needs. 

We hope to have kids really soon, so I'm sure that will change our spending habits, but like you mentioned on your blog, it might actually decrease our spending while they are younger. Luckily I'll be able to take the year off with my salary paid at 93%.

We dont often eat at restaurants, but mostly because my husband loves to cook and eat quite healthy, which we find easier to do at home. We purchase good cuts of meat and fresh vegetables and make most everything from scratch.


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## Eclectic12 (Oct 20, 2010)

Four Pillars said:


> It can be hard to switch from paying off debts to investing. We paid off our mortgage last year and I can't say we've saved very much of the extra cash flow...


Interesting .... I know I've spend more on gifts this Christmas and helping others out, knowing I have more cash flow since paying off the mortgage.

I am saving more as even with the extra spending, I'm not spending everything.


The biggest factor for whether I'm investing versus savings is whether I see any stocks at what I think are a bargain price. If the stock is in a higher range, I tend to delay and may not buy.


Cheers


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## andrewf (Mar 1, 2010)

Have you thought about your financial goals? How much you'd need to save to achieve them?

Do you want to retire early? What kind of income would you need in retirement? 

I think if you save $4k/month from age 30, it won't take you too long to have enough saved to retire. On the other hand, maybe you can reduce your savings rate and enjoy life a bit more. Unless you have clear/aggressive financial goals you want to achieve, or a very high income, $4k/month is probably too much to be saving, in my opinion.


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## Sampson (Apr 3, 2009)

1. Unread the Derek Foster stuff.
2. Develop goals, short, mid and long term for your financial resources.
3. Put your money into a HISA until you develop an investing strategy.


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## james4beach (Nov 15, 2012)

Congratulations! What an excellent situation.

I strongly recommend you first build up a cash hoard of 6 to 12 months after-tax salary (one person's salary) and keep that money in cash form, such as a high interest savings account. Max out the TFSA of course. Don't worry about the low return (savings accounts get 1.2% to 1.5% ish).

I wouldn't even touch anything investment-wise until you have a very healthy hoard of cash. This is money you could use in case of layoffs or other surprise expenses. Layoffs happen from government too... I have several friends who work in the public sector, and there were layoff scares in some departments last year. I know that most people will rely on a line of credit for this kind of emergency money but lines of credit can be suddenly revoked (they're callable).


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## Toronto.gal (Jan 8, 2010)

Amanda said:


> I have a basic understanding of what investing is, but now that I'm at a point where I am ready to start, it all seems so daunting! I'm not sure where to begin.


Time is your biggest asset, so the earlier you start learning first, then investing, the better. In fact, you did just that, ie: started investing early by having paid-off your mortgage! :encouragement:

Once you are knowledgeable enough, you'll have the confidence to develop a plan/figure out your goals/identify the investing strategy that will suit your situation, etc. You need more than money to invest; you need to fully understand your investments.

Maybe now, you'll want to become more active here learning/participating [than you have been since you joined the forum in 2009]. But don't replace books with internet forums, articles, etc.

*Sampson:* I disagree with your point #1. I learned a lot from him myself [not to say that I was in full agreement with all he ever wrote].

Good luck!


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## Amanda (Apr 3, 2009)

I'm not sure of specific goals right now, but I hope to be able to retire early. I'm also planning on taking 5 years of leave to raise my future children. Other than that, live comfortably in retirement is my main goal.

Since I have a DB pension, that really helps with my retirement fund, and since we are mortgage free, our expenses will be quite low.

We dont have a super high income, but saving 4000$ a month leaves us with about 2600$ a month to pay for bills and whatever else we want to buy, so I dont think we are saving too much. Dont get me wrong, if there is something either of us wants, chances are we will get it. We will probably start travelling a little more as well. Right now we travel down south about once a year.


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## Amanda (Apr 3, 2009)

Sampson said:


> 1. Unread the Derek Foster stuff.
> 2. Develop goals, short, mid and long term for your financial resources.
> 3. Put your money into a HISA until you develop an investing strategy.


Since I forget most of the specific stuff I read in those books, that wont be too difficult. 

As for goals, I guess thats where I'm not sure where to start.


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## Amanda (Apr 3, 2009)

Toronto.gal said:


> Time is your biggest asset, so the earlier you start learning first, then investing, the better. In fact, you did just that, ie: started investing early by having paid-off your mortgage! :encouragement:
> 
> Once you are knowledgeable enough, you'll have the confidence to develop a plan/figure out your goals/identify the investing strategy that will suit your situation, etc. You need more than money to invest; you need to fully understand your investments.
> 
> ...


Is there a list of books I should get my hands on to start with? I saw the stickied post about it, but are there any in particular that you would recommend I start with?

I do plan on becoming more active on this forum for sure  I've certainly been more of a lurker than an active participant since my first goal was to pay off the mortgage. 

Thanks for the advice!


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## Four Pillars (Apr 5, 2009)

Amanda said:


> Interesting article Four Pillars. I can see my partner and I spending a bit more freely now that the mortage is paid off, but I hope to curb this by having an automatic transfer continue into a high interest savings account as soon as I figure out how to go about doing this. Have you set up an automatic transfer at all? I think if I do this, we wont miss the extra cash in our account because it will continue just as it had before. We do not ever feel that we are going without our wants and needs.


I haven't set up any automatic transfer, although that is probably a good idea.


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## Echo (Apr 1, 2011)

Sampson said:


> 1. Unread the Derek Foster stuff.


+1


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## namelessone (Sep 28, 2012)

Amanda said:


> Is there a list of books I should get my hands on to start with? I saw the stickied post about it, but are there any in particular that you would recommend I start with?
> 
> I do plan on becoming more active on this forum for sure  I've certainly been more of a lurker than an active participant since my first goal was to pay off the mortgage.
> 
> Thanks for the advice!


Read the intelligent investor by Benjamin Graham. Based on that, be open minded to other ideas and learn and use whatever works for you.


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## uptoolate (Oct 9, 2011)

PARTY!! 

Sorry, couldn't resist! Congratulations! What those other guys said. :encouragement:


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## Echo (Apr 1, 2011)

@Amanda - I read this MoneySense article last year (http://www.moneysense.ca/2011/09/06/11-steps-to-financial-freedom/) and then my wife and I followed these steps over the course of a few months and found it very helpful to get started with our financial plan. 

The tracking/reviewing expenses part might not be as helpful for your situation. Overall it was a good exercise and interesting to sit down with my wife and talk about our short, medium, and long term goals to see how our priorities aligned.

One book that I've heard a lot of good things about is Pound Foolish by Helaine Olen - http://www.amazon.com/Pound-Foolish-Exposing-Personal-Industry/dp/1591844894


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## doctrine (Sep 30, 2011)

"The Intelligent Investor" by Benjamin Graham. On the cover: "By far the best book on investing ever written." - Warren Buffet

"The Four Pillars of Investing" is a great book by William Bernstein. He is more of a couch-potato type investor, but makes great cases for diversification.

"Stocks for the Long Run" by Jeremy Siegel is another great stock investing book.

I have read Derek Foster's books. Although some people don't like him, the fact is that he is on perma vacation, somewhere in Texas right now, able to support his wife and five kids. There's something to be said about that. You won't make that kind of money in 2% yielding bond funds.


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## Sherlock (Apr 18, 2010)

I don't mean to pry but how the heck did you manage to pay off a mortgage by your late 20s without a high income? I assume your house is not in the GTA or any other large city...

And if we're recommending books I would recommend The Little Book of Big Dividends.


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## andrewf (Mar 1, 2010)

Assuming they were paying $4000 per month for their mortgage, ie, $48k/year. Bought the house 5 or 6 years ago... seems feasible. Living on $2600 per month is not exactly living extravagantly, either. I spend somewhere in the neighbourhood of 1800/month.


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## Jon_Snow (May 20, 2009)

Like the OP, my wife and I live on about $2500 a month. Our monthly income is around $8500. We cannot but help save money, and lots of it.

I admit to being clueless about many aspects of investing - but if you can avoid "lifestyle inflation" (and it appears that many Canadians can't) and save at this rate, it is really hard to screw things up and become financially independent much sooner than one might believe. Congrats to the author of this thread, you certainly are on track.


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## My Own Advisor (Sep 24, 2012)

Congratulations....what an awesome situation to be in!

Like another comment, I also recommend you first build up a cash fund, maybe up to 3 months, after-tax salary and keep that money as your emergency fund.

I would then recommend you read The Millionaire Teacher by Andrew Hallam. Also get your hand on the MoneySense Guide to the Perfect Portfolio by Dan Bortolotti. 

After those two books, you'll be in some good shape to start understanding your investing journey. Take your time, and ask tons of questions until you have very few left  

Good luck!


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## Sampson (Apr 3, 2009)

Amanda said:


> As for goals, I guess thats where I'm not sure where to start.


