# My journey at age 24, OSAP loans finally paid off



## dude_smile

Hello everyone, I have been following this forum for a long time and am looking to share my journey with everyone, and hopefully seek some advice. I am currently 24 and have just finished paying off my OSAP loans (18xxx). Now that I am dept free, I am looking to hit some of my life goals. Right now my fixed expenses I think are pretty low, but there are a couple purchases I’m looking to make that would change that. 
I currently work a government job (OPS) making 1750 bi-weekly after taxes, and that includes my pension contributions to the Ontario Public Service Employees Union Pension Plan. 
My fixed Expenses monthly
-Rent 450 (to my parents)
-cell phone 50
-car and motorcycle insurance 250
-gym membership 40
-yoga membership 100
TOTAL 890

Variable Expenses monthly (averaged from past 6 CC and Bank statements)
-Gas 260 (gas guzzling SUV)
-clothing 80
-bars/alcohol 115+any cash spent out
-groceries 80
-enjoyment, restaurants and eating out, and others 280 (includes things like Wonderland, movies, concerts, etc, I also had hygiene products, books, and things that didn’t fit into any other category into here)
TOTAL 815
COMBINED 1705 
Now this is my total amounts spent averaged out in the last 6 months, not including what I used to pay off student loans and what I used in cash to pay. 
ASSETS
Chequings- 6500 (have to keep a minimum of 5000 to save annual fees on CC and debit at TD)
TFSA 7000
General Savings- 5500
Rainy day Emergency Cash 1000
TOTAL 20 000
I realize all the money in my general savings and chequings accounts are both a waste and not getting any return, however I am currently looking into a large purchase that I will explain below. 
My goals- To get out of my parents house ASAP, either by renting or owning. I live in Toronto, so owning something is difficult as the market is just ridiculous. 
-new vehicle. Currently looking at purchasing a Lexus Ct200h used, approximate cost 28xxx. (why my money is currently tied in my general savings)

Now looking at my budget and earnings as a whole, I am currently saving more than 1700 dollars a month on average towards my goals. I realize I have some poor spending habits, especially towards restaurants and my night life, however I am ok with those at this point of my life and believe that I need enjoyment in my life, especially with the stressful job that I work. I’m looking for advice towards my two major purchases in the future. 
CAR- I need a new vehicle, as mine is getting high in KMS (250xxx km). I like the reliability of the Lexus as well as the gas savings of it being a hybrid. 
HOUSE- now I can either rent, which in my area would most likely cost 800-1000 with a roommate, meaning an addition fixed expense of 350-550, plus the costs of utilities and cable/internet, plus more money in groceries. I can suck it up and live with my parents, and possible buy a condo in 2-3 years. 

Sorry for the extremely long post, and thank you for reading. Any advice would be fabulous!


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## Ag Driver

Well done on the current assets and situation! We are the few and far between in our age bracket that manage to be debt free and with a fair amount of money in the bank. I am similar in age and situation ... however there is one glaring thing that I would modestly suggest.

Personally I would not waste $28k on a vehicle! I try to avoid going into debt over wants. You may need a car, but you do not require a luxury vehicle. As that is a want vs a need. Pay cash for wants! I too want a nice car -- In the past I have also looked at that very Lexus you want (...in black). Having said that, I will still choose a vehicle in the 5-10k range vs 20-30k range. At this point in time, that extra 20-30k for eye candy can be used much better elsewhere. You can get a very reliable car in the 5-10k range (arguably even lower). Try to pay cash for all vehicles! If you don't have the cash for a high end vehicle -- you "can't" afford it (or should not be going into debt over eye candy.) Merely my $0.02!

I do have one question -- who the heck are you insured with for your motorcycle? That rate seems ridiculously low.


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## dude_smile

Thanks for the reply Driver. The vehicle situation is something that goes thru my mind almost everyday, do I pull the trigger and buy it or suck it up and buy something cheaper. Thanks for your 0.02 on the situation, and I will keep that in my mind. Your right that it is "eye candy", however I try and justify it by telling myself "It's a hybrid" and "reliable as its a Lexus." I realize these are not the best arguments, but I want the car SO BAD. 

Check out Statefarm for motorcycle insurance. If you group your car and bike insurance together, you can often get a great rate. They take into consideration your driving history more so then Bike history(I believe 5+ years is sufficient). I also drive a sport touring bike, so it's not too bad.


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## SpendLessEarnMore

Unlike most other motorcycle insurance companies statefarm usually goes by the CC's. They are also known to be difficult getting insurance for anyone under 25 unless they have 5+ years of car driving history. Anything less than 500 cc's pays about the same. They were my first insurance company for both my car and motorcycle. Than I went to Jevco but I think they don't exist anymore. At one point I had 3 motorcycles and a car insured simultaneously. Talk about being frugal lol.

In Alberta my 250 cc scooter is just $100/year while in Ontario I was paying 5 times that.

Well you're turning 25 soon so your insurance rate should nose dive a lot.


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## jamesbe

Good job for sure!

Regarding the car. yeah it's a Lexus so you really are paying for the eye candy here. The car is identical to a Prius which is arguably more reliable and would save you $10k but it doesn't look as "cool".

You are 24, I understand the want for the cool car -- been there but couldn't afford it . It seems the new generation wants everything their parents have NOW, realize that they didn't have the Lexus probably well into their 40's-50's when they could afford it, if they ever could.


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## My Own Advisor

Almost 40 and still want a cool car!

I might go big in a few years and splurge on a Hyundai


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## MoneyGal

How would your parents feel if you bought the Lexus? 

You are financially dependent on the situation they've extended to you, in that your current financial well-being (ability to save and spend as you have been doing) is possible as a result of the generosity they are providing. 

Is your continuing to live with them conditional on you building financial independence? 

If yes, would buying a new car affect how long you can stay living with them?


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## tygrus

You first need to undertand what good debt is and what bad debt is before you go on the next phase of your life. You are already poised to make a wrong choice by getting all horny over a lexus. Car is just a way to get around...period. Its depreciation factor makes it the poorest place to ever put your money. You need to learn about return on money.

On top of that, your parents are subsidizing you to the tune of about $1000 bucks a month. Real rent in any major city is over $1000 and a monthly food budget for a single person is easily $300 buck a month.


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## dude_smile

Thanks for the good advice everyone. I see your points on the car and am starting to realize how bad of a purchase it is. However my question is where do you draw the line. The same can be said about a thousand dollar suit for work vs a hundred dollar one. Or that 10 dollar watch that tells time almost as good as the thousand dollar watch. 

I think I'm going to hold out on the car until my car starts to have some more serious problems. I am going to look into saving some more money and putting it into a townhome condo in the Toronto region. It's true that the car is something that I seriously just want but have no need to get.


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## tygrus

Find a DRIP calculator online, put your downpayment on the car in as your principal and your monthly payments in as monthly contributions. Then run the calculator for 5-7 years or the life of your car loan. In 5 years your lexus would be worth half what it is now, but your stock portfolio will be close to $50,000 and growing.


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## dude_smile

I have took some time to think about the vehicle purchase, and looked at the DRIP calculator and decided that a vehicle purchase would not be in my interests to purchase with my long term goals in mind. 

With this, I have approximately 15 xxx that I could invest. I am looking to hold onto 5000 of that, as well as the 5000 I have in my chequings account. I have recently opened a RRSP that is going to withdraw from my paychecks, however I am having some trouble deciding what I should do with my current cash. I am contemplating between using my cash from my TFSA and invest into TD E-Series, or potentially into some stocks. I don't like the returns on the GICs I was offered, as my PC financial high interest account gathers me only a little less return. 

What are your thoughts, keeping in mind that I would like to purchase a town home or condo in the next 3-5 years. My uncle suggested that because I have a defined benefit package with the government and a very stable job, that I could take some risk in my investments. I am fairly new at this and would love any feedback.


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## the-royal-mail

I feel that if you are going to need the money within 3-5 years that you should NOT concern yourself with investing at this time. You certainly seem to be off to a good start and I do understand your desire for that car. I disagree with buying RE but if that's what you really want to do then you may as well just keep your cash in GICs for the next few years. You will be going through a lot of changes and will need those funds. The time horizon is too short and you could end up selling your investments at a loss if the market is down at the time you want to buy house in 3-5 years. Cash balance in TFSA pays 1-3% depending on who you are with and the money can be accessed at any time without penalty.


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## MoneyGal

What he said. If you want or think you might need the funds in five years or less, these are not "investments" and should not be exposed to market risk.


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## andrewf

+1 on saving in GIC or savings account. Use RRSPs (up to $25k) and TFSA, and just hold GICs/savings. Especially if you want to buy a house ASAP.


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## dude_smile

@the royal mail, why do you disagree with buying real estate? is this a general belief you have or one for my situation?


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## the-royal-mail

I generally advise against buying RE when the threads are from young, single people who are just getting started. In other cases the individual seems very hot and bothered to do it as some sort of fail-safe investment. I believe your case is the former. I think everyone should move their way up. In your case at 24 it is a high time to move out on your own but that doesn't mean you need to jump head first into a locked-in RE situation. I believe you should start out by trying to find yourself a nice apt somewhere and then work your way up. Housing costs are at historically high levels right now and most of that money is going to pay property taxes, condo fees, RE fees of 4-6% when you sell, land transfer tax and on and on. You would be feeding those middlemen and end up with empty pockets at the end of the month. It's either pay them or pay a LL and since it is harder and more costly to get out of RE when you need to move/sell, in your situation it is better to start out with something that doesn't have you quite so tied down.

Then in 3-5 years, when you have 20% DP saved up and have been on your own for a while, if you still want to buy at that time then you'll be in a much better position all around.


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## MoneyGal

What he said. 

When you are young, your largest asset is the non-tradeable, non-cashable value of your future earnings. It doesn't make sense at that point to take your limited financial capital and dump it into another large, non-tradeable (except with significant friction), non-diversified asset. 

Build up some financial capital first, which takes time -- but gives you options.


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## Max

A kind of sidebar here, but have you added up all the disbursements from OSAP and compared that with the first statement they sent you? I remember back around 2006 coming out of school in Ontario that there was a big difference. The reason? Remember that 6 months "grace period" they give you after you graduate... The loans are actually accruing interest during this time, the grace period is only for payments. Then when I got my first statement, it showed opening balance including all the interest accrued during the 6 month grace period, and on the annual interest statements for tax purposes, they never included this additional interest.

I paid off my student loan within 1 year, and reconciled carefully all the statements of interest from OSAP against actual cash flows, and the difference was exactly the amount of the grace period interest accrued. For my own situation, I claimed this additional hidden interest on my tax return, fully prepared to argue with the CRA that, but they accepted it without argument (whether by luck or because I was right, I don't know). Since interest is only deductible on a cash basis (when paid), the problem arises for repayment over multiple years of how to determine when this grace period interest was paid, but I did not have this problem.

Anybody know more details about the 6 month grace period interest on OSAP? Is there something in the income tax act that says this is not deductible? Otherwise, I would recommend the OP to take a closer look at past statements and possibly get some extra cash from the additional deduction. Most of the interest paid over the life of the loan originated from this initial ramp up as interest accrues without any payment.


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## dude_smile

Hey Max, thanks for the message. I was able to pay off my students debts within the 6 month grace period, and when I checked it does not appear that I accrued any interest. Thanks


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## peterk

Max said:


> Then when I got my first statement, it showed opening balance including all the interest accrued during the 6 month grace period, and on the annual interest statements for tax purposes, they never included this additional interest.
> 
> For my own situation, I claimed this additional hidden interest on my tax return, fully prepared to argue with the CRA that, but they accepted it without argument (whether by luck or because I was right, I don't know).


Thanks for the tip there max. I noticed the same thing. The accrued interest is rolled into the total loan and it is all stated as "principle" when the loan goes into repayment after the 6 months.

I'll be taking care of this for next year's tax return. Did you itemize the accrued interest separately from the actual interest (that you received a receipt for) or just lump it all together on your tax return? Did you send the OSAP paperwork showing the accrued interest or just complete the return unsupported?


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## Max

I believe I just sent copies of the supporting statements, but on the return claimed it all together. If you want to list it separately that is a good idea. The big debate is with the determination of when this accrued interest is considered paid, since tax deductibility of the interest is on a cash basis. Since I paid it off within one year I was able to claim it fully and not worry about the reconciliation of the accrued interest to paid interest. I would try and review with somebody about this as I am no tax expert, but in my opinion, I don't see why it would not qualify. Better to wait until the end of the loan before claiming the hidden interest so you can be sure it has met the cash basis test, or consult further on how this should be treated.


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## peterk

I've also paid my loan off within a year, so I don't think there will be a problem. Thanks Max, you saved me about $50!


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## dude_smile

I guess my thought process has been a little different to others. I was taught (by my parents) that renting a place was a waste of money, as we were virtually paying another person's mortgage for them. My sense was, if I could afford a small condo (bachelor or studio, 200-250k), it would be better than putting up about 15k a year into housing that has no return value? Am I getting it all wrong?


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## the-royal-mail

You are the victim of rhetoric, yes.

The way to look at it is basically to compare the numbers. There are threads around here from people who cannot sell their condos for what they think they are worth. So you need to consider (as I explained in my last post) the cost of condo fees, property taxes, land transfer taxes, interest, legal and RE fees when you go sell the place. Don't disregard any of those costs as they are significant. Also, consider the cost of your condo if interest rates rise, which they have already started to do. You will quickly see that you will be spending more money every month to live in the same type of dwelling. Sure, you will get some back at the end, depending how long you live there, or you may even take a loss. You don't know. It's not guaranteed and the risk is all on YOUR shoulders while this is a winning formula for all those middlemen. You could also have trouble selling when you move, which will cost you money as well.

