# No Idea What I'm Doing - Trying to Figure It Out



## loggedout

So i'm 30, doing alright...but i don't know what i'm going to be doing and have a hard time pulling the trigger on anything involving money or really any decision i feel i can't back out of - commitment phobic? so what do in the mean time given my situation. i know i need to invest but when confronted with options, i freeze up. No clear life goals = no clear financial objectives (other than: get rich or die trying)

I plan to use this thread to remind myself to stop procrastinating, to record any progress, and to ask others what would they do if they were me (financially speaking)

Here are my vitals:

- monthly income 5k average after tax and deductions (to pension and not including company's contribution which seems to be 1.5).

- job security is uncertain. how can you even predict this in this day and age? maybe ill be laid off in a month, maybe ill work another 30 years w/o interruption.

- no goals except to establish goals 

assets:
~85k in chequing account
~90k loaned to parent (can be immediately be returned if requested)
5k in a tfsa trading account but not-invested (put the money in and just couldn't buy anything)
>40k in RRSP invested in a td balanced index fund
~50k in a public service pension (estimated off of deductions and amount company has put in)

debt:
0

net worth = assets - debt = 270k

monthly expenses (after tax):

Housing $700 (rent, includes hydro)
Food $250 (guestimate)
Cable/Landline $75
Fitness	$60.00
Cell $65
Car Insur $65
Car Gas $250
Car Maint $50 (guestimate)
Clothes/Entertainment/Other $300 (guestimate)
Automatic RRSP Contributions $400 ($100 weekly)
---------------------------------
Total expenses $2215

Therefore monthly revenue 5000-2215 = 2785 .... how to allocate when aimless?

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## the-royal-mail

I am in a similar situation, though I haven't saved anywhere near as much as you have. Wow $85K in the bank is incredible.

Any interest in putting that towards a house or condo downpayment? I realize that's not a good thing for someone who is commitment phobic.

Barring that, how about something like the RBC High Interest e-savings account? 1% on $85K would be better than what you are making now in a plain vanilla savings account.


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## Spidey

You are doing extremely well for someone your age. I realize that there are no job guarantees but with a public sector job, you have more job security than most. You've got a great base to work from and a public sector pension gives you a little more security.

What I would suggest is not doing anything too drastic at the moment, but to read a financial book a month for the next year. Some books may give slightly contradictory advice, but that's okay. After that you should have a little firmer grasp on what investing style you are comfortable with and you will probably be able to plan a strategy. However, keep reading.

Suggestions: 

The Wealthy Barber
Investing for Dummies
The Four Pillars of Investing
The Intelligent Asset Allocator
Stocks for the Long Run
The Future for Investors
Your Money or your Life
Sleep Easy Investing

All available at the library.


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## m3s

Knowing how to save is the key part and you have that mastered

Look into the couch potato portfolio. No rush really but if the market keeps tanking it might be a good time to start investing slowly by "dollar cost averaging" while the market's on sale.


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## MoneyGal

I would disagree that you "don't know what you are doing" - you are clearly doing many things right! There are people (like Zvi Bodie, no dummy) who believe that stock market risk should pretty much always be avoided. You are risk-averse, but very competent at saving. I'd recommend adding "Worry-Free Investing" to your reading pile - and I'd also add that while there is a strong disposition towards stock market risk here in this forum, that view is by no means universal.


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## the-royal-mail

MG, can you suggest an alternative to stock market risk?


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## MoneyGal

TRM: Bodie argues that "stocks for the long run" is oversold to ordinary people saving for retirement. Here's a brief article which says a bit more about his philosophy. 

For Canadians, Bodie would argue the best way to save for retirement is using real return bonds. 

I know his approach is controversial - you can just read the comments to that article I posted above to get a sense of the outrage some of what Bodie says inspires. However, at a general level, it is hard to argue with what he's proposing: to fund your retirement safely, you need to save aggressively and in safe vehicles. I've heard too many horror stories, personally, from and about people who have failed to do exactly this. I do not personally shun stock market risk but I appreciate Bodie's message.


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## Cal

You seem to have the saving part down pat.

Now you need to educate yourself to find the investing strategy that works best for you.

It is sad too see so much $ in a chequing account. When you account for inflation you are actually losing buying power.

So for now your basic goal is to have your money grow. Yet to figure out the how.

What % is the loan to a parent at?
Do you have unused RRSP contribution room?
Do you want to set some $ aside for a down payment for a property?

At you level, good start by keeping the RRSP in a low mer indexed balanced fund. Good Start.

While you figure out a few of these things, I would move the $ into at least a higher yielding savings acct, and maybe top up the TFSA contribution, again at least put the TFSA $ into a high yield while you decide on how/where to invest it.


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## Larry6417

*You're doing very well*

You're well ahead of most people your age. Staying out of debt and living within your means are the basis of personal financial security, and you've mastered that. 

You say you have no financial goals except to "get rich." You need to quantify your goals. What's "rich"? And what time frame are you willing to accept to become rich? The answers to those questions will dictate your asset allocation i.e. how much fixed income vs equity.

Spidey's advice is very good - increasing your investment knowledge can go a long way in reducing your indecision. I would add _A Random Walk Down Wall Street_ to that list. Few people, aside from a few academics, take the efficient market hypothesis seriously, but the advice from the book is still valuable. Behavioral finance has skewered one of the fundamental tenets of efficient markets - that people make rational monetary decisions. 

Speaking of behavioral mistakes, financial prognosticators/professors/"market insiders" are no less susceptible to these errors than anyone else. One of the errors is to overrate recent experience. I've seen much of that. In the 1990s the S&P 500 grew at almost 20% per year. People expected that rate of return constantly. If people didn't make 15% on their mutual funds, they switched or dropped their advisors. People forgot history and a basic principle: investment gains (or losses) revert to the mean. When the DOW hit 10,000 a decade ago, I remember a prescient article that forecast a very long climb to 20,000. The article looked at past mlestones on the DOW and found a pattern. Milestones were often met in bull markets; subsequent euphoria almost always overrated the prospects of the DOW advancing quickly. Bear markets usually decreased the DOW, which meant a long time before the next milestone was surpassed. I was taking a personal finance course at that time, and we discussed the article (this was before the tech bust). The article was almost universally panned by my class. The sentiment among CNBC, financial advisors, and the media was euphoric at the time. Silly books like _DOW 100,000 _were taken seriously.

After the 1990s, market returns, inevitably, reverted to the mean. The past decade for the S&P 500 has been the worst in history - a decade-long return of zero while the preceding decade was the highest return in history, almost 20% per year for a decade.

I repectfully submit that basing financial decisions on the past decade of well below average returns is as foolish as basing decisions on the well above average returns of the 1990s. Yet we see some financial gurus doing exactly that. 

No matter what you decide, investing dispassionately at the lowest possible cost (index funds, ETFs etc) will serve you well.


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## loggedout

Well, I have finally done something. I've opened up a HISA account with Ally and moved 60k from chequing account to it. It's CDIC insured based on my readings, is this correct for sure?

Also maxed out my TFSA, and now I have 10k sitting in the online brokerage account. Still trying to figure out a strategy for how to invest it: bonds, stocks, ETFs?

Got some books and reads to better educate myself based on the suggestions here.

I know I don't want to go the complete Zvi Bodie route, that seems awfully conservative, and while I am risk adverse, I do want to take some calculated risks.

Still don't have life objectives to frame my financial objectives with. A bit concerned about my crown corp becoming privatized and possible layoffs, so it's been a bit of a challenge figuring out what I am going to do given the uncertainties.


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## Cal

First step complete. Good start.

And yes Ally is CDIC insured.


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## heyjude

loggedout said:


> Well, I have finally done something. I've opened up a HISA account with Ally and moved 60k from chequing account to it. It's CDIC insured based on my readings, is this correct for sure?
> 
> Also maxed out my TFSA, and now I have 10k sitting in the online brokerage account. Still trying to figure out a strategy for how to invest it: bonds, stocks, ETFs?
> 
> Got some books and reads to better educate myself based on the suggestions here.
> 
> I know I don't want to go the complete Zvi Bodie route, that seems awfully conservative, and while I am risk adverse, I do want to take some calculated risks.
> 
> Still don't have life objectives to frame my financial objectives with. A bit concerned about my crown corp becoming privatized and possible layoffs, so *it's been a bit of a challenge figuring out what I am going to do given the uncertainties*.


Well done! You are right where I was at your age. Life is full of uncertainties. There is no such thing as a permanent job any more. You are young and have time and skills on your side. In other words, you are rich in human capital. Over time, you will be able to turn your human capital into financial capital. I suggest you add Moshe Milevsky to your author list. He's a finance prof at York University in Toronto and he writes in very understandable terms about this subject, about insurance, etc. I recommend a recent book of his: _Are you a Stock or a Bond? _


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## 412driver

Highly taxed Bonds and GIC's go into the RRSP....

The brokerage TFSA should be used to buy equities that would normally would incur high capital gains...

have a non-registered account to buy preferred/dividend paying shares where their tax credit comes into play....

question....instead of putting money IN the bank at 2% interest...why not buy shares OF the bank basically becoming an owner and collect higher dividends? My BMO shares are paying me over 5%! Pick a bank....they are all about the same. Oh, and my 5% of dividends is taxed alot less than your 2% interest...

good luck....


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## loggedout

412driver said:


> Highly taxed Bonds and GIC's go into the RRSP....
> 
> The brokerage TFSA should be used to buy equities that would normally would incur high capital gains...
> 
> have a non-registered account to buy preferred/dividend paying shares where their tax credit comes into play....
> 
> question....instead of putting money IN the bank at 2% interest...why not buy shares OF the bank basically becoming an owner and collect higher dividends? My BMO shares are paying me over 5%! Pick a bank....they are all about the same. Oh, and my 5% of dividends is taxed alot less than your 2% interest...
> 
> good luck....


Okay thanks, that strategy makes sense. What worries me about buying shares is just not knowing what and when to buy. Being a naturally pensive person, I'm not confident enough evaluator to buy stocks. I've looked at a number of stocks I've liked like FTS, BNS, TA, ENB but shied away from buying.

What about buying into Canadian Dividend ETF like CDZ? Would that be an option if I'm not comfortable with purchasing dividend paying stocks? Are the tax implications the same or different if I do it that way?


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## andrewf

CDZ is not a bad idea. The tax implications are essentially the same. CDZ has some income trusts mixed in, so some of the current distributions will be taxed as income (as they are not eligible dividends) or as a capital gain, but this will change in January as nearly all income trusts will convert back to corporations paying eligible dividends as a result of a change in federal tax law. 

You should probably take a gander at claymore's site for cdz:
http://www.claymoreinvestments.ca/e...ed-funds/fund-details/fund-summary?ticker=CDZ

You can see what companies and sectors comprise the fund. Unsurprisingly, it is dominated by financials (banks and insurance) and energy stocks.


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## loggedout

Well for the sake of doing something and seeing how it goes:

I took $5k (outside of TFSA) and put into BNS, $2.5k into MCD, and 5K into CDZ with the latter two being in the TFSA. I could lose it all and I'd be pissed but it wouldn't kill me so I can live with it.

I figure these are pretty conservative companies and going with that ETF also fits in with that to an extend *maybe*. After a year, I'll reconsider but for now, I'm going to ignore it.


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## Cal

IMO the MCD is bet held inside your RRSP, to avoid paying the withholding taxes on dividend payments.


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## loggedout

Cal said:


> IMO the MCD is bet held inside your RRSP, to avoid paying the withholding taxes on dividend payments.


Yeah I didn't realize that until after. Should have done my due diligence. Oh well. This is just an experiment, I'll see what happens in a 1 year or so. Lesson learned.


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## loggedout

I looked over some other threads and saw people setting goals of being a millionaire by a certain age.

I wanted to know how realistic it would be for me....

My current net worth tabulation is like this:

86k	Loan *immediately returnable
63k	Savings
13k	Chequing
10k	Unreg-Investments
11k	TFSA-Investments
46k	RSSP
53k	PSSA
-4k	visa *will paid when due
----
278k

Given that, if my calculation is correct I would need at least an net growth rate of 15% or greater to reach the goal of a million by age 40 (in 10 years). That doesn't seem realistic given the expenses that may come during that time frame.


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## MoneyGal

1. Have you included (the discounted value of) your pension in that calculation? 

2. Unless you actually want to retire at 40, your human capital is like a long bond which will pay out over your entire working life. It, too, has a present value that can be calculated. In fact, if you include the (discounted present value of) your human capital in your calculations, I'm sure your total net worth is over $1m right now.


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## Four Pillars

You seem to be assuming no further savings. You must have been saving quite a bit to get to the spot where you are today at age 30. 

If you save $20k per year then you only need about 10% return to be a millionaire by 40.


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## loggedout

MoneyGal said:


> 1. Have you included (the discounted value of) your pension in that calculation?
> 
> 2. Unless you actually want to retire at 40, your human capital is like a long bond which will pay out over your entire working life. It, too, has a present value that can be calculated. In fact, if you include the (discounted present value of) your human capital in your calculations, I'm sure your total net worth is over $1m right now.


1. Is that the same as the Transfer Value? If so, no.

I've just added up the sum total of my contributions and that of my employer.




Four Pillars said:


> You seem to be assuming no further savings. You must have been saving quite a bit to get to the spot where you are today at age 30.
> 
> If you save $20k per year then you only need about 10% return to be a millionaire by 40.


I assuming that I will not be saving at the rate that I am at now over the entire time frame due to the probability of being laid off and the potential for increasing expenses if I start a family or have to take greater care of my parents in their old age or whatever other expense may come up.

I also think that 10% returns are an overly optimistic expectation given today's climate. 5% seems more reasonable.


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## MoneyGal

Discounted value of a future pension payment: not (necessarily) the same as the transfer value. 

If you have a defined benefit pension, you can get an estimate of what your pension will be when you retire - or if you leave the company/stop contributing before normal retirement age. 

We can work with the age of 40, since that's the age you originally mentioned. You could ask the pension administrators at your workplace what you will have earned in pension credits if you work to age 40 and make your pension contributions along the way. (Or possibly you can figure this out with paperwork or calculators you already have.) 

The question you want to get the answer to is how much pension income you would receive *at your normal retirement age* based on your contributions and credits *to the age of 40.*

For the sake of argument, let's say that the pension administrators at your work say that if you continued to make your pension contributions as you have been, that by the age of 40 you will have amassed credits sufficient to provide you an income of $1,000 per month in retirement, or $12,000 per year. 

That future income stream has a present value today. Now, you need to be able to do some actuarial calculations in order to get today's value - in fact, you are looking for what is known as the "actuarial present value" of that future income stream. 

Using today's rates, the actuarial present value of $1,000 (non-inflation-adjusted) per month of pension income starting at age 65 for a male aged 40 is $55,000. (If the pension is inflation-adjusted, the APV is roughly double the non-inflation-adjusted APV.)

That ends the actuarial math portion of your Canadian Money Forum experience for today.


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## MoneyGal

Wait. One more thing, and here it is: you can do the same calculations with CPP and OAS, too - calculate the value today of these future entitlements, as a lump sum.


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## loggedout

Thanks Moneygal for that informative post, I will look into....This seems like a very involved calculation but in the context of calculating a net worth to what end is this useful?

To make it easy, can I assume that my FV will be AT LEAST worth the sum total of the contributions that I've made? or is that an error?


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## MoneyGal

Well...it's a bit of a mind game, I guess. I'm not sure what immediate or practical value it has. 

My point was just that there are many ways of calculating net worth AND that a future stream of lifetime payments has a present value today, and (properly speaking) it should be included in your net worth calculations. 

Particularly if you have a DB pension, it is worthwhile to figure out the APV, and especially if you are comparing your net worth to someone *without* a DB pension. 

For example: think of a "financial facelift" in the newspaper that says so-and-so public servant has a net worth of (let's say) $450K - but their pensions are omitted. Once pensions are included (and properly discounted and valued, this should not be difficult for the "experts" surveyed for these things), their true net worth is now in the millions. 

My larger point is that clear thinking about net worth and particularly about retirement planning (given that's when these streams of income I keep referring to kick in) must include the present value of future streams of lifetime income. 

And to answer your question: it depends on how your pension is funded. But for your purposes, the approach you've laid out is probably fine.


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## MoneyGal

Oh - and in case anyone is actually interested in calculating this - let me know, and I will do it for you with the actuarial software I work with.


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## the-royal-mail

That's very nice of you MG. I always thought that sorta stuff was billable!

I'm looking at a net worth calculator online and it asks about "Value of pension plan(s):" I'm assuming this is what loggedout is asking about. I would need to look at my statements and see.


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## loggedout

Question that I am pondering right now: 

Should I be maxing out my RRSP this year?

Relevant info:

Just turned 31, so far away from retirement.

I have nearly 12k in available room, and I have the $ to invest but I am wondering if it's better to push it forward and/or make investments outside of RRSP.

My gross income for 2010 was 100k, and I suspect that my income for this year will be around 20k less than that, if not more, for this coming year. (There's a small chance that I could be laid off or go through a strike)

I will be topping out my TFSA regardless.

Thanks.


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## the-royal-mail

If labour uncertainty is before you this is definitely NOT the time to lock your money into an RRSP or similar. Keep the cash for a few months until you see what happens. If you go on strike you'll need that cash. Good luck.


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## loggedout

Thanks. I should have added that most of what I have is basically cash already, outside of the RRSP and pension, so I am not worried about that in the context of being without income for a while.


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## steve41

Put it in your RRSP, take the refund. At 100K gross income, I don't see how you can afford not to.


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## Rico

loggedout said:


> Thanks. I should have added that most of what I have is basically cash already, outside of the RRSP and pension, so I am not worried about that in the context of being without income for a while.


I can see why. For example, if you lost your job:

Your expenses are around $2200/mo (from your first post) which includes 250 in gas (commuting I assume). If you're not working, you're not driving as much but let's use the $2200 anyway. One year's living is around $27000. I would guess EI would come into play and it might not take a year to find similar (or other) work? My point is, you have more than enough saved or available (e.g., demand loan to parents) without feeling any sort of cash crunch. So, I think maxing the RRSP is an easy choice.

What are your thoughts about investing in real estate/property? Do you plan to rent even into retirement? What is your plan for retirement (when, where, what does it look like to you?). Lastly, are you having at least some fun with a bit of your money here and there?


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## NLOIL

*Loggedout*

Interesting post.....basically what I take from reading this post is that you need to do alot of reading.....read everything you can on investing.....some people say nay to the stock market, but everything we do in life revolves around the market, so one might as well learn how to profit from/within it, as opposed to it......Loggedout said, "oh well" in regards to having purchased shares of MCD outside of an RRSP.....and you said you purchased shares of those three companies so that the money wouldn't be doing, "nothing."

No offense, and I could be reading into your post way too much, but your attitude toward investing is exactly the kind of attitude that gets people burned and then they turn around and tell others to avoid the market.....

Investing in MCD outside of an RRSP in canada was not just a rookie mistake, it demonstrates your lack of knowledge in regards to investing.....

Don't get me wrong, I'm not harping on you personally, but you must read everything you can get your hands on BEFORE you start investing.....if you had, a mistake like that would have been avoided. You also didn't mention at what cost you purchased those shares.....value investing is a strategy all in itself, to buy a great company at a good price makes all the difference.


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## loggedout

NLOIL - You are right. To be honest I don't think I can put into the amount of time and focus it takes to be a knowledgeable investor. I've tried reading books here and there, but it just doesn't stick. For instance, all of these tax rules require so much "memorization" for lack of a better word that I don't particularly absorb it very well, even if I have read it (which I probably did prior to investing in McD's but forgot at the time I pulled the trigger, now that it's been pointed out as a mistake, it does stick, lol), especially because it's particularly dry material to begin with and to me, and doesn't follow logic and/or any physical laws to deduce them from first principles. How can one read "everything" anyway? I realize that it's a cop out, but it's overwhelming to me which is probably why I had avoided investing for so long any way.

My attitude towards investing in stocks is like the same one I have for sports betting, and it is to never take huge risks, bat for singles not HRs, & never invest in anything that I could not afford to lose entirely. With the McD stock, it was going for a shade under 73 at that time, and I knew it wasn't a great value but didn't think it would lose significant value (which it hasn't), and at worst, it'd be just a tad worse than keeping the money under my pillow. 

I would never give anyone advice on investing. It will always be outside my scope of expertise so I know what my limits are.

And to answer Rico's question on ever thinking about investing in RE. Thought of it, but don't think I am cut out for it. Renting suits me fine, because it's a lot less hassle and is easier to get out of. I believe it's less risky than owning.


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## Sampson

the-royal-mail said:


> If labour uncertainty is before you this is definitely NOT the time to lock your money into an RRSP or similar. Keep the cash for a few months until you see what happens. If you go on strike you'll need that cash. Good luck.


While I don't disagree with these statements in principle, I do disagree considering the OP's position.

OP has the ability to make the maximum RRSP contribution AND maintain 3 full years expenses in cash. If the OP gets laid off and can't get a job after 1-2 years... well, then something has really hit the fan.

@OP, one thing that hasn't much been discussed are your goals. If you have mentally earmarked your cash for retirement and don't have more pressing needs for it, then absolutely you should fully take advantage of maximizing your RRSP contribution.


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## NLOIL

*Loggedout..*

Loggedout.....overall you are in a solid financial position.....to further our discussion, you don't need to be an expert to proper from investing. My final suggestion would be one of strategy....1) talk to a professional certified fee only financial advisor, see what they have to say....it would be worth it. 2) do it yourself, follow a couch potato strategy, there are a lot you can research using google....place the international and US dividend paying ETF's in your RRSP, place the dividend paying Canadian ETF's in your TFSA....

I would also advise you place at least 20K of your savings into a high interest savings account, such as Alley.ca at 2%.....that's safe easy to access cash.

As far as "fixed income" goes, and it's part in your allocation of your future portfolio....for now, don't worry about it.....when interest rates run up in the future, go to your bank, or your RRSP investing account and buy a laddered fixed bond/GIC with a minimum 2K for each of 5 years......

Presto, your off and running, check in once a year or two with that planner, and your good to go.


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## loggedout

NLOIL said:


> Loggedout.....overall you are in a solid financial position.....to further our discussion, you don't need to be an expert to proper from investing. My final suggestion would be one of strategy....1) talk to a professional certified fee only financial advisor, see what they have to say....it would be worth it. 2) do it yourself, follow a couch potato strategy, there are a lot you can research using google....place the international and US dividend paying ETF's in your RRSP, place the dividend paying Canadian ETF's in your TFSA....
> 
> I would also advise you place at least 20K of your savings into a high interest savings account, such as Alley.ca at 2%.....that's safe easy to access cash.
> 
> As far as "fixed income" goes, and it's part in your allocation of your future portfolio....for now, don't worry about it.....when interest rates run up in the future, go to your bank, or your RRSP investing account and buy a laddered fixed bond/GIC with a minimum 2K for each of 5 years......
> 
> Presto, your off and running, check in once a year or two with that planner, and your good to go.


Thanks NLOIL. Good advice. I am just curious if there's a financial advisor version of ratemymd/teacher type sites?

As for moving my savings to ally. i've done that. my assets look more like this now:

66k in ally savings account
80k loan to parent
8k in chequing account
17k TFSA
17k stock (non-registered)
47k RRSP
60K Pension
-----------
295k


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## trillian

Kudos to you LoggedOut! You are doing really well at such a young age. 

I was (am) in a similar situation as you. When I turned 31, I went through a divorce and found myself living alone for the first time in my life. I knew nothing about finances (except saving (~235k)) and seeked help from some financial advisors at my local bank. They made me feel inadequate and uncertain and wanted full control over everything I had saved. I'm a little distrustful of other people having full control over everything. I wanted to go slow but they wanted at least half of my money invested in mutual funds. I told them no, and I started on my own quest to learn everything. I read and read and read. I can relate to your feelings of being overwhelmed and not fully grasping everything I read. But KEEP reading. The more I read, the more things sink it. I read for a bit until I feel overwhelmed, and then put it on hold, and then pick it up again in a few months. 

I still feel a bit inadequate but I've slowly got my feet wet in buying some bank stocks, bonds, gics, and high interest savings account. I'm currently 36 with a net value of 395k.

I'm thankful for you writing this post as I'm interested in all the advice you have been given. But please don't get too overwhelmed. Just read as much as you can and experiment. Like myself, you seem risk adverse, so your experimentations will most likely be very conservative, so learn! You are obviously doing SOMETHING right as many people our ages are still paying off school and consumer debt. Be proud of your accomplishments but keep saving and keep studying!


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## loggedout

It's been a while since an entry....

I'm trying to figure out a Plan B in case of being laid off, or if I decide I need a career change. Given recent events, I'm not feeling too excited about the job prospects of an electrical engineer with mostly nuke experience.

One option is going back to school, so I was trying to figure out the opportunity cost of going back to school, and I came across this calculator by Ivey MBA: http://www.ivey.uwo.ca/mba/finances/optcost.htm

I punched in my current wage (85k) and it spat out that Total Cost (Program Costs + Lost Wages):

Ivey $181815
Rotman $313936 
Harvard $376100 

http://www.ivey.uwo.ca/mba/finances/optcost.htm

Looking at average salaries for MBA grads (70-100kish), as well as job prospects, this doesn't seem like a wise investment.

Am I missing something?


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## loggedout

My employer is re-structuring and there will be a major reduction of staff. I'm part of a union and so layoffs will follow seniority rules and I likely will not get laid off but I am considering taking a voluntary layoff settlement, as it's equivalent to 50% of my salary (70%, if I include unused days off paid out) before taxes ... 

I figure if I can come up with a job that pays at least as well within 6 months, I'll at least break even in comparison to staying. But it's hard to assess the job market, and I don't have a lot time to make a decision.

Also, I'm not sure how EI will work though having never been unemployed though...

Any advice?


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## MoneyGal

EI will likely kick in after your package has been exhausted. 

The good news is you have (potentially a lot of) time to find something new if you take the offer. 

What do you think you need to do in order to make a decision? If you are "tempted" to take the offer, that's probably a sign that you should consider the offer seriously. 

If you had no money worries, and knew that you would never have to worry about money again, what would you choose to do? (That's just trying to get what you want to do. You add the money worries back in later.)


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## MoneyGal

loggedout said:


> I was trying to figure out the opportunity cost of going back to school, and I came across this calculator by Ivey MBA: http://www.ivey.uwo.ca/mba/finances/optcost.htm


Two things missing from that calculator:

1. Relative security of jobs with/without the education. Will the education make you MORE employable, or not?

2. Expected raises in current career path vs. with education. Will the education provide you with MORE and/or FASTER raises? 

Try this one: http://www.qwema.ca/calc/education.aspx


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## loggedout

I thought I should revisit this post since it's 2017 and I still have no idea what I'm doing....

I'm 37 now, and I have been through a myriad of jobs since the original post. Tried my hand at a different career path while remaining in the same industry. I landed one of the most coveted entry level jobs in the province, which required me to take a 40% paycut as an engineer, to work shift as a field operator at a power plant, then after a few years decided that wasn't for me due to lack of opportunities, and have gone back to engineering with a private consulting company that does work for said power plant. This maybe an all-time worst career move....sometimes I'm such an idiot.

Anyhow, since the original post I also got married, have a mortgage, no kids yet, and still feel lost with respect to my financial situation. We've set a goal to retire at 55 .... is it achievable?

Monthly income (after tax): 10k 
Monthly expenses: 6.5k

Assets (887k):

600k home
20k cars

170k RSPs mine
20k RSPs hers
40k TFSA
17k non-reg
20k savings

Debts (354k):

325k mortgage, 2.55% var (trying to pay off in 19 years)
21k loan, @ 2.9% fixed, car, will be paid off in 2021
8k loan, @ 4.2 personal, will be paid off in 2018

Net worth: 533k

Pensions:

I have retained a public service DB pension from a previous gig, that is indexed for 1k/monthly at retirement
And I'm going to start contributing (9.5%) to another one (DB pension) with my new job so hopefully that will be worth something at some point if pensions aren't destroyed by the time I get to retirement


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## lonewolf :)

Loggedout complacency is dangerous in the financial arena. Fear reading VIX when shows lack of fear investors in the future are about to be burned.


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## loggedout

Lonewolf, I don't understand what you mean. Are you anticipating a massive market downturn?


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## Mukhang pera

loggedout said:


> Lonewolf, I don't understand what you mean. Are you anticipating a massive market downturn?


Y'er not alone there logged. That was a rather opaque bit of prose offered in response to your post.


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## Spudd

Since you have enough savings to pay off that 4.2% interest loan right now, I would go ahead and do it. But I'm debt-averse.


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## humble_pie

logged there's no doubt but that you are doing well. To an outsider, at a distance, the career & the finances & the personal evolution (family) look great. There you are, doing critically important work that's vital to the prosperity of your province as a nuclear engineer. Some day you'll be able to find a position where you can tweak the terms of service to mean max satisfaction to yourself.

re the financial history since you joined cmf forum 7 year ago, if one puts this on a chart one sees a lot of volatility but the overall trendline is steadily up.

there's a bit of a problem though. That trendline isn't rising quite as high as it should.

we can see that the pension value isn't included in your list of assets, this inclusion would certainly push the asset growth line higher. But perhaps still not quite enough.

you've mentioned that present expenses are running around 6.5k, while net takehome is 10k, ie you have an extra $3,000 or more each month to boost the investment savings.

thoughts that come to mind are a) pay off the personal loan immediately, & b) build both your own & your wife's TFSAs to the max limit. You might have to develop an allocation plan for TFSA investing. For starters, since both existing TFSAs are relatively small, myself i would keep US securities strictly away from them. I'd put US securities in RRSP, as so many others do, since the foreign taxation consequences in RRSP are more favourable.

best wishes for the 55-retire.


.


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## redsgomarching

10k income per month.........................must be nice.


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## loggedout

humble_pie said:


> logged there's no doubt but that you are doing well. To an outsider, at a distance, the career & the finances & the personal evolution (family) look great. There you are, doing critically important work that's vital to the prosperity of your province as a nuclear engineer. Some day you'll be able to find a position where you can tweak the terms of service to mean max satisfaction to yourself.
> 
> re the financial history since you joined cmf forum 7 year ago, if one puts this on a chart one sees a lot of volatility but the overall trendline is steadily up.
> 
> there's a bit of a problem though. That trendline isn't rising quite as high as it should.
> 
> we can see that the pension value isn't included in your list of assets, this inclusion would certainly push the asset growth line higher. But perhaps still not quite enough.
> 
> you've mentioned that present expenses are running around 6.5k, while net takehome is 10k, ie you have an extra $3,000 or more each month to boost the investment savings.
> 
> thoughts that come to mind are a) pay off the personal loan immediately, & b) build both your own & your wife's TFSAs to the max limit. You might have to develop an allocation plan for TFSA investing. For starters, since both existing TFSAs are relatively small, myself i would keep US securities strictly away from them. I'd put US securities in RRSP, as so many others do, since the foreign taxation consequences in RRSP are more favourable.
> 
> best wishes for the 55-retire.
> 
> 
> .



Thanks Humble Pie. I am not sure about my career now because I am changing jobs again. It?s filled me up again with a lot of uncertainty. I know you are supposed to make a decision and not look back but I am second guessing myself at this most recent decision. I had a guaranteed job until 2024 barring catastrophe but gave it up for a better schedule (no rotating shift schedule), working conditions, and higher base pay (with shift premiums, it?s a wash long term) but may be a bit more risky job security wise (or not?). I guess that?s a fact of life though. Nothing is guaranteed.


As for paying off that personal loan at 4.2%. It?s my wife?s to pay off, which she has steadfastly been doing since we were married. Now she is planning to pay it off by the end of this year when she gets her commission rewards. 

One part of the equation that muddled my financial outlook is what to do with our aging parents. Both sets are independent right now but we are planning on hers to perhaps live in a rental property that we purchase on a HELOC, a bungalow, so that we can have them paying rent to us along with another renter in the home and lower their cost of living and they can live off the $ they make from the sale of their existing property. Ideally they can do this themselves, with a very small, cheap bungalow so we would not be involved but those aren?t easy to find. 

I haven?t put $ into the TFSA for years because I had to purchase my own home, etc. But it looks like I should get back to it with increased savings. I have limited RSP room now because I am thinking of transferring my last jobs DB pension into it (only 3 years of work - which I included in my RSP numbers above. That is the best thing to do right? 

The last pension I left in the pension because the amount outside of tax limits was too much shelter in the RSP and I would have had to pay tax on the cash portion. At the time I left that position, the transfer value was 180k and it was indexed to pay out $1k monthly at retirement. Figured it was worth holding on to especially since it was federally backed. 




redsgomarching said:


> 10k income per month.........................must be nice.


It?s household income. We live in the GTA so it may be slightly above average. We are lucky though.


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## lonewolf :)

loggedout said:


> Lonewolf, I don't understand what you mean. Are you anticipating a massive market downturn?


 If your complacent in regards to your finances you will not do well financially


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## peterk

redsgomarching said:


> 10k income per month.........................must be nice.


He said net, don't forget. Be sure to increase your envy by 30%...


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## redsgomarching

peterk said:


> He said net, don't forget. Be sure to increase your envy by 30%...


increased by 100% haha I want to get there. Combined me and my gf are around that but to get there on one's own is something else.


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## humble_pie

.

logged overall you seem to be doing very well & i respect all the accomplishments; the fact that i'm back with a couple little niggling suggestions should - hopefully - be seen in this context. They are only small suggestions.

first re the job. Sometimes an opportunity to vent certain frustrations over a current place of employment is helpful, this might be what you are doing here. Certainly there are not very many cmffers who can help with career comments based on actual experience as nuclear engineers running power plants ... :eek2:

one takeaway from your thread is that your career history is ... shall we say ... lively. Successful but there always seems to be a catch to each new job. Perhaps this unease is the grain of sand that produces the pearl.

in any event, in my view this makes it doubly important for your investment/savings career to be reliable, stable, consistent ... shall we say ... conservative. So that gradually you & your wife are building some kind of bedrock, even if the career happens to wander a bit.

re your wife's small loan: you originally marked this to be paid off in 2018. Now you've adjusted to 2017. Hopefully it'll be 2017 or soonest, even if you have to casually lend her cash grocery money over the kitchen table.

is the $40k indicated for TFSA for yours alone? or for both? TFSAs are wonderful savings vehicles with the ultimate in zero income tax advantages. You have a high enough income to really build these up; it's possible that with your lively career history you have simply not had enough time to think these through.

now comes the hard part. I am baffled by the choice of a "small, cheap bungalow" to rent to aging parents as an investment strategy. Unless you are very, very, very good at a) emergency home repairs, b) home renovation & maintenance, also c) caring for parents who are aging under the home roof, so to speak.

the ultimate worrisome detail is the reference to "another renter in the home." One has to wonder, Whose home? is this renter to be crammed in with the aging parents in the small cheap bungalow? surely it's doubtful that this arrangement could work out. 

plus if this set of parents are still strong enough to maintain their independence in a bungalow for several years to come, then why would they not use the funds from the sale of their existing larger home, to purchase the new, smaller, cheaper bungalow themselves?

in any event the 'rents-in-law are going to have to invest some or all of the funds from selling their existing home. Creating this investment plan is already a whopping challenge in today's sky-high-market-prices-low-interest-rate environment. 

overall, i believe you have enough real estate investments with your own house at the present time. The next logical step seems to be - to me anyhow - to build up the tax-free accounts. Adding cash to a 2nd HISA TFSA at a financial institution like tangerine - which will permit transfers out with no fee - could be a good way to temporarily build a TFSA account while making plans for long-term TFSA investments.


.


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## Eclectic12

humble_pie said:


> ... Adding cash to a 2nd HISA TFSA at a financial institution *like tangerine - which will permit transfers out with no fee* - could be a good way to temporarily build a TFSA account while making plans for long-term TFSA investments.


Tangerine's FAQ says that transfers have a $45 fee. 
https://www.tangerine.ca/en/faq/saving/tfsa/index.html

TFSA withdrawals, I believe have no fee.


The transfer fee is why some will choose to move $$ from one TFSA to another TFSA by making a late Dec withdrawal then an early Jan contribution. The benefits are:
a) avoiding the transfer fee
b) keeping the time the $$ are taxable short (can be a week or less)
c) eliminating the possibility of an over contribution that triggers penalties ($5K withdrawn adds $5K of contribution room when Dec becomes Jan)



Cheers


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## Eclectic12

loggedout said:


> ... I have limited RSP room now because I am thinking of transferring my last jobs DB pension into it (only 3 years of work - which I included in my RSP numbers above. That is the best thing to do right?


Question is ... will any of your RRSP contribution room be needed?
Have you received a letter spelling out whether the proceeds from leaving the DB pension will need to use your RRSP contribution room?

The last two DB pensions that I transferred went directly into a LIRA with none of my RRSP contribution room being used up. 

Further, the pension adjustment reversal (aka PAR) gave me back thousands of dollars of RRSP contribution room.


> PAR is used to restore an individual's RRSP room when a member terminates their membership in a benefit provision of a registered pension plan or deferred profit sharing plan (DPSP).


https://www.canada.ca/en/revenue-ag...trators/pspa/pension-adjustment-reversal.html


Cheers


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## loggedout

My understanding is when exiting a dB plan a certain portion can be transferred within tax limits to a LIRA and an additional portion, should there be any, is taxable. I have received a letter from my former employer?s pension plan management company that of a total 48k transfer value, 32k can be transferred to a locked in retirement arrangement and that 16k is the cash amount. So if I elect to exit the plan, I need to put 16k into an RSP to shelter it from taxes. Is that an incorrect understanding?

The last time I considered exiting a plan and having the amounts transferred into another plan, the LIRA portion was 100k but the taxable cash amount was 80k, so I elected to keep it in the plan.


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