# My Debt Repayment Plan



## Dufresne (Mar 4, 2015)

I spend so much of my time on the other side of the balance sheet, so here are my liabilities, with the plan to pay it down and eventually completely off. Currently age 50, 51 in the spring :eek2:. Our only debt is our mortgage and line of credit (LOC). Please leave any comments or suggestions for improvements. 

I'm expecting a $165K inheritance in about five years from now when both my parents pass. 

I've always been somewhat frugal, and last year I started to lighten up a little. My goals through to my retirement in 9 years are to renovate our 1950 sf home to our desired standards, decor and taste. We enjoy the planning and design aspects, the results are very satisfying. My neighbour across the street is a contractor who allows me to do the grunt work (I'm not very handy) to help defray the costs.

Also, we want to fly away on a carribean vacation every other year to create some special family memories as my kids are still young (aged 11 and 8).

Current Situation:
Mortgage balance- $95,000 (@3.14% Aug 2013-2018), bi-weekly payments $600. Normal amortization runs until 2022. Principle res FMV $530,000.
LOC- $25,000. 
The LOC balance is made up of the first round of renos, a great family vacation last year, and I borrowed $10,000 to get caught up on RESP contributions. I know, borrowing to fund a higher lifestlye is frowned upon.

2018 Projected Situation:
My mortgage will renew at $45,000. Concerned about higher rates upon renewal, but with only $45K remaining, a much higher interest rate wouldn't effect the amortization much as it would mostly be principle repayment at that point.
LOC- $45,000 lots of home renos drive up the LOC balance (new roof, landscaping, furniture, etc.). Family vacations in 2016 and 2018 are included in that high balance too. I'm exposed here on higher rates, until my inheritance kicks in two years later. 

2020 Projected Situation:
My mortgage balance would be approx. $25,000 at the end of that year. 
LOC- would get paid off using my inheritance, it would also fund $30,000 of RRSP contributions, $25,000 of RESP capital (fed in over several years to max the CESG), a new car for my wife, and finish up the reno projects (new windows, air conditioning unit), and a really big family vacation. 

2022 Projected Situation:
My mortgage would be discharged by the end of this year. Debt free 2 years ahead of my planned retirement date

My spending, investing, and debt repayment plans are all highly dependant upon my inheritance. My parents are 79 and 75 respectively this year, and not in good health. Should they survive longer than 5 years from now, my plans will be deferred from my anticipated timeline obviously.

The risks to my plan include higher interest rates in 2018 (mortgage renewal) and my floating LOC (P + 0.9%). Either of my parents require LTC, this could signifigently threaten my plans.


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## Homerhomer (Oct 18, 2010)

Dufresne said:


> My spending, investing, and debt repayment plans are all highly dependant upon my inheritance. My parents are 79 and 75 respectively this year, and not in good health. Should they survive longer than 5 years from now, my plans will be deferred from my anticipated timeline obviously.
> 
> .


I would change your inheritance expectation to zero and built your plans based on that since your parent may live much longer than that, and they may require care they deserve.


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## RBull (Jan 20, 2013)

I agree. I think it's clear you need to abandon any plans that include an inheritance, since you cannot predict your parents future or their needs. 

If an inheritance occurs you can can adjust accordingly.


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## OnlyMyOpinion (Sep 1, 2013)

Dufresne, Presumably you are just being 'realistic' in your parent mortality and inheritance assumptions. Maybe this comes from 25yrs in the insurance business but it certainly comes across as macabre.
I'd go with HH & RBull's suggestions that you also develop a plan B that does not assume the inheritance. It is uncertain since you don't control your parents decisions or future. Determine how it could be done without the $165k, through 10yrs of saving in other areas to allow debt reduction and spending in your proposed areas. Debt reduction in the current plan seems 'end-loaded'. I'd personally feel better reducing it on a continuing basis rather than racheting it up and paying it off right before the finish line. Also, until the kids are actually through school and self-sustaining, we felt exposed to some uncertainty whether there would be extra expenses.
Most of the spending categories (eliminate debt, finish renos, travel w/ kids, new vehicle prior to retirement) are similar to those we knocked off in our 50's so seem reasonable in that regard. The one that did stick out though was 'buy new car for wife' since I'd assume that in retirement one vehicle should be sufficient?


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## Jorob199r (Sep 4, 2014)

Do not plan on receiving that inheritance money. It will distort proper planning.


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## mind_business (Sep 24, 2011)

That $165K won't last long if they need longer term care. My parents are quite well off, however I have not, and will not include an inheritance in my retirement planning. I would like to see my parents spend every last penny if at all possible.


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## Spudd (Oct 11, 2011)

I agree with everyone else, you need to forget about that inheritance. You can't predict when it will come or what size it will be. Treat it as a bonus if/when it arrives.

I think that ensuring your own retirement is secure is a higher priority than paying for your children's schooling. You don't mention here how your retirement savings are looking, or do you have a pension, etc. But going into debt for RESP savings seems like a poor idea to me. 

I would also hold back on un-needed renovations, new furniture, etc until you can pay cash for them. Caribbean vacations are nice, but they too should be paid for in cash and not in debt.


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## marina628 (Dec 14, 2010)

I count on my parents costing me money at end of their life ,agree with everyone else it is very poor planning if that money is part of the retirement plan.


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## Dufresne (Mar 4, 2015)

Thanks to all for the sober second thoughts about including my potential inheritance. Eliminating it from the plan pushes my proposed retirement age from 60 to 65. I'll develop a second plan to self fund all of the things on my 'wish list'.
Also as an FYI, i have no pension, but i do currently have $460K in RRSPs, $40K in RESPs, and my share of the business is currently worth $420K (tax free under the CGE for small biz). I also have a $200K whole life insurance policy on my biz partner, which can be paid to me tax free via special dividends through the CDA. He is age 66 and morbidly obese, again, not counting this but I must at least acknowledge its presence. Looking for $50K net/yr (expressed in $2015) when I retire.
Spudd, i borrowed for my children's RESP because the financing cost is so low, i picked up a 20% CESG, and I feel a strong obligation to partially/wholly fund a 4 year uni degree. Looking back, the investment has worked out well, so I do not regret my decision.
I'm not looking for any validation, but your challenges to my logic/assumptions keep me honest.
Thanks


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## peterk (May 16, 2010)

Spudd said:


> I think that ensuring your own retirement is secure is a higher priority than paying for your children's schooling. You don't mention here how your retirement savings are looking, or do you have a pension, etc. But going into debt for RESP savings seems like a poor idea to me.


I think this is the bigger concern than counting on an inheritance. I don't think you can afford to spend tens of thousands on each kid's school.

Everyone here was a bit thrown by your matter-of-fact treatment of your parent's demise. Perhaps you were already being conservative with your estimations though... Maybe they truly are in poor health and you wouldn't anticipate them living for more than a year or two more, but you've said 5 to be thoughtful and conservative in your planning? I'll give you the benefit of the doubt.

Other than the kid's schooling the biggest thing that pops out at me is that it seems like you aren't really saving any of your income at all, and are actually spending more than you make during several years. This is not the path for a 50 year old who wants to retire at 60 to be taking.

We might be able to give you some more helpful advice if you advise us of your income, spending, and any assets you may have that weren't mentioned (mutual funds? pensions?).


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## peterk (May 16, 2010)

^^ Edit:

Nevermind. It sounds like you are more well off than you let on. How is it that you have 460k invested in RRSP but can't come up with 10k to fund an RESP? 

You can see the confusion in everyone's response, as you first post did not indicate that you spend more than you save, have only a house as your main asset, and were heavily reliant on a smallish inheritance that required both your parents to die at a younger than average age...


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## Homerhomer (Oct 18, 2010)

Dufresne said:


> Thanks to all for the sober second thoughts about including my potential inheritance. Eliminating it from the plan pushes my proposed retirement age from 60 to 65. ,





Dufresne said:


> I also have a $200K whole life insurance policy on my biz partner, which can be paid to me tax free via special dividends through the CDA. He is age 66 and morbidly obese,


I don't know if this is just me not interpreting your posts correctly but this comes across really creepy, your fortune is others misfortune and vice versa.

With what you have, and what you can potentially accumulate over the next ten years, I don't see why you can't retire at 60, I think you will get more insight and help if you list your incomes, expenses and other facts related to the subject (while paying less attention to inheritances and life insurance proceeds).


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