Big purchases (but you have the house taken care of), travel, early retirement, funding children's education are the most common ones. You have some breathing room, think of how you dream your life to be, if you aren't there now, use your financial resources to move you life in that direction.

We have 2 young children, getting them educated and exposing them to interesting activities is high on our priority list, but so is early retirement (we should have the option to stop working by 45), and travel.


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## Amanda (Apr 3, 2009)

Sherlock, my parents worked hard to ensure I started off my adult life debt free, so they paid half my schooling. I paid off the rest while working summer jobs and working throughout the school year, so I finished university debt free. This allowed me to purchase a condo when I was 23, and I always paid much more than my my mortgage amount, and then when I sold it 4 years later, I made money off the sale that was then put towards our current house. We didnt do it all on our own because my partner had a small inheritance. 

We live in Ottawa, so not the GTA, but not a small town either. I guess I was very dedicated to paying off the mortgage as quickly as possible so that we could do what we wanted with our money afterwards and not worry about mortgage payments. My partner likes to think we will move to the country and raise chickens one day  

Sampson, thanks for that list of goals! They are all goals of ours that I had never really thought of too much before from a financial aspect, but now that the mortgage is done with, I will start thinking about them. In fact, we are going on vacation later this month! 

As for early retirement, that is definitely a goal of mine, but I`ll have to put more thought into it. I cant retire without penalty before the age of 55, but I suppose if we build up a large enough nest egg, that penalty wont matter.


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## Toronto.gal (Jan 8, 2010)

Amanda said:


> 1. so I finished university debt free.
> 2. I always paid much more than my my mortgage amount......very dedicated to paying off the mortgage as quickly as possible
> 3. We didnt do it all on our own because my partner had a small inheritance.
> 4. My partner likes to think we will move to the country and raise chickens one day
> 5. In fact, we are going on vacation later this month!


*1.* What a great way to start life! Obviously not everyone is able to for various reasons, but there are also many students that graduate with huge debts, and unnecessarily I might add.

*2.* Not only dedicated, but very smart indeed! :encouragement:

*3.* Again, very smart not to have used said inheritance in something else, like buying a car.

*4.* Love that idea myself! 

*5.* Have a great time!

With respect to books, the list of 8 is a good start as all are easy reads [would leave the last for last], and after that, you'll be able to understand the more complex books & pretty much on your way to becoming a successful investor! You specifically asked what book to read next, for a bit of humour, I would read 'One Up on Wall Street'. 

You're my kind of gal Amanda!


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## venter (Apr 10, 2009)

Most important thing is to start with a well thought out Financial Plan. Given your situation, hiring a Fee Only Financial planner might be a good first step.


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## andrewf (Mar 1, 2010)

Many people who aggressively paid off a mortgage have commented that once they paid it off, the extra cash flow did not go to saving, and instead went to increased consumption. If you like the forced savings of a mortgage, you could consider borrowing to invest. This might be especially useful since you will probably quickly run out of RRSP/TFSA contribution room.

Essentially, get a mortgage for some % of the home's value, and invest the proceeds into a diversified portfolio of equities. You can start big or small, say 25% - 50% of your home's value. The benefit is that the interest on your mortgage can then be deducted from your income as an investment expense.

This way you have somewhere to direct your saving energy (the balance on the mortgage).


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## Belguy (May 24, 2010)

Always live below your means.

Live simply so that others can simply live.

Don't waste your money on unnecessary 'stuff'. Also, it's mostly all unnecessary stuff.

Instead, spend your money on experiences that will enrich your lives.

Remember those other lives that you can enrich with your help. Help one another.

Also, check out the model portfolios at www.canadiancouchpotato.com

Put most of your initial investment effort into establishing a target asset allocation (cash/fixed income/equities) considering your overall financial situation and risk tolerance. This target asset allocation should be such that you are not tempted to panic sell during stock market crashes of which you will likely experience quite a few given your long time horizon.

Another approach is to set up an appointment with a fee-only financial advisor (NOT a financial services salesperson) who charges you a fee only for his or her time and does not make money off of any products that are recommended to you and ask for a recommendation for a well diversified portfolio of fifteen or so dividend paying stocks from solid companies who you feel will be in business for a long time to come and who have a history of increasing their dividends over time.

http://www.moneysense.ca/2012/10/01/where-to-find-a-fee-only-financial-planner/

To purchase your actual investments, you will first need to set up a discount brokerage account with the bank that you deal with.

Live a meaningful life and all the best to you.


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