# 22 year old joining the workforce...



## myk0 (Jan 14, 2012)

Hello everyone,

I graduated from university in April 2011 and began working full-time this month. With the new income coming in, I'd like to use this thread to keep track of my financial situation, and I look forward to see what the community thinks of my plan. 

*Assets:*
$ 750 Cash
$ 5,600 Chequing Account
$ 5,300 TFSA
$ 200 Company Stock Purchase Plan
*$11,850 Total*

I currently have no debt, but if my mom would like me to help pay rent, I will most likely be in a good position to assist her.

Monthly Income = $51,000 before taxes, about $1500 bi-weekly after taxes

Annual Bonus ~ $5,100 which will be contributed to both a company pension plan and RRSP

Based on a budget for 2012 I created using Quicken (awesome tool btw), a conservative estimate for my monthly expenses will be about $700. This figure obviously does not take into account potential rent payments.

*Financial Goals for 2012:*
1) Max out TFSA in 2012: With automatic transfers of $750 from each pay cheque to my TFSA, the goal should be reached by November 2012.
2) Convert TFSA into a TD e-series account and follow a couch potato strat.
3) Open a company RRSP account (they use Sunlife)

*Long-term goals:*
1) Max out RRSP every year
2) Buy a car in ~ 2 years if needed (using money from TFSA)
3) Buy a house/condo in ~ 5-7 years (using RRSP HBP and TFSA as a down payment for the house)
4) Travel once a year
5) Build an emergency fund
6) Build knowledge about investing (dividend portfolio investing seem very interesting to me at the moment)

Thankfully from observing my mom's incredible savings habit on a very low income, I have been consciously saving since I was 18. I know I will probably not be able to sustain my current savings rate when bigger things like kids and mortgages come in the future, so I figure I might as well start now.

Cheers,
Mike


----------



## Montrealer (Sep 13, 2010)

Good luck! When I see what your paying in tax on $51K, it pisses me off because I am getting killed with taxes in Montreal, Que and it is starting to get very annoying.


----------



## OhGreatGuru (May 24, 2009)

Sounds like a good plan. Pretty early to suggest any detail on what to invest in.
- Spend less than you earn;
- never borrow money except for a mortgage;
- be careful about company stock purchase plans, unless you can cash them out regularly. Having both your savings and your job tied up in the same company's future is risky. And even company pensions aren't necesarily safe anymore.


----------



## Montrealer (Sep 13, 2010)

OhGreatGuru said:


> Sounds like a good plan. Pretty early to suggest any detail on what to invest in.
> - Spend less than you earn;
> *- never borrow money except for a mortgage;*
> - be careful about company stock purchase plans, unless you can cash them out regularly. Having both your savings and your job tied up in the same company's future is risky. And even company pensions aren't necesarily safe anymore.


I disagree and feel that you can and should borrow for an education, house and a car, just DON'T borrow on credit cards and pay cash for everything else so that your living below your means.


----------



## myk0 (Jan 14, 2012)

Thanks for the tips guys. For the share purchase plan, I get a matching bonus at year end, and I can cash out at year end as well. Then the cycle repeats, which is pretty good to me.


----------



## KaeJS (Sep 28, 2010)

Montrealer said:


> I disagree and feel that you can and should borrow for an education, house *and a car,* just DON'T borrow on credit cards and pay cash for everything else so that your living below your means.


Borrow for a car? 

That's a lose, lose, lose and... lose situation. 

Please don't ever borrow on a car. You are paying interest for a machine that consumes money, costs money to fix, depreciates in value and adds other miscellaneous expenses (insurance, sticker renewal, tickets, etc).


----------



## Montrealer (Sep 13, 2010)

I am paying 0.9% for my car and will not have to worry about major repairs or buying another car for at least 10 years! In thise 10 years, I can save money while knowing that I am driving a reliable car that takes me to see clients that will make me more money.

0.9% is peanuts!!!


----------



## Sampson (Apr 3, 2009)

I'm also not totally opposed to borrowing money to buy a car.

We did just that a few years ago even though we had the cash on-hand. Why? We used the remaining money to invest. It was a much cheaper way to borrow to invest that a conventional investment loan, a HELOC, or even conventional mortgage.

Done right and safely, borrowing isn't a terrible thing.


----------



## humble_pie (Jun 7, 2009)

like barwelle & other wise 20-somethings in cmf forum, this recent university grad has a great plan:

_" I know I will probably not be able to sustain my current savings rate when bigger things like kids and mortgages come in the future, so I figure I might as well start now."_

he knows that, at his age, the greatest increase in wealth is going to come from savings from income, not necessarily from investment growth since investments are still relatively modest. He also knows that, even if he stops contributing to TFSA at age 30 due to pressing kids-&-mortgage needs, that one zero-tax account alone could be worth $1 million in his old age.

he already has an education, no need to talk about borrowing. He's already decided he can get by without a car, for now, so no need to borrow there either. House ? Condo ? Let's not be ridic. Right now he's free as a bird. Can vacation as he pleases. Can move to another city for a job, or a girlfriend, or a whim.

it's the time of his life.


----------



## Helianthus (Oct 19, 2010)

Montrealer said:


> I am paying 0.9% for my car and will not have to worry about major repairs or buying another car for at least 10 years! In thise 10 years, I can save money while knowing that I am driving a reliable car that takes me to see clients that will make me more money.
> 
> 0.9% is peanuts!!!


0.9% is the stated rate to lure you in. The implicit rate is much higher...


----------



## canadianbanks (Jun 5, 2009)

Montrealer said:


> I am paying 0.9% for my car and will not have to worry about major repairs or buying another car for at least 10 years! In thise 10 years, I can save money while knowing that I am driving a reliable car that takes me to see clients that will make me more money.
> 
> 0.9% is peanuts!!!


Yes, if you can get financing/leasing at this rate this is a great deal, considering that real inflation is probably running above 3-4% per year.


----------



## Helianthus (Oct 19, 2010)

If you can get a LOC at 0.9%, that is a great deal. This is different though, as the loan is typically issued by the financing arm of the car manufacturer, and the 0.9% is based off an inflated value of the vehicle. If you paid cash, the cost of the vehicle would be much lower than the stated value of the car in the 0.9% lease agreement. The same applies to "interest free" loans. These deals are constructed in such a way so that people rationalize the purchase by thinking they are paying minimal (or no) interest.


----------



## MoneyGal (Apr 24, 2009)

OT but there's a long, great article on Edmunds.com about the process of buying and selling used cars - written by a guy who went undercover as a used car salesman in order to write it. 

http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html


----------



## humble_pie (Jun 7, 2009)

?

what have car loan discussions got to do with a 22-year-old's financial plan when he specifically says he doesn't want a car right now, might not even need one in 2 years ...


----------



## MoneyGal (Apr 24, 2009)

Nothing! But I was responding to Montrealer's point and the follow-up by Helianthus. 

Don't conversations in your house go this way? They sure do in mine.


----------



## humble_pie (Jun 7, 2009)

oh they do indeed or else people get ignored entirely ...

but i was hoping to turn the spotlight back on the OP.

he's another young person who has joined cmf forum & he's got life by the tail. This is so astonishing to me ! i mean, finance boards used to be populated by grouchy old men, right ?

so these talented youngsters are amazing. Especially their sense of responsibility & their good will. We should all be encouraging them all the way imho.

ps we have some angelic older folks here too.


----------



## Helianthus (Oct 19, 2010)

I was responding to Montrealer's post. 

As for the OP, I don't have much to add. In fact, I should follow in his lead, as he is better off than I. Definitely impressive to be going in the right direction at 22, with a well paying job and no debt!


----------



## donald (Apr 18, 2011)

That's a awesome read! Wow were they fing with mr.park.....you always know it's a game of poker and the "car" has nothing to do with it!One big physc game.I have had the "four" square pulled on me looking back when i bought a few yrs ago(friend of the family thou)amazing how they have sterotypes and buying patters/response patterns looking for cues-weakness,body language.Like a lion looking for a weak gazelle.

Process kinda reminds me of the "friendly" mutual fund salesperson with fancy diagrams and let me show you the "power of componding"lol. "and will hope you don't read the fine print and this is just standard stuff sign here"


----------



## Barwelle (Feb 23, 2011)

humble_pie said:


> Can move to another city for ... a girlfriend ...


Careful what you suggest there humble... don't give him any crazy ideas!



MoneyGal said:


> Nothing! But I was responding to Montrealer's point and the follow-up by Helianthus.
> 
> Don't conversations in your house go this way? They sure do in mine.





humble_pie said:


> oh they do indeed or else people get ignored entirely ... but i was hoping to turn the spotlight back on the OP.


I'm with humble on this one. This is, after all, a thread in the Money Diary section, not general discussion, so whatever's discussed here should actually pertain to what the OP's plans are. Since myk's not serious about buying a car, well... (though I'll admit that I've gone off track in another thread too.)

myk, just out of curiosity, any idea what your allocation is going to be in the e-Series funds?

Did you get some travelling in between graduating and now? I think it's a great experience for young folks like us (and anybody, really), to be able to go travelling without the pressure of knowing you _have_ to be back home by a certain time to get back to work.


----------



## Four Pillars (Apr 5, 2009)

Barwelle said:


> I'm with humble on this one. This is, after all, a thread in the Money Diary section, not general discussion, so whatever's discussed here should actually pertain to what the OP's plans are. Since myk's not serious about buying a car, well...


Actually he listed buying a car in about 2 years as one of his goals. So I would say that MoneyGal's link is fairly on topic.

In general however, I think off topic posts should really be in new threads.


----------



## humble_pie (Jun 7, 2009)

his reference to a car was "if needed," ie car was not among his definite goals. Plus it was far down the list.

i for one strongly uphold jumping off topic. I like chaos, myself.

but even more strongly i believe in looking respectfully at a poster's original message & attempting to deal with the needs that he has articulated there.

where this thread got derailed a bit was the now-infamous personnage upthread who keeps insisting that every 22-year-old fresh out of college should be buying a home.

there we go. Now i'm off-topic ...


----------



## Four Pillars (Apr 5, 2009)

humble_pie said:


> his reference to a car was "if needed," ie car was not among his definite goals. Plus it was far down the list.


It was listed as his #2 long-term goal - not that far down. Plus the term "if needed" doesn't mean it's an optional goal. I assume it will depend on his employment/location etc.

Anyway, I was just trying to help MoneyGal recover her reputation after her impertinent offtopic post.


----------



## MoneyGal (Apr 24, 2009)

Thanks but according to PA it's easier to just listen to me (I am going to adopt this as my motto around the house). 

(Does anyone here watch AdventureTime? My current motto is "that is why *I* am royal, and *you* are servile!")


----------



## myk0 (Jan 14, 2012)

Wow this thread blew up quick (in a good way of course). I can most definitely get by the next two years without a car, but I definitely don't mind hearing opinions on that subject matter since I will need it in the future.

@humble_pie, thank you for the kind comments. These next few years will definitely be exciting, and I do hope to get a lot of travel in. I've actually been browsing this forum for over a year now. I should have joined sooner! 

@moneygal, i'm still going through the article, but so far it's a fantastic read! Thanks for sharing 

@barwelle, seeing the world is definitely a high priority for the next few years, as my girlfriend and I plan to travel once a year. We went to New York two years ago and last year we visited Mexico. We might postpone this year and go on a bigger trip next year (either Europe or Asia), since we both just started full time jobs this year.

I'm actually going to mail in the forms for the e-series tomorrow. I'm planning on allocating 20% in canadian bond index, 30% in U.S. stock index, 25% in Canadian stock index, and 25% in international stock index. What do you think of this allocation?


----------



## humble_pie (Jun 7, 2009)

i for one feel that the international allocation is too high. If one looks at the 10-year histories of int'l funds they have done mizzuble.

their proponents chant that the high canadian dollar made em mizzuble. But if one looks back at the 20-year histories - by now one would be into mutual funds, since many etfs & index funds are newish entities - the returns are still mizzuble.

no matter what, it seems to me that international funds are black holes destined to drag down portfolios like mysterious millstones.

with younger, beginning investors the portfs are not huge, i am imagining. I'd divide em something like 20% bonds, 40% each canadian & US large caps.

the senior large cap stocks are themselves multinational corporations, so therefore they are actually international funds in disguise. Some big canadian businesses - scotiabank, snc lavalin, most big drillers, most big energy, potash, agrium, valeant pharma - have the bulk of their business outside canada, for example. So there's your international exposure right there.


----------



## Four Pillars (Apr 5, 2009)

myk0 said:


> I'm actually going to mail in the forms for the e-series tomorrow. I'm planning on allocating 20% in canadian bond index, 30% in U.S. stock index, 25% in Canadian stock index, and 25% in international stock index. What do you think of this allocation?


Good move.

That's pretty close to the allocation I have, except my Cdn equity is lower.


----------



## myk0 (Jan 14, 2012)

Now a 24 year old still in the workforce...although I haven't updated this thread as intended, I still have been keeping track of my finances through Quicken and consciously saving what I can.

*Assets:*
$ 800 Cash
$ 13,250 Chequing Account
$ 25,900 TFSA
$ 3,600 Company Stock Purchase Plan
*Total:$43,550*

*Income* = 52k, about 1,500 bi-weekly after taxes

*Monthly Expenses:*
Rent: $950
Public Transportation: $260 
Internet/TV/Phone: $180
Eating out: $150
Groceries: $150
Gym: $33
Misc: $50
*Total: $1777*

My interest in investing/personal finance has definitely diminished as I became more interested in fitness and health. I have also been reading self-help books/blogs, and am looking for methods on earning passive income.

My TFSA has not been converted to an e-series and it is all cash right now. I want to buy a car this year (not for me, but for my mom) and it will most likely come out of this account. I have not done any research yet and don't know much about cars, but am willing to spend 5k - 20k for a reliable vehicle. I figure once I go through with this purchase I'll invest whatever is left in the e-series.

I hope everyone else is doing well. See ya'll in another 2 years :encouragement:


----------



## Plugging Along (Jan 3, 2011)

First OP, welcome and I think you are doing great. I wish had your smarts at 22. When I was 22 my focus was on getting rid of stupid debt I had plus student loans. You re well ahead with no debt, and good savings habits s. keep it up and the investing will come later.





Montrealer said:


> I am paying 0.9% for my car and will not have to worry about major repairs or buying another car for at least 10 years! In thise 10 years, I can save money while knowing that I am driving a reliable car that takes me to see clients that will make me more money.
> 
> 0.9% is peanuts!!!


We were offer 0% financing just last month on a car. We asked what's the rate if we pay cash, they dropped the cost by 9%

I thought that was a great return. 





MoneyGal said:


> Thanks but according to PA it's easier to just listen to me (I am going to adopt this as my motto around the house).
> 
> (Does anyone here watch AdventureTime? My current motto is "that is why *I* am royal, and *you* are servile!")


I could call you 'your majesty, or 'royal highness'. Again, I agree in this forum Imhave not seen a bad post from you yet. 

I tell peopel at work and at home if they would just listen to me life would be easier.


----------



## FrugalNotCheap (Oct 17, 2011)

Well done myk0!

You're in a great position, as you have the student loans paid off at such an early age. Keep saving as much as you can while you can, as when you get older you'll run into more expenses (home/car/family) and you'll be glad you had saved as much as you did at an early age. 

I can really relate to you in the fact that I support my parents as well, so I respect the fact you are thinking about them and taking away from your future savings in order to support them.

Also - don't forget to enjoy the little things, and invest in yourself even if it costs money.


----------



## myk0 (Jan 14, 2012)

Thank you for the kind words.

I am actually getting laser eye surgery this week, and I hope it will turn out to be a great investment for me.


----------

