# Beginner looking for financial help



## Tafraser (Sep 14, 2013)

Hi everyone.

I'm 24 years old, I graduated from university in April 2012, and started my first "real job" June 2012. I'm looking for some financial advice - I have short term goals (buying a house, going on a trip, etc) as well as long term goals (not being broke when I retire) but I don't know where to start. My parents do well for themselves but they've never been into investing so they've had no information to pass down to me.

At the moment I make about $1850.00 per week after taxes. I have bills (rent, car payment, student loans, insurance, groceries, gas etc) totalling $4100.00 per month. This gives me approximately $4000.00 profit per month without considering any "fun" expenses like going out for a dozen beer and wings or going to a hockey game.

I have $27,500 in a "high interest" savings account...which doesn't have very high interest...And I have about $12,000 in my checkings account.*
I have no rrsps (although my work has a great pension plan) and no tfsa as of yet because I'm pretty ignorant as to what the three types offered by scotia bank (GIC, cash, and mutual fund) actually are. I hope I'm not too much of a lost cause...any advice would be appreciated. Thanks.


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## jcgd (Oct 30, 2011)

You make about twice what I do and I make decent money. First things first, start socking it away. Your greatest gains at this point will come from saving. Use the time to research investment options. I would look into a coch potato portfolio first. It's hard to go wrong with indexing if you don't want to sped a lot of time doing legwork. 

May I ask what you do?


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## Sherlock (Apr 18, 2010)

Wow what is your degree in to be making so much money right after graduating? I'm guessing some kind of engineering and working in oil in Alberta?

My advice: Put all your money against the debt and pay it off as soon as you can. There is no reason to keep 12k in your chequing account while you're paying interest on your debt. That cash should be used to pay down your student and car loans. Once you are debt free, open a self-directed TFSA with Scotia iTrade. A self directed TFSA will allow you to manage your own investments in it with online banking. Do NOT put GICs or "high interest savings accounts" in your TFSA. Create a couch potato portfolio using ETFs in your TFSA.


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## Tafraser (Sep 14, 2013)

jcgd said:


> You make about twice what I do and I make decent money. First things first, start socking it away. Your greatest gains at this point will come from saving. Use the time to research investment options. I would look into a coch potato portfolio first. It's hard to go wrong with indexing if you don't want to sped a lot of time doing legwork.
> 
> May I ask what you do?


Thanks for the advice. I'm a geomatics engineer at Syncrude - I work a lot of hours too .


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## AltaRed (Jun 8, 2009)

Tafraser said:


> I have $27,500 in a "high interest" savings account...which doesn't have very high interest...And I have about $12,000 in my checkings account.*
> I have no rrsps (although my work has a great pension plan) and no tfsa as of yet because I'm pretty ignorant as to what the three types offered by scotia bank (GIC, cash, and mutual fund) actually are. I hope I'm not too much of a lost cause...any advice would be appreciated. Thanks.


You are doing very well for your age, both in terms of financial net worth and your interest in taking care of your financial health and goals. While you do have a lot to learn regarding investing in general, including basics like: 1) asset allocation and diversification, and 2) account types, e.g. TFSA, RRSP, Full Service Brokerage, Discount Brokerage, and 3) products like GICs, mutual funds, exchange traded funds, common stock, preferred stock, get your current money making more for you by getting more interest on your savings, etc.

IF you limit your investing account to any of the big banks, you are limited to the specific products they offer, i.e. their own GICs, their own savings vehicles, Scotia mutual funds, etc. Investing directly with any bank is NOT the way to maximize your returns. For example, you could make 1.9% today on your savings by opening a High Interest Savings account (HISA) with Canadian Direct Financial or Peoples Trust, and link that savings account to your chequing account. That way you can move money back and forth between Scotia chequing and the HISA account.

Your initial first best bet for an investment account (beyond a HISA) is to open a TFSA to accumulate your investment returns tax free. If you have been a resident of Canada for the last several years, you have $25,500 of contribution room. The key is to open the TFSA with an online discount brokerage so that you can buy a range of investment products from different suppliers. You may wish to do that with Scotia iTrade if you are currently with Scotiabank. Alternatively, you may wish to open a TDWaterhouse http://www.tdcanadatrust.com/produc...unds/td-eseries-funds.jsp ?cm_sp=wESER000-320 or http://www.tdwaterhouse.ca/products...stment-types/mutual-funds/index-investing.jsp so that you can buy fixed income products and/or equity products.

A Couch Potato portfolio of TD e-Series of index mutual funds is considered one of the best for young investors just getting started with a relatively low level of funds. The cost to buy/sell TD e-Series of index mutual funds is zero versus $10-30 to buy equity products such as stocks or exchange traded funds on stock exchanges. And you get both the asset allocation and diversification you want. After you have gotten your feet wet for a year or two, you may want to branch out into other investment products and account types.

