# Starting My Journey At 25



## FrugalNotCheap (Oct 17, 2011)

Hello all,

I’ve been a constant follower of the board for the last 2 years and have enjoyed many of the posts/tips/tricks presented by the posters here. Thanks everyone for indirectly helping me get my finances in order.

I’m 25, and currently employed in a Consulting firm, making $50K/year (around 3050/mth after taxes, with another 400/mth after taxes in per diem). I’ve worked hard to get my $25K student loans paid off (as of May), and have since been wanting to get a game plan in place for my financial situation.

I currently live at home with the parents, and contribute around $600/month for groceries/cable-internet/utilities etc. The $600 also covers my car insurance. My financial goals are: to save $40-50K for a down payment on a house in 2-3 years’ time; to start contributing to an RRSP so I can retire comfortably ($1m?) by 55, and to establish an emergency/rainy day fund. 

Of the 3450 monthly income:
-$600 goes to parents along with auto insurance
-$200 is for gas 
-$51 for a gym membership
- $1400 into TFSA account
- $200 into a rainy day/emergency fund 

I really don’t have any other fixed expenses. Luckily, work covers my cell phone costs. This leaves me with an extra $1000/mth, which about 700 of that goes towards extra expenditures like clothes, dinners and outings with the girlfriend, car maintenance etc.

I’ve just started saving, so all I have in assets is a $6500 TFSA account (along with a TV/couch/furniture that I purchased during my first job out of school when I lived away from home). I have no debt, and I pay off my credit card the same month. I know I can squeeze myself to save more than I am, and I’m hoping to get some feedback/advice regarding this.

After December, I will have about 10K in my TFSA account. At this time, here is what I’m hoping to do.
- $1K/mth in a TFSA account (will start contributing this amount to RRSP once TFSA is maxed out)
- $500/mth in an RRSP account
- $200/mth in a rainy day/emergency fund

My bonus at year end should be around 4.5-5K (before taxes), and I’m hoping to put all bonus money into the TFSA account.

I would really appreciate some feedback on how I’m doing and where I could do better. Thanks everyone!


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## KaeJS (Sep 28, 2010)

Hi FnC, welcome to CMF (officially!).

It looks like you don't need any help. You are on the right track. Your weakness is down below:



FrugalNotCheap said:


> This leaves me with an extra $1000/mth, which about 700 of that goes towards extra expenditures like clothes, dinners and outings with the girlfriend, car maintenance etc!


You are living within your means - but you are still spending too much. $700 on nothing? Tone that down a bit.. I know your car maintenance is included, but make it $500 or something.

You'd be surprised how far $200 a month can go, and how much you won't even miss not spending it after the first month.


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## the-royal-mail (Dec 11, 2009)

Sounds pretty good. You have a good plan and are working towards it. The only thing I might question is your goal to have your own house in 2-3 years. While it's good to set goals and save money, I wonder why this needs to be a goal at this time. Are you thinking of starting a family? Are you happy/stable in your job? The house thing is about the only thing I see that you might want to think about while you save for its downpayment. I'm not sure you need to rush in to that right now or in the short term.

But maybe I'm wrong. Tell me more about why you feel this is necessary.


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## Four Pillars (Apr 5, 2009)

KaeJS said:


> Hi FnC, welcome to CMF (officially!).
> 
> It looks like you don't need any help. You are on the right track. Your weakness is down below:
> 
> ...


I disagree - the OPs saving rate is fairly high. Unless, he is in a rush to save faster (ie buy house quicker), I'm not sure there is much point in reducing his "fun" money.

[edit] Forgot to mention that just because the OP can save more, doesn't mean he should.


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## FrugalNotCheap (Oct 17, 2011)

Thanks for the response guys - greatly appreciate the feedback.