Apts OTOH allow you tons of flexibility, esp if you can get into a month to month rental arrangement and can find an apt you enjoy living in. They're not all dumps but the newer, nicer ones cost more.

So, pay someone else's mortgage or pay the long line of RE middlemen. Your choice.


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## Spudd

Buying is a good investment if you plan to stay for >5 years. If you buy a bachelor/studio condo you'll probably want to sell it in a few years if you get married and the transaction costs are high in selling real estate. I would recommend renting until you know you'll be staying for >5 years in whatever place you buy.


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## andrewf

dude_smile said:


> Am I getting it all wrong?


Pretty much. You either rent money, or you rent a house. Either way you're renting.

The key is to save money, whether that be in principle repayment on your mortgage and/or building up RRSP/TFSA/nonreg savings. Otherwise you should pick the housing solution that makes financial sense and fits your needs. Buying a home is by no means always the best option. It's a 'rule of thumb' for people who can't do financial analysis.


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## dude_smile

What are your thoughts on preconstruction townhomes in Toronto? With only an intial deposit and than deposits in set time limits, I could save money while not being bogged down on a mortgage?



andrewf said:


> Pretty much. You either rent money, or you rent a house. Either way you're renting.
> 
> The key is to save money, whether that be in principle repayment on your mortgage and/or building up RRSP/TFSA/nonreg savings. Otherwise you should pick the housing solution that makes financial sense and fits your needs. Buying a home is by no means always the best option. It's a 'rule of thumb' for people who can't do financial analysis.


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## blin10

you also need to keep in mind you in your 20's once in your life... lexus is financially a bad idea, but if you want it SO bad then you'll be paying to stay happy, I bought 60k cars in my 20's and I would never change that... just balance your expenses and savings and you'll be alright


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## YYC

dude_smile said:


> What are your thoughts on preconstruction townhomes in Toronto?


And then when you move in in 2-3 years when it's finally built, it's already worth $30,000 less than you paid for it... or more. Pre-build contracts are super risky right now and I would stay as far away as you can. I agree with the other posters that buying real estate is likely not a good idea for you right now, but if you must, this would be the absolute worst way to do it. Do some research on the overbuilt condo market around Toronto and I think you will find it easy to stay away from it.


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## dude_smile

So its been four months, and within this four months a bit has changed. I took a job transfer, and I am making approximately 1950 bi-weekly, however with shift premiums, I often have stay and do overtime, my paychecks have been over 2000 for the past 3 months. This has significantly helped me save, however I did end up moving out and renting a place. 

My fixed Expenses monthly
-Rent 1000 (shared condo with a roommate,inclusive)
-internet/cable (50
-cell phone 50
-car insurance 180
-gym membership 40
-yoga membership 100
-parking 125
TOTAL 1545

Variable Expenses monthly (averaged from past 6 CC and Bank statements)
-Gas 120 (gas guzzling SUV)
-clothing 60
-bars/alcohol 145+any cash spent out
-groceries 60
-enjoyment, restaurants and eating out, and others 300 (includes things like Wonderland, movies, concerts, etc, I also had hygiene products, books, and things that didn’t fit into any other category into here)
TOTAL 685
COMBINED 2230

ASSETS
Chequings- 6500 (have to keep a minimum of 5000 to save annual fees on CC and debit at TD)
TFSA 9500
General Savings- 5500
RRSP 4500
Rainy day Emergency Cash 500
TOTAL 26 500

I have also realized that I will not be buying that Lexus, and how ridiculous it was for me to want it. I thank those on the forum who showed me that. I work with a lot of people who are on the sunshine list (100k plus), which for many is very good living. However, so many of these individuals are stuck constantly working Overtime to pay for their debts and needs, and I just realized I do not want to be in that boat. Any suggestions for me? By moving and taking this transfer, I pay much more in rent and parking, and seem to spend much more money going out as I live downtown. However, its a much better lifestyle for me.

*edit-I also had to sell my motorcycle. I couldn't justify having one downtown.


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## Janus

dude_smile said:


> I have also realized that I will not be buying that Lexus, and how ridiculous it was for me to want it. I thank those on the forum who showed me that. I work with a lot of people who are on the sunshine list (100k plus), which for many is very good living. However, so many of these individuals are stuck constantly working Overtime to pay for their debts and needs, and I just realized I do not want to be in that boat. Any suggestions for me? By moving and taking this transfer, I pay much more in rent and parking, and seem to spend much more money going out as I live downtown. However, its a much better lifestyle for me.


It's incredibly fortunate you're figuring this out now and not at age 30. Making more income is never the answer to a spending problem. I'm glad you dodged a bullet by not buying that lexus!


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