Added later after seeing Sherlock's post: I agree with Sherlock. Get rid of your debt first, especially if the interest rate is more than about 1%.


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## Tafraser (Sep 14, 2013)

Thanks for the quick replies, guys. I'm a geomatics engineer at Syncrude - good guess. Sorry for sounding so naive but how exactly do I create a "couch potato" portfolio? While writing this I received a third reply, I'll read that now and respond in a bit - I have a quick meeting to attend.


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## jcgd (Oct 30, 2011)

http://canadiancouchpotato.com/

It may or may not be for you, but I believe the idea is sound and it is easy to start and maintain. It's good if you want to be a lazy investor.


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## GoldStone (Mar 6, 2011)

Tafraser said:


> Sorry for sounding so naive but how exactly do I create a "couch potato" portfolio?


Start reading here:

http://canadiancouchpotato.com/couch-potato-faq/


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## GoldStone (Mar 6, 2011)

jcgd said:


> It's good if you want to be a lazy investor.


It's good for many other reasons.


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## Tafraser (Sep 14, 2013)

So I guess I should use index mutual funds since I'm limited to investing $25,500 with my TFSA?


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## Captain Cook (Sep 12, 2013)

Sherlock said:


> My advice: Put all your money against the debt and pay it off as soon as you can. There is no reason to keep 12k in your chequing account while you're paying interest on your debt. That cash should be used to pay down your student and car loans. Once you are debt free, open a self-directed TFSA with Scotia iTrade. A self directed TFSA will allow you to manage your own investments in it with online banking. Do NOT put GICs or "high interest savings accounts" in your TFSA. Create a couch potato portfolio using ETFs in your TFSA.


Ditto ... always deal with "personal" debt elimination first.


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## randomthoughts (May 23, 2010)

Yep, option 2 here:
http://canadiancouchpotato.com/model-portfolios/

Heh, there's a reason why we're all quoting the same source at you...
This is what I've done as well, more or less. (I didn't bother with bonds, since most of my money outside of the tfsa is in guaranteed stuff. Dunno if that's an equivalent thing, but... you probably can't go wrong just following the model.)


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## GoldStone (Mar 6, 2011)

Read this to understand where Investing fits in the broader subject of Financial Planning:

http://www.finiki.org/wiki/Creating_a_Financial_Plan


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## AltaRed (Jun 8, 2009)

Tafraser said:


> So I guess I should use index mutual funds since I'm limited to investing $25,500 with my TFSA?


It is a personal decision, but use of index mutual funds, especially the TD e-Series, in a Couch Potato format is a great way to start investing. The TD e-Series can only be bought through an online TDW or EasyWeb account. The other option would be to open a TFSA at Scotia iTrade and buy index mutual funds (but not TD e-Series) there.

What about the advice above to pay off debts first?


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## Tafraser (Sep 14, 2013)

AltaRed said:


> It is a personal decision, but use of index mutual funds, especially the TD e-Series, in a Couch Potato format is a great way to start investing. The TD e-Series can only be bought through an online TDW or EasyWeb account. The other option would be to open a TFSA at Scotia iTrade and buy index mutual funds (but not TD e-Series) there.
> 
> What about the advice above to pay off debts first?


I tried to reply to that earlier but since I was new a moderator had to approve it and I guess it hasn't been approved yet.
My student loan has about 13,000 left on it so I can pay that off after work today. As far as the car loan goes I put a big down payment on it and don't have much left to pay off (about 4500) - its 0% so I'm not in a rush for that one.


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## My Own Advisor (Sep 24, 2012)

I'd kill the student debt first, for sure. 

Then, look into using your RRSP account for "lazy" couch potato investing. If you make good money, you'll want to defer taxes. Also, as other commenters have said, look to start contributing to your TFSA. Probably good to read about couch potato investing for that account as well. All money made inside the TFSA is tax-free, so you might want some holdings that pay income (dividends or distributions) in there. 

I wouldn't be in a rush to pay off car loan at 0% either. 

After a few years, you might want to start investing in dividend paying stocks, maybe, but I wouldn't be any rush.

Well done and congrats on the great job.


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

Jumping straight from debt into investing? Uhmm no.

1. pay debt
2. save up a tiered emergency fund
3. invest or buy house

Only move to the next step when you have completed the one before.

BTW for a novice I would advise a lot of caution about investing, esp in mutual funds. You can lose a lot of money that should really be set aside for emergency. Ignore the rhetoric that money you've saved is "wasting away in a savings account" and remember a lot of people have a vested interest for you to "invest". (ie. so instead of making 1% for you with no equity risk, it feeds them 1-3% in fees for little/no work and you take all the risk)


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## Tafraser (Sep 14, 2013)

the-royal-mail said:


> Jumping straