# Hi there - Hoping for some advice



## yayfinances (Aug 11, 2010)

I tried to post this earlier but it never showed up. I apologize if it shows up twice!

I am just starting out and in need of some direction. I have read most of the recommended books, blogs, etc. and now I just feel overwhelmed. I really hope you guys can help me 'get started' as I don't really know where to begin.

My situation is really simple and I haven't done any financial planning at all. 

What I want to do:

- I am looking to purchase a condo or whatever I can afford (living in Vancouver makes it next to impossible! especially since I make nothing) in 3-5 years with a 20% down payment.

- I would like to start investing my money

- Open an RRSP - but I am not sure if I should because of my low income.

About Me:

Age: 27
City: Vancouver, BC
Salary: $38,700 (non-profit. so low I know!) (After tax, I take home $2600/month)
Savings: $8000 (sitting in a regular TD savings acct)
Debt: $0
Rent: $0 (recently moved back home)

Mandatory Monthly expenses:
Bus Pass: $151
Cell Phone: $45
Groceries: $100

That leaves with me about $2300 for savings and other stuff (entertainment). I also don't plan to move out of my parents place until I can afford to buy a place. (Renting in Vancouver is insane!)

Can anyone give me some advice as to how/what I should start saving and where?

I've been thinking about opening an ING Savings acct to start saving my 15% automatically. Good idea?

What should I do with my savings that I currently have?

What kind of savings should I have? I've read about tierd savings...

How do I start investing? How much do I need to begin? I should have a good nest egg first before I can start investing correct? Or is it too early for me to even think about investing?

I don't know where to start! Help! Thanks, I look forward to hearing from you knowledgeable ppl!


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## GeniusBoy27 (Jun 11, 2010)

First off, great for you that you have no debt! And second, asking the questions is always a great start!

I don't think there's 1 answer. However, what I would suggest is maybe a GIC, or even an ING account isn't a bad idea. There was a previous thread looking at ALLY's savings account and/or GIC.

I wouldn't forget about putting all your money in the RRSP, to get some minimal tax benefit. When you're buying your house, you can always pull that money back out. 

Good luck!


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## Cal (Jun 17, 2009)

Opening a TFSA would be a great move for someone in your situation.


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## humble_pie (Jun 7, 2009)

i think this is a terrific profile for a young person. Congratulations ! because of the absence of debt, your savings program should augment nicely once you start it up. It looks like you can easily save 10k per annum, possibly more.

here's what i'd do myself. I'd have 2 equal-weight priorities (hard to juggle but doable since you're going to be an excellent saver.)

1) i'd open a tfsa now, or very soon, maybe with something like 5k from savings but keeping in mind that in 2010 a new tfsa has a 10k ceiling so there's plenty of room to contribute more as the year progresses. I'd probably open this at ING, unless td has a competitive high rate. For starters, while you build your investing knowledge, i'm assuming you'd choose a plain vanilla high-interest tfsa account.

2) i'd also open an rrsp & aim towards contributing enough until the march 2011 deadline to get my 2010 income taxes as low as i could. You could do this at the big green since you're there already. Just one simple interest-bearing instrument should be ok for the small amount of money here.

the royal mail will not like this, but for a little while, maybe a year or so, i'd keep only a maximum couple thousand in any daily savings account, in fact much less if i felt comfortable. Yes you'd have to bust into the tfsa to get emergency cash, but it doesn't sound like an emergency is headed your way in the next little while. Like, there's no spouse or children or other dependents. You're home with the parents. Opportunity for max savings even out of a modest income.

meanwhile you might embark on a casual study course. There are plenty of excellent reading material suggestions right here on this forum. There's a thread nearby. Our author member moneygal - she has a terrific book coming out this very month ! - once suggested to a novice investor who was feeling a bit overwhelmed that he break the investment field down into modules and study these one at a time. This makes everything more doable, because honestly the studying is going to continue for the rest of your life.

courage, as we say here. That's pronounced Koo Rahj.


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

Interesting. I think the OP is doing just fine. I think the question here is where exactly to allocate the savings. Personally, I feel there should be a plan for that, even if it's not my 3 tier savings structure, at least plan SOME allocation for those savings, be it in TFSA (super idea, I agree), short-mid term or cashable GICs, stuff like that. I'll deviate from my usual format here and concur with humble and the other posters but say that the focus now should be on setting up a plan, any plan for where to place the savings.

I'm slightly hesitant to suggest RRSPs as those tend to be long term and not as fluid.

Reason being is that without this plan and without major recurring expenses such as car, mortgage and other serious payments, it is easy to go wild and say "Look at all this money in the bank, party time!"

How is your car? Does it or will it need replacing in the next 5 years?


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## Young&Ambitious (Aug 11, 2010)

I agree, max out the TFSA so you won't have to pay taxes on your interest income. While the savings are not substantial it's there so why not take advantage of it, and besides, a low budget calls for counting pennies right? Another advantage over the RRSP is access to the cash in case an emergency were to come up. Although, if only for your own peace of mind, putting a bit of money into the RRSP and doing a small monthly automatic contribution (eg. $50) wouldn't hurt. 

As far as your salary, you pointed out yourself that it's low, to bump up your savings and ability to support a mortgage increasing your income is an option. You may want to _consider _making some changes to your current work situation. I've done the mortgage calculators for myself and know how hard it is to be approved for a mortgage at your current income level, so your current salary will unfortunately make it more difficult for you to get approved for a mortgage.


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## yayfinances (Aug 11, 2010)

Wow - thanks everyone for the help so far! It feels nice! I am starting to feel better about my whole situation. I am also a little frustrated that it's taken me so long to start caring about my finances. 

Royal:
I currently don't have a car nor do I plan on purchasing one in the near future. Probably not until I plan to have children with whoever I marry (which is gonna be awhile! hehe). Probably 5+ years and hopefully that dude's got his own car!

"Reason being is that without this plan and without major recurring expenses such as car, mortgage and other serious payments, it is easy to go wild and say "Look at all this money in the bank, party time!"

I don't really get what you mean by that?? I am not being rude if it sounds like that..but I really don't understand. Might be because I am crazy tired from trying to watch meteor showers yesterday..

With the advice so far, I think I should:

- Open a regular TFSA with ING

- Open a savings acct so I have money for investing in the near future (& keep reading more about investing!)

- Keep about $2000 in my regular savings at TD

Still unsure about:

- RRSP - should I just continue saving and when I get a higher salary I can start contributing? Or is it worth it to start even saving a little. 

- How to save for my down payment. Where do I put it? Should I do it within my RRSP with the HBP? For some reason, I just don't really like the idea of that. But I should probably read more about it...

SAVINGS BREAK DOWN: If I decide to do RRSPs without HBP
(Please let me know your thoughts on this. Am I putting too much money in the wrong places?)

After tax total income: $2600
Minus mandatory expenses of $296.00

Left with: $2304.00 for savings.

Down payment: $1050.00
RRSP: $250.00
TFSA: $200.00
Investment Savings: $150.00
Vacation: $125.00
Entertainment: $500.00 (dining out, books/mags, bday gifts, sushi lunch every once in awhile, etc)

$29.00 left over for the month..


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## yayfinances (Aug 11, 2010)

Young&Ambitious said:


> I agree, max out the TFSA so you won't have to pay taxes on your interest income. While the savings are not substantial it's there so why not take advantage of it, and besides, a low budget calls for counting pennies right? Another advantage over the RRSP is access to the cash in case an emergency were to come up. Although, if only for your own peace of mind, putting a bit of money into the RRSP and doing a small monthly automatic contribution (eg. $50) wouldn't hurt.
> 
> As far as your salary, you pointed out yourself that it's low, to bump up your savings and ability to support a mortgage increasing your income is an option. You may want to _consider _making some changes to your current work situation. I've done the mortgage calculators for myself and know how hard it is to be approved for a mortgage at your current income level, so your current salary will unfortunately make it more difficult for you to get approved for a mortgage.


Thanks for your thoughts! I am actually looking into a new line of work next year and hopefully it works out. I really love my job but there is no more growth for me here. Ugh. Non profits!

I do realize that my low income will be very hard to get a mortgage. I don't plan on buying for 3-5 years and hopefully my situation will be different by then. (married, higher income) But for now, I figure I should just start saving.


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## Young&Ambitious (Aug 11, 2010)

Hi YayFinances, my recommendation as far as the investment savings max out the TFSA first because you can avoid paying taxes on your income stemming from investments held in a TFSA. Only then add to the investment savings as all that will be taxable income. Otherwise sounds great! Good for you for getting serious about saving! Goodluck


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## humble_pie (Jun 7, 2009)

hey yay is it possible you made a tiny typo here's what you wrote:

_With the advice so far, I think I should:

- Open a regular TFSA with ING
- Open a savings acct so I have money for investing in the near future (& keep reading more about investing!)
- Keep about $2000 in my regular savings at TD_

that's one savings account too many !

i'd go for the tfsa first, using at least 6000 from existing TD savings or 7000 if you felt comfortable (myself, i'd feel comfortable.)
then i'd add every month until i had the tfsa up to its 10k limit for 2010. You could do that easily this year, probably by november.

after maxing the tfsa i'd continue saving into the TD savings account. I'd work on the decision whether to open an rrsp with these savings (you have until march 2011 to decide) or whether to transfer these into the tfsa on january 2, 2011, which is when the 2011 tfsa contribution window of 5k for the year will open up.

myself i'd continue with the tfsa. Believe it'll be easier to raid this account for the future down payment than an rrsp.

also believe that ING has always had a small tfsa promotion frill, a bonus they offer to attract more tfsa business. Starting around october each year, they allow clients to accumulate savings earmarked for next year's tfsa contribution in a regular account. Interest from october to december 31 will be taxable, of course. But ING offers to reimburse the tax payable. You'd have to get details from ING. In any event we are not talking about very much money; it's tax payable on a very small amount of interest income for up to 3 months. What it boils down to is, you could either accumulate your 2011 pre-tfsa savings in a "tax-free" account at ING, at least after october; or else you could accumulate these same pre-tfsa savings in a taxable savings account somewhere else.


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## Spidey (May 11, 2009)

You've received excellent advice so far. I'll just throw in my advice that I often give to young or new investors. Take out a financial book per month from the library. This will probably amount to 5-10 pages per day so it should be doable.
Get books from a variety of authors and that offer varying opinions. Don't assume that anything written is gospel, but after a period of time you will likely get a feeling for which advice suits your personality and situation. After 2-3 years you will probably know far more about investing than most Canadians.

Suggested authors (probably more suitable after you've read some books that offer the very basics of financial planning): William Bernstein, Jeremy Siegel, Gordon Pape, Eric Tyson and of course you should check out MoneyGal's new book


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## kcowan (Jul 1, 2010)

Also make sure your chosen books are not made obsolete by the market of the 2000's. Much of what worked in the 1990s no longer works now. Much of the advice is timeless but it takes some interpreting.


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## yayfinances (Aug 11, 2010)

humble_pie said:


> hey yay is it possible you made a tiny typo here's what you wrote:
> 
> _With the advice so far, I think I should:
> 
> ...


Oh crap! Is that one too many?? I thought I was being smart. haha Guess not!

So..I've opened up a TFSA with ING yesterday. And I will take your advice and continue saving in my regular TD acct and think about RRSP's.


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

That ING staging area sounds like a clever idea. I have never heard of it but it makes complete sense. I basically have my 2011 TFSA money saved now and there really isn't much more I can do with it from now to 1-1-11. It's not worth the fuss to make an appointment at the bank to get a GIC, so this cash will just sit in my regular savings account until New Year's Eve. 

But the ING idea is a clever one, and probably aimed at this exact situation. I'll keep this info in mind for future years as this may happen again.


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## yayfinances (Aug 11, 2010)

So I talked to a financial advisor at TD yesterday and he told me that saving for a down payment is faster in an RRSP than a TFSA.

Is that true? What is everyone's thoughts on this? I've read lots of info about RRSP vs TFSA but I never really came across info on that..

Is it because of the tax refund that I would get back if I were to re-invest it in my RRSP? Again though.. I am in a low tax bracket here in BC. 

Also, he said its more wise to start an RRSP with mutual funds instead of doing a self-directed one. Thoughts??


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## Kirkland (Sep 15, 2009)

Congratulations on not being in debt, you're in a better financial situation than most from the get go.

I'd definately open an RRSP and start contributing with any extra finance you do have, just remember to keep some money on hand for any emergencies.


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

yayfinances said:


> So I talked to a financial advisor at TD yesterday and he told me that saving for a down payment is faster in an RRSP than a TFSA.
> 
> Is that true? What is everyone's thoughts on this? I've read lots of info about RRSP vs TFSA but I never really came across info on that..
> 
> ...



I smell a rat. It does not sound like you were given objective advice. It almost looks like the advice given is designed to steer you towards products that bring in more fees for the bank? For instance, the mutual fund vs self-directed thing...yeah sure, so they can get 2-5% in fees from you.

Saving pure cash in one account vs another...it defies common sense that one accumulates down payment cash faster.

But if a down payment savings is your goal, then why anyone would consider locking away the money in an RRSP is beyond me. It's better to save in the 3-tiers of personal savings first, independent of things needed like house down payments etc. Down payment money needs to be cash that is readily accessible and not locked in. If you raid your savings accounts to buy a house, then lose your job as you as you move in, you'll be in for some trouble.

IMO you're getting better advice here in this thread than at the bank.


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## kcowan (Jul 1, 2010)

yayfinances said:


> Also, he said its more wise to start an RRSP with mutual funds instead of doing a self-directed one. Thoughts??


Ask him why TDs e-funds are not a good idea?

Ask him about the forever lost RRSP room versus the TFSA preserving the contribution room?


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## HaroldCrump (Jun 10, 2009)

yayfinances said:


> Also, he said its more wise to start an RRSP with mutual funds instead of doing a self-directed one. Thoughts??


Yes, that is wise advice.
Your advisor needs to upgrade his BMW and someone gotta pay for it.
So it is indeed wise advice - _for him_.


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## yayfinances (Aug 11, 2010)

Hey guys,

Thanks for all the rad advice! I am so thankful I have somewhere to turn. 

I thought that whole 'saving in an rrsp' thing was really weird..so thanks for confirming!

I also asked him about the HBP and what happens to the money I pay back. If I can pay a percentage towards my RRSP to receive a tax credit AND also pay back the HBP money (no tax credits) I took out at the same time. 

He didn't know. He said if I found out, I should give him a call and let him know as well because he's never thought of that...


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## andrewf (Mar 1, 2010)

"So I talked to a financial advisor at TD yesterday and he told me that saving for a down payment is faster in an RRSP than a TFSA."

This is true to the extent that when you contribute to your RRSP, you get a tax deduction/refund. If you also save this, then the savings can accumulate more quickly. This is only relevent up to $25,000 in savings, as this is what you can 'borrow' from your RRSP for a downpayment on your first new home. It's worth noting that you'll need to pay this back or incur tax.

Likely, you'll want to save more than $25k for your downpayment--I'd suggest any amount in excess of this be in a TFSA, if possible.

Also, if you're saving for a home purchase in a few years, I think you should stick with GICs, or a bond fund on the outside. There's not much sense in taking much risk here.


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## humble_pie (Jun 7, 2009)

hey yay i have 11 words 4 U today

i
knew
you'd
be
good
at
this
+
never
buy
mutual
funds.


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## Bupp (Nov 13, 2009)

If your #1 goal is to save up the downpayment as fast as possible you should put the first $25,000 of savings in the rrsp.

Use the tax refund for the tfsa.

This will give you a larger dollar amount available for the downpayment.

Using an rrsp does not mean you have to buy expensive products from the bank. You could do a high interest savings account just like in the tfsa.


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