@KaeJS - the last few months I've been spending a lot of the 'extra' money on large expenses such as an online course I'm taking ($650 which work will reimburse me for after I complete the course; dental care expenses for Mom which equate to another 400; 400 on a trip to see my extended family at the end of the year). As I don't foresee any other 'large' purchases coming up (other than Christmas), I'm going to try and squeeze another $200/mth into my emergency fund.

@TheRoyalMail - Personally, I'd like to live away from home after the age of 26. I know I can save a lot more money living at home (as I am right now), but I just feel a greater sense of accomplishment and that I can have a more enjoyable time living on my own again. From a career standpoint, one big reason I enjoy working for the company I work for is the flexibility. I currently work at the customer site and not at my 'home base', and the job allows me to work remotely as well. It provides a lot more freedom when deciding where I want to move to, but then again, I've also go to think about where I'll be in 2-3 years' time. I guess there really isn't an urgency to move out, but as the gf and I have been going steady for a year now, it'd be nice not to live at home with the parents when you're in a long-term relationship.

Based on other discussions on this board, I'm seeing that many people lived at home to save up and then ultimately move out around the same time I'm thinking, what has your experience(s) been with this? Do you regret waiting too long/not waiting long enough to move out?


I guess if my savings/financial plan is 'on the right track', my next question is in regards to the investments. Based on my age, goals, and savings rate, what would be a good strategy for my TFSA/RRSP account? I'm a big fan of dividend-paying stocks, and have no problem with a buy-and-hold strategy. My TFSA is currently at TD Waterhouse, so that $29 commission fee per trade is a big bummer. 

From my $6500 in the TFSA account I currently have that split between RY.TO and FAP.TO, with a DRIP setup for both. However, I've been debating between these dividend paying stocks vs ETFs vs TD e-series mutual funds in my TFSA. Any feedback would be great. Thanks!


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## Sherlock (Apr 18, 2010)

But living with the parents and buying a house aren't the only two choices. You can always rent for a few years while you save up a bigger down payment.

I like dividend paying stocks, but since you are currently contributing monthly those commissions will kill you. It would probably make more sense to wait until you've maxed out the TFSA, then buy the stocks in your TFSA with the money. Then buy a few more each year when more contribution room becomes available.


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## KaeJS (Sep 28, 2010)

I don't agree with Sherlock in regards to renting - with the opportunities you have, it would not make sense.

Staying at home for a bit longer makes the most "financial" sense, or

You have a girlfriend and a steady stream of money. After you get some capital built up, you and your girlfriend could go halves on a (_small_) house and maybe get a 3rd party renter, such as someone in the basement. Of course, this would be more work, but it brings the best of both worlds - own place with the girl, and more financially sound than renting.

You said your job is flexible, and in a world where renting costs the same as a mortgage, the only downside to owning a home is maintenance and taxes (and of course, buying and selling). But if you do it properly and get a 3rd party, it should be cheaper than renting.


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## donald (Apr 18, 2011)

Kaejs,he is 25.Girlfriend,25,home ownership together = trouble! Whatever you do dont get into homeownership with a girlfriend @ 25.

Refer to biggest financial mistakes theard lol.


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## KaeJS (Sep 28, 2010)

donald, I _totally_ agree with you.

But, if they are both splitting 50-50, what's he got to lose? He just needs to make sure he keeps his foot down and doesn't let her slip up with her part of the deal. 

And a year is not really a "long" term relationship, imo. I was with mine for 2 years and look what happened!!


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## LBCfan (Jan 13, 2011)

I think you're doing fine, probably better than 99% of your peers.

You're currently saving 200/3400 or a bit more than 5%. If you get a $5K bonus and save it that 15%. Should do you well.

As for the house. I agree with previous posts. Maybe don't risk 1/2 of your equity until you and gf decide to be permanent. As well consider that you are in the consulting biz. Sometimes that means moving. I'd wait until i was sure of my medium term location. If you do well, you may be asked to move frequently in your early career years (and it would probably be a good idea, career-wise, to say yes). Housing markets can be fickle and if you don't stay put for about 7 years, things may not work out as you hope.

Many years ago, I was in a similar position. My immediate reaction was to get my own (rented) place. The main reason was so I could be free of maternal oversight (and gf could have sleep-overs). I realize norms have changed and that may not be a big dea but independence is a great feeling.

You are young, spend some money on youth, it doesn't come back.


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## KaeJS (Sep 28, 2010)

LBCfan said:


> 1. I think you're doing fine, probably better than 99% of your peers.
> 
> 
> 2. You are young, spend some money on youth, it doesn't come back.


LBC has noted 2 important things.

1. It's all about mindset and how you feel. I am doing 99% better than all of my peers, but I don't _feel_ like it. The very few people who have some insight into my financial health think I am "rich", and I think I am poor. I put away almost 50% of my income - steadily - and I am not even happy with that. It's stressful for me. I don't care how well I am doing compared to my peers, I care how well I am doing according to my own principles. Right now, I am suffering. You need to find your balance and what you feel comfortable with. 50% is not enough for me, but it can be WAY too much for some people.

2. I struggle with this one all the time. I am younger than you and people are always telling me (even on this forum) I need more balance, or I need to spend more money. And maybe that's true... but I genuinely feel worse when I spend money. I rather not buy something, just because I know it will affect my finances. Is that OCD or what?! 

But I do know how to have fun - and when I do, I make sure money is not a concern. 

I think of it sort of like going out to dinner, but having water and no dessert. What's the point?

I rather blow $60 on a good dinner and have it once a month as opposed to spending $20 on a "restricted" dinner 3 times a month. 

It kills me when my mom will go out for dinner and order a water... absolutely kills me.


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## FrugalNotCheap (Oct 17, 2011)

Can't believe it's almost been 2 years since I started this thread. I read the forum constantly but totally forgot that I had posted!

I must say THANK YOU for all the active contributors on this board - I have learned a lot from the advice provided by members of this board and it has definitely helped me with my personal finances.

Here is what happened in the last two years (just turned 27):
-Still with same company; Income is now $60K, with another $12-$15K in annual bonuses
- Purchased townhome in the last 2 months
- no longer with girlfriend (am seeing another girl)

*Assets*
Townhouse - $195,000 (just purchased 3 months ago from parents, purchased for $170K)
Cash - $500
TFSA - $3,000 (TD eSeries - Couch Potato)
Non-Reg Mutual Fund Account - $12,500 (TD eSeries - Couch Potato)
Company Pension (Manulife) - $9,400
Company Stock - $2300 (with another $3500 of company matched shares that don't vest until 2015)
TOTAL : $222,700 (as of today)

*Liabilities*
Mortgage - $135,000

TOTAL: $135,000

*Net Worth: $87,700 *

Since my original post, I was able to achieve my goal and save $55K. I then purchased my parents' townhome at a discount (they are relocating elsewhere). Ideally, I would like to rent this townhome out, and get another house within 2 years' time.

Here is my expenditures each month:

Income: ~$3550 after tax/premiums/pension contribution (not including bonus)

Mortgage Payment: $590 ($295.22 semi-monthly)
Property Tax: $175
Condo fee: $225
Cable/internet/phone: $75 
Utilities: ~$100 
Cell phone: none (company paid for)
Gym: $51
Gas: $250
Water Heater Rental: $15
Food: $250
Car/Home Insurance: $175
Other (entertainment/car maintenance etc): $590

Total Monthly Expenses: $2496

SAVINGS: $1000/month
Cash: + $250
Non-Reg: +$750

As I took roughly $25.5K from my TFSA account this year for my down payment, I will start replenishing this next year.

I did not factor in my annual bonus and mileage (~$400-$500/month) into this. What I want to do with these amounts is to either pay down my mortgage/make a lump sum contribution to RRSP. What do you guys think?

Let me know how I can improve my situation here.


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## peterk (May 16, 2010)

Awesome work! So you've managed to save an entire years salary (pre tax) in only 2 years? That's a >50% savings rate! Well done sir.


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## Retiredguy (Jul 24, 2013)

Refreshing to hear from a young person with a great outlook.

IMHO You are never wrong to pay down your mortgage on your principal residence. If your mortgage is at 3 % when you pay a dollar on your mortgage it immediately is returning 5% to you guaranteed. Its a wonderful feeling to own your home mortgage free and once you do then you can buy some blue chip dividend stocks on margin using your home as collateral. Interest expense will be fully deductible and dividends are taxed at very favourable rates. Do some what ifs on a tax calculator and it will show you what I mean.

I hate and have never own a mutual fund in my life. Never will fees are killers. I would cash it in and put the money on your mortgage and also not worry about repaying your TFSA, the room in it will stay there. Apply the money to your mortgage.

Try not to get caught up in thinking about a bigger fancier home. You need a decent place to live but a bigger home just means more junk to put in it and more expense to keep it going, making improvements etc.

Also when considering your relationship try to figure out whether your girl friend is on the same page as you regarding your approach to money. If she's a spender trouble looms. (This of course is not meant to be sexist as it could be the guy in the relationship that is the spender.)


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## FrugalNotCheap (Oct 17, 2011)

Thanks all for the feedback. I try to live below my means, but at the same time I also try and have fun once in a while (go on little trips here and there). I think everything has worked out nicely so far, just need to figure out what the next 'goal' is now that I have this townhouse. It's tough not being able to save >50% of my income now that I have this town home, but in the long run I think this place would make a great rental property. Units around here rent for roughly 1100-1200, which would cover my mortgage payment/condo fees/property taxes and leave me with $100-$200 a month extra.

I had thought about throwing everything at my mortgage payments in order to pay it off sooner, but given the stage that I'm at in my life (engagement ring...wedding..?) I do like to have a small buffer. I will definitely use the pre-payment options that are available (increase payments by 15% etc.) in order to pay off more of the principal amount though. For all the home-owners out there, what has been your experience with pre-payments? What strategy has worked well for you?


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## Spudd (Oct 11, 2011)

Personally, my strategy is to max out my registered account contributions (TFSA & RRSP) and once those are done, any excess money gets thrown into the mortgage. I don't see the point of having non-registered investments while I still have a mortgage. At some point my mortgage balance will be lower than my TFSA balance, and at that point I plan to clean out the TFSA to rid myself of the mortgage once and for all. And then, my newly increased cash flow will be able to replenish the TFSA fairly quickly.


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## AlbertaBoy (Mar 21, 2013)

FrugalNotCheap said:


> What strategy has worked well for you?


I am a young person so I have been concentrating on my mortgage. My mortgage is held with ScotiaBank which allowed me to increase my payments by 15%, do match payments and also pay up to 20% of the original mortgage amount each year. So far this year I have been able to do the additional 15% on each payment, match all payments and put down a lump 20K. Planning to keep the match payments going but likely no more lump payments until bonus time next year (Feb time-frame). Hopefully kill this mortgage in another 5 years (at that point I will be age 35).

AB


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## FrugalNotCheap (Oct 17, 2011)

*Assets*
Townhouse - $195,000 
TFSA - $3,225 (TD eSeries - Couch Potato)
Non-Reg Mutual Fund Account - $15,250 (TD eSeries - Couch Potato)
Company Pension (Manulife) - $9,600
Company Stock - $4200 (with another $3500 of company matched shares that don't vest until 2015)
*TOTAL : $227,275 (as of today)*

*Liabilities*
Mortgage - $134,600

*TOTAL: $134,600*

*Net Worth: $92,675 *


Thanks for the input all.

I'm deciding not to make any additional payments to the mortgage at this time, and instead will continue to save up and add to my couch potato strategy (e-series funds). 

Within the next year, I plan on renting 1 or 2 rooms out in my current town home and will be in a much better position to make additional payments then.

I've got a few options here, and was hoping I can pick your brains a bit.

Do I...

1) Continue to live in the town home and rent 1 or 2 rooms out ($450-500/mth per room); or
2) Rent the whole unit out for roughly $1100-$1200/month, and purchase another smaller place (and possibly find a room-mate to help lower the mortgage payments)


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## FrugalNotCheap (Oct 17, 2011)

Should I continue the couch potato strategy, or do I take the $15K and invest in some dividend paying stocks?


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## FrugalNotCheap (Oct 17, 2011)

*Assets*
Townhouse - $195,000 
TFSA - $3,225 (TD eSeries - Couch Potato)
Non-Reg Mutual Fund Account - $18,455.21 (TD eSeries - Couch Potato)
Company Pension (Manulife) - $11,013.36
Company Stock - $4,643.49 (with another $3500 of company matched shares that don't vest until 2015)
TOTAL : $232,337.31(as of today)

*Liabilities*
Mortgage - $133,500

TOTAL: $133,500

*Net Worth: $98,837.31*

My savings rate has slowed down the last 2 months, as I am now living alone (no extra rental income). However, I'm on pace to achieve my goal of crossing the $100K Net worth by year end!


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## FrugalNotCheap (Oct 17, 2011)

Assets
Townhouse - $195,000 
TFSA - $3,794.76 (TD eSeries - Couch Potato, and FAP)
Non-Reg Mutual Fund Account - $19,413.42 (TD eSeries - Couch Potato)
Company Pension (Manulife) - $12,976.20
Company Stock - $4994.63 (with another $3500 of company matched shares that don't vest until 2015)
TOTAL : $236,179.01 (as of today)

Liabilities
Mortgage - $133,000

TOTAL: $133,000

*Net Worth: $103,179*

Happy New Year everyone! No major changes here...just been following my game plan and trying not to make any big purchases for the last few months. I am getting a 10% raise start in March, so my annual income will be roughly $63K (with another $15-16K in annual bonuses). Expecting my monthly contributions to the TFSA account to jump from $875/month to roughly $1300-1400/month starting next month. 

My goal for this year is to increase my net worth to $135K. I've been dating my girlfriend for close to 2.5 years now, and I think this year may be the year I finally pop the big question. Any advice on how much to budget for a ring?


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## jacofan (Apr 17, 2013)

ring price??? better to ask your lady friend about that - I got off easy as my partner doesn't care too much for jewelry. For some women, the ring is quite important. Find out what she likes with money as no object and then get it with cubic zirconia and then later add a post to the "TOO frugal regrets" thread on how you swapped the diamond for cubic zirconia. Win, win!


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## nobleea (Oct 11, 2013)

My opinion is that it is better to spend money on HOW you propose, rather than WHAT you propose with. Anyone can buy an 'expensive' ring. That's the easy thing. But being creative and unique with the actual proposal - that will blow her socks off, and her friends, and family, and her friends' friends.
I spent a couple grand on the ring (online vendor), but spent twice as much again on an elaborate treasure hunt/amazing race type thing for her that ended up with a surprise 4 day trip to paris for the proposal. 7 years later and she still tells the story to people we meet and they still swoon. No one asks to see the engagement ring after that time.


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## Canadian (Sep 19, 2013)

nobleea said:


> My opinion is that it is better to spend money on HOW you propose, rather than WHAT you propose with. Anyone can buy an 'expensive' ring. That's the easy thing. But being creative and unique with the actual proposal - that will blow her socks off, and her friends, and family, and her friends' friends.


+1

A family member was proposed to a few months ago and, although the ring was gorgeous, the proposal story takes the cake. The glimmer of the ring may fade but memories last. If one hopes to live money-smart lifestyle while married, one should hope that the price tag on the rock (i.e., bigger/more expensive, the better) will not be primary concern.


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