# Recent Graduate... Want to follow a good path



## lifeliver (Aug 30, 2010)

I recently graduated with a BA in a liberal arts program. I know this is not is not a degree that has high earning potential but I chose to study it due to personal interests. 

I am currently 24 and have been working for one of the major banks making 34k gross per year. I still live with my parents so I don't have many expenses. 

Net Pay is $2100 per month 

Expenses:
Transportation is about $200 - 250 per month (including everything)
Student loan payment $150 per month (12,500k debt)
Cell phone $60 per month
Gym membership is $40 per month
Total expense = $500 

I also spend money on entertainment, but I never really tried to keep track of that. 

I have been working full time for about 5 months now have $3500 saved up. With most of my extra money I have been paying off my student loan by making additional payments. 

When I was younger I read some of the personal finance books like Rich Dad Poor Dad. Now that I have my first full time job its time to make the right choices. 

One of my personal goals is to travel the world for a few years. I don't intend to do this in an extravagant matter. But it is important for me to get some sort of financial foundation before I pursue that dream. 

I do not know much about finance, accounting and investing. Only general knowledge from taking into courses when I was in school. 

I would like some advise as to what would be the smart choice to do with my money. 

I am also thinking about possibly renting a place so that I can start living on my own. I live in the GTA so rent would eat up a significant portion of my income. I am still undecided about what course to follow.


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## GeniusBoy27 (Jun 11, 2010)

Sounds like a positive step.

I think we all have our personal philosophies. Mine would be pay off debt first. Live at home as long as you can, to build a nest egg. It's always a good idea.

If you can, save 20% of your income, and put it in a RRSP/TFSA. Always get a good nest egg. Build a safety margin as well.

Do travel the world, but do it after you save some money. Seeing the world may not be the single best financial decision, but it may be a great life decision to make. And you only live once.


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## Bupp (Nov 13, 2009)

Sounds like we have the same job. 

My advice would be to:

1. Take advantage of any employee share purchase plan that is available to you (my fi offers 50% match).

2. Beat your sales targets (annual bonus can be as much as 20% of base salary)

3. Break your goal of travelling the world into smaller pieces. How much will the trip cost? How much do you need to save over the next 3 years? How much over the next year? The next month? The next paycheck?

4. Move out of your parents place. 34k is the average income in canada. You are in the 50th percentile. Time to say thank you to your family for taking care of you and move out so everyone can get on with their lives.


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## humble_pie (Jun 7, 2009)

such a sense of déja vu. Although it appears to be déja vue in both these cases.

there's an almost-identical thread nearby from yayfinances. She's also a young recent grad living at home & planning her savings program.

http://www.canadianmoneyforum.com/showthread.php?t=3058

your plan is perhaps even simpler, because of the student loan. You do know this should be paid off ASAP, right.

all of your savings should go into a tax free savings account, imho. The current ceiling is 10,000, but an additional window of 5,000 will open on january 2, 2011. Unlike a rrsp, tfsa savings can be drawn down to fund travel or apartment rent.

an exception could be shares of your bank employer, if the bank will contribute. Others here might warn you against taking on any kind of market risk whatsoever, but i am partial to canadian bank shares & see them as a forever investment for a young bank employee. The standard offer from a major bank used to be one share donated for every 2 that the employee would purchase, with a minimum holding period of 2 years. Terms may be less beneficial now.

perhaps you could think on about saving to travel the world vs renting an apartmnt of your own. Perhaps travel would be more doable if you postpone renting your own place for a year or two or even several.

there are countless low-cost ways for young people to work, study & play in foreign countries. You'd want to be doing this at your age, or at least in your 20s, when you're not encumbered with kids, schools, mortgage, serious career choices, etc. When i think about your situation & consider the relatively high student loan debt you'd want to pay off before travelling, then work/travel programs become the sensible choice.

wishing you all the best. Like yayfinances, you're amazingly well-organized & clear-sighted, so your financial well-being should prosper all the days of your life.


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## lifeliver (Aug 30, 2010)

My current plan is to enroll in the employe share purchase plane program. I can contribute up to ten percent ofmy income. I will contribute the full ten and use the RRSP program instead of the regular plan. Its true that the bank will put in 50 cents for every dollar that I put but only up to 1 percent of my total income.

I also have an appointment at my bank to open up a TFSA. I am just not sure what to do with the money once its in there.


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## humble_pie (Jun 7, 2009)

... an appointment at your bank to open a tfsa ... oh dear.

you risk falling into the clutches of a rep who will try to sell you the bank's mutual funds. High expense ratios. To avoid. Forever. Even when U are old & rich.

if you are buying bank shares that's enuf risk for such small savings imho. Perhaps a wise idea to check around & see who's offering tfsas with highest interest rate. Check w ING. (parent bank in amsterdam is selling ING USA but keeping ING canada; there is cdic insurance; other members here have ING tfsas; it's not bad at all.)

check also the tfsa rates for 1-year GICs at several institutions including your bank.

won't your bank contribute if you purchase your bank shares in a tfsa ? do they insist their contribution go towards a rrsp purchase ? how annoying. Because offhand i'd say your savings are too small to have 2 registered accounts plus a general checquing or savings account, so in your place - and given you may be off travelling for a year or 2 - i'd postpone an rrsp unless the bank absolutely forced me.


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## kcowan (Jul 1, 2010)

Also the taxes you will save from RRSP contributions are likely to be less than you will pay when you are retired. Leave the RRSP until you are in a higher tax bracket.

Stay at home until your loan is paid off (as long as your parents are OK with that).

Your savings rate is 3500/5=$700/mo. That leaves $900/mo that is not being tracked. Find out what that is! It seems too high to be all entertainment?


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## lifeliver (Aug 30, 2010)

I dont spend that much money on entertainement, I bought a vehicle for $2,500 so that I can get to work.

I feel the 10% that will go to the RRSP Employee Share Purchase Plan, is not alot of money. My expenses are minimal right now, so I feel that I can get an early start on retirment savings. 

I am not gonna buy into any of the sales attempts from the Bank's rep. I simply want to open up a TFSA to store my funds in there until I learn about stocks and feel confident enought to put my money into some.


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## andrewf (Mar 1, 2010)

ING is offering a 2% daily savings TFSA account right now. Sounds like a good deal to me!


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## FrugalCanuck (Jan 28, 2010)

Life,

I share some common goals with you. I have specific savings goals, careful with spending but I have a serious travel bug. To me, nothing in the world can compare to how enriched travelling has made my life. What I do is budget for a trip every year. Generally, the goal is to explore one new country every year. I budget $3000 to $3500 for everything. I firmly believe that being frugual does not stop at the grocery store.

Here is some of MHO:

#1) Max your company share purchase. This is like free money.
#2) open a TFSA, get in to a no load, low MER mutual fund and start small if you have to, $50 a pay - dollar cost averaging.
#3) Get a small Emerg Fund up. Nothing serious since you living at home, 3K to start but you should try to increase it by 1K every year going forward.

I would not move out too soon. If it is not a problem for anyone involved stay put and build yourself some security first. And it will let you save for #4, the most important of all.

#4) Get you travel fund up!!! This is great. I use a separate account for it. Once you find where you want to go, research the $h!t outa it! Planning is half the fun, and the better you plan, the better you can budget.

I have lots of tips for travelling on a budget. You can PM me if you want some.


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## lifeliver (Aug 30, 2010)

I went a head and checked out the ING website. I liked it, and also the rate is much better then what my bank offers. So I just registered with the ING.


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## lifeliver (Aug 30, 2010)

I can be extremly frugal when backpacking, I actually enjoy pinny pinching when travelling. It is sort of a test of self control. I have no problem saving for short vacations. For instance I am going to California in Sept and most of the stuff is already paid for. The type of travel that I am really looking to do is long travel, like a professional traveller. To achieve that dream I need to be in a position when I have some income producing assets. I dont want to come back to Canada after a year or two of being away and have to start from scratch. 






FrugalCanuck said:


> Life,
> 
> I share some common goals with you. I have specific savings goals, careful with spending but I have a serious travel bug. To me, nothing in the world can compare to how enriched travelling has made my life. What I do is budget for a trip every year. Generally, the goal is to explore one new country every year. I budget $3000 to $3500 for everything. I firmly believe that being frugual does not stop at the grocery store.
> 
> ...


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## tinypotato (Jul 27, 2010)

Great advice from everyone.

I recommend living at home for the time being if everyone involved is OK with it. The money you save now will buy you much more flexibility later.

Save up money and then use it to travel. The life experience and memories you will have will be well worth the cost.


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## lifeliver (Aug 30, 2010)

I just realized the I can get LOC at prime + 1 % (Bank employee rate), while my actual student loan rate is prime + 2.5%. I am gonna open up this LOC at my bank so that I can save some money on interest.


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## Sherlock (Apr 18, 2010)

I'm confused, you guys are telling him to avoid his bank's mutual funds because they have high MERs, but you're also telling him to store his money in a HISA until he decides what to do with it? Correct me if I'm wrong, but even mutual funds with a typical 2% MER will still make him more money than a HISA, will they not? Why not just put his money in the mutual funds, then when he becomes more knowledgeable about investing he can look into moving it out of there and into TD e-funds or ETFs.

A balanced portfolio of high-MER MFs is still a lot better than earning 1.25% in a typical savings account, isn't it?


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## HaroldCrump (Jun 10, 2009)

Sherlock said:


> A balanced portfolio of high-MER MFs is still a lot better than earning 1.25% in a typical savings account, isn't it?


No, not at all!
A mutual fund can (and usually does) lose money.
Depending on his entry point, if there is a market correction soon afterwards, he could be underwater for months (or years) to come.
A savings account, on the other hand, will never lose nominal value (ignoring inflation).
Mutual funds, esp. ones based on equities or bonds, are not a good holding place for short term cash.
Any monies needed in less than 5 years should not be in mutual funds.


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## lifeliver (Aug 30, 2010)

I dont think I am going to end up paying down my student loan with the loc because I just realised that the interest that is paid on the student loan is tax deductible. 

I want to build up a good credit history, will my credit history be good if I have a credit card and LOC but dont use it? or do I need to use it actually?


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## Bupp (Nov 13, 2009)

The credit card and line of credit only report to the bureau on months where there is actual activity on them. However, having them open and not using them still helps your score because you get a lower utilization ratio (amount of credit you use vs. amount that is available to you) which helps your score.

Why are you doing 10% into the share purchase program if they are only matching the first 2%?

You are better off throwing the extra 8% of pay into your tfsa or using it to pay down debt.


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## Guest (Oct 19, 2010)

I suggest forget the RSP until you earnings are higher; forget all those investment schemes for now; live at home for as long as you are tolerated and help out with the expenses ... and put your extra cash into a daily interest savings account for the next year or two ... so, how does one travel the world while holding down a $34K/yr job?


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## jamiechese (Jul 13, 2010)

I am not sure if anyone has said this yet but I guess I will go ahead and say it...

1. I assume you have already heard people say constantly, PAY OFF DEBT ASAP. Well I will reiterated.... DO IT ASAP. Debt sucks and is one of the biggest wastes of money around, honestly thats the best utilization of your cash currently.

2. The next thing to do would be to build up an emergency cash fund incase you lose your job or if you get sick etc. Usually this should be 3 - 6 months pay, and this should either be put into a HISA or later on a cashable GIC so it can grow.

3. The next thing you could do is start building a decent chunk of money for travel now you could also pair this with growing your nest egg. Say a % to a travel savings account and a % to an investment account for later on (start with a TFSA until you begin maxing that out, depending on how much you save because if need be you can withdraw that TFSA cash and recontribute it the next year).

4. Now pertaining to the renting a place, yes the GTA is probably on of the MOST exspensive places to live in Ontario, my mother has lived in and around the GTA all her life and has always complained about how exspensive it is in Ontario to rent/buy property. 

My suggestion would be to find out how much renting will really cost you and base your choice on whether it would be a good idea to rent or if you want to settle to buy a house. Now I understand that buying a house is a big thing and renting may be the best decision until later on in life. It really depends on how you view the world and what your expectations/opinions are.

I hope some of my comments helped, now this is just based on what I would do after higher education. Admittedly this is what I am looking at doing after I graduate from College or Uni, depends where I go haha!

Good luck and remember, travelling is probably the best idea before you get too old! . Although I have to admit my parents are always travelling...and they are old :O.


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## lifeliver (Aug 30, 2010)

Hello All, 

2 Years have passed and it is time for an update on my financial situation. 

I now have a much better Job with the same FI. It is a sales role where I am making 60 - 70k per year. 

I no longer live at home but am now renting a place in midtown Toronto for $950 per month. 

I have about 7k sitting in my bank account doing nothing and also close to 9k in my employee share purchase plan this is an RRSP. 

At this point I have zero debt which is really great. 

Although I have progressed in my life, I have not really made any steps in financial planning above and beyond the employee share purchase plan. 

Can anyone recommend any good reads that can introduce me into the world of investing? 

Thanks.


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## ddkay (Nov 20, 2010)

Congrats on your raise. No more student loans? It should be easy from here. Write up a budget. I would budget more for housing, at least twice as much since $950/mo is far below average for a nice place in TO. If you aren't already, buy everything on CC so easy to track and see where your money is going. Do this for a year and then you can cut down the excess. Fill up your TFSA before your RRSP. RRSP is a curse if you retire with high income, you will get taxed like crazy at the highest marginal rate. Plus who knows if income tax will increase by then. If your plan is to be rich, it's better to pay taxes upfront now to soften the blow in the future.


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## P_I (Dec 2, 2011)

lifeliver said:


> At this point I have zero debt which is really great.
> 
> Although I have progressed in my life, I have not really made any steps in financial planning above and beyond the employee share purchase plan.
> 
> Can anyone recommend any good reads that can introduce me into the world of investing?


Well done getting the debt paid off. You might want to take a look at Eight with Weight: A Reading List for New Investors, which is a sticky on this forum and also Getting Started - finiki, the Canadian financial Wiki which offers some common sense introduction to investing.


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## Feruk (Aug 15, 2012)

Sounds like you're doing pretty well. With $70K/year, you've got about $4K net take home monthly which is awesome. I'd try to put at least $1.5K into savings monthly. It might not seem like much, but over time it'll add up. Take some time and learn about investing rather than rushing in. I didn't do this and took some decent losses in my first few years of playing with stocks.


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## cash (Mar 5, 2011)

I like the Canadian Couch Potato and the reading list he's made:

http://canadiancouchpotato.com/resources


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## GOB (Feb 15, 2011)

ddkay said:


> Congrats on your raise. No more student loans? It should be easy from here. Write up a budget. I would budget more for housing, at least twice as much since $950/mo is far below average for a nice place in TO. If you aren't already, buy everything on CC so easy to track and see where your money is going. Do this for a year and then you can cut down the excess. Fill up your TFSA before your RRSP. RRSP is a curse if you retire with high income, you will get taxed like crazy at the highest marginal rate. Plus who knows if income tax will increase by then. *If your plan is to be rich, it's better to pay taxes upfront now to soften the blow in the future.*


Agree with everything except the bold. A balance must be struck between paying now and paying later, and it is dependent upon the amount of disposable/investible income you have. If paying all the tax now means you have very little to invest, you're missing out on the wonders of compound growth simply to avoid a tax bill in the future. If you have enough to invest, then by all means pay whatever else you can off as soon as possible. 

It is also possible to contribute to RRSPs while deferring the tax benefit. This way you can get the growth of an RRSP and only take the tax break when you see fit (i.e. when you are in a high tax bracket). RRSPs do have advantages, especially in the case of US dividend stocks. TFSAs will charge a 15% withholding tax on US dividends - RRSPs will not.


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## lifeliver (Aug 30, 2010)

50% of my income right now is commission so it is better to contribute to the RRSP as much as possible so that I can get a tax break now. I finally got around to opening up a TFSA and dumped all my access funds in there. I will try to fill it up to the limit within the next year. In the mean time I will start reading about investing so that I can put my money to work.


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## Ethan (Aug 8, 2010)

lifeliver said:


> I now have a much better Job with the same FI. It is a sales role where I am making 60 - 70k per year.
> 
> Can anyone recommend any good reads that can introduce me into the world of investing?


What do you sell for the FI? I find it odd for a bank salesman to be looking for an introduction to the world of investing.


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## lifeliver (Aug 30, 2010)

Ethan said:


> What do you sell for the FI? I find it odd for a bank salesman to be looking for an introduction to the world of investing.


I am in Mortgage Sales.


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## lifeliver (Aug 30, 2010)

A little update as of the end of November 2012 

Age 26

Assets: 
$9,500 in TFSA saving account (will go into some sort of index fund or EFTs once I read more) 
$10,300 in RRSP employee share purchase Plan 
$1,300 Bank Account
Liabilities:
$0 - No Debt

Net worth: $21,100

Income:
Approx $3000 - $4000 after tax, this fluctuates because of commision. For 2012 the gross is 63K before year end Bonus (expecting about 5k but not 100% sure).

Expenses:
$950 Rent (I live with a girlfriend who has finished school and is starting to work finally so this will be cut down to $475 each)
$150 Motorcycle insurance (Planning to sell the bike this summer as I don’t use it enough)
$200 Groceries (the other $200 comes from gf)
$60 Cell Phone
$50 Internet
$40 Gym 
$80 Dog expenses
$120 in Bus tokens (only in the winter as I ride the bike from March - November).
The rest of the expenses are not fixed so I dont know exactly. 
Total: $1650

Cash Flow: 
$1750 - $2500 Approx as Income fluctuates. 

Goals: I would like a personal net worth of $100,000 by 30. Continue renting as there is no reason to purchase property in the GTA. Learn as much as possible about investing. Maybe invest in a rental property outside of the GTA.

Feedback is welcome...


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## lifeliver (Aug 30, 2010)

Here is an Update as of July 9, 2013

Assets: 
$26,874.11 TFSA invested in Index Mutual Funds
$14,477.27 in RRSP invested in the stocks of the bank that I work for
$17,034.95 in Emergency Funds sitting in a savings account
$293.16 in Regular Chequing Account

Liablilites 
Non

Net Worth:
$58,679.49


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## Compounding1 (May 13, 2012)

Pretty big increase in net worth in 7-8 months there. Investments doing well?!


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## lifeliver (Aug 30, 2010)

The increase is not from the investments. Its a combo of a sold vehicle, last years bonus and also very tight budgeting for since January.


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## lifeliver (Aug 30, 2010)

Time for another update to this thread. 

I am now 30 years old and moved to Vancouver this summer. 

Still working for the same bank as before but have worked my way up to a better position. Income now varies from 60k - 100k, depending on how good I do. Average usually around 75k. 

*Assets: *
Chequing Account: $530
High Interest Saving Account: $42,876

*RRSP:* 
Bank stock (the one I work at) $39,965.59
RBF556 - RBC CANADIAN INDEX FUND -$8,280.45
RBF559 - RBC INTERNATIONAL INDEX CURRENCY NEUTRAL FUND - $7,534.01
TDB966 - TD CANADIAN BOND INDEX FUND I SERIES - $6,660.52
TDB661 - TD US INDEX FUND I SERIES - $6,225.26

Total RRSP: $70,631

*TFSA*
RBF556 - RBC CANADIAN INDEX FUND -$16,180.47
RBF559 - RBC INTERNATIONAL INDEX CURRENCY NEUTRAL FUND - $14,102.22
TDB966 - TD CANADIAN BOND INDEX FUND I SERIES - $14,479.75
TDB661 - TD US INDEX FUND I SERIES - $14,048.11

Total TFSA: $58,810

*Total Assets: * $172,848.46

*Liabilities*: $0

*Net worth: $172,848.46*


I am currently a renter and plan to stay this way for a long time. I am at the point where I believe that its time to switch from the index funds to ETFs. I was thinking about possible getting a rental property but after reading some books and talking to landlord friends, it is not something that I want to deal with at this stage of my life. 

I am still committed to passive couch potato investing but I would like to add some REIT ETF's and also possibly some ETF's that focus on Canadian Divident Stocks. This would be my fixed income portion and I would reduce my bonds to 10 percent or less. I will also sell my bank stock and put that into ETF's as well because I dont like having too many eggs in one basket. 

I will take 25k out of my saving and put into into an un-registered investment account. 


Thinking of something like 30% USA 30% International, 20% Canadian Equity ETF, 10% Canadian Divident ETF, 10% Canadian REIT ETF. 

Goal is to work until 40 / 45, than hopefully stop working full time and go live somewhere in the third world or off the grid here in the west. 

Let me know your thoughts and advise.


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## lifeliver (Aug 30, 2010)

Ended up selling all my mutual funds and bank stock and buying the following: 

XIC - 27% of total portfolio in taxable account and a little in the TFSA
VUN - 27% of total portfolio in TFSA
XEF - 20% of total portfolio in RRSP
XEC - 6% of total portfolio in RRSP / TFSA
ZAG - 20% of total portfolio in RRSP

Will re-balance and contribute extra funds in 2017 when I get extra RRSP / TFSA room.


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## mordko (Jan 23, 2016)

Looks like you have a decent amount in VUN. Why not use VTI within an RRSP account instead? You would then save 15% of the dividends + 0.11% of the total on MER per year. Assuming you have 40K in VUN, it would save you about $200 annually, which would of cause be compounded over the years. There would be a small one-off currency conversion cost.


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## lifeliver (Aug 30, 2010)

A little life update. 31 now. Net Worth is at about 225k. Zero debt.

Asset Allocation:
Canadian Equity - 20%
Bond - 14%
International Equity -21%
Emerging Equity 9%
REIT - 3%
US Equity - 22% 
cash - 10%

Still doing the couch potato approach with the majority of my funds but also took a small potion to try and trade for small income, its not going that well but its a business that takes time to learn. 

I am no longer working for the bank that I did. I quit in December and am taking some time off of paid employment to peruse personal dreams before I settle down and have kids. After tracking expenses for several years I figured I can live on 25k a year comfortably in Canada if I am disciplined and much less if abroad. I spent this winter season snowboarding. This summer will travel BC in a camper and will spend next year travelling around south east asia. The travelling lifestyle is way cheaper that living the traditional life in desirable cities in Canada so this will be my pursuit for now while I figure out what I want to do in the future. 

I always wanted to do this change but did not have the courage to give up the stable well paying job. Last summer I read "Your Money or Your Life" and it really gave me a kick in the *** to live life how I actually want because time is the most valuable commodity in existence. Really recommend that book to anyone, the authors coined the term financial independence.


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## My Own Advisor (Sep 24, 2012)

Well done..."Net Worth is at about 225k. Zero debt."



You seem to be very frugal so your money, even if you work part-time, could last you some distance....

As for the "Your Money or Your Life", it is a great book and over the years I've personally found myself going back to it a few times for some inspiration.

Continued success to follow your goals/aspirations.


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## canew90 (Jul 13, 2016)

Seems like you've decided to go with ETF's and that's ok. As you are also investing with your bank, why not go to Google Finance and compare the 10 yr chart of each of the etf's and your bank. Several of the etf's have not been around that long, but look at their distributions. With your own bank I assume you are reinvesting the dividends. How has it been doing over the years you've owned it? After a year or two compare the etf's to the bank, especially the income you are receiving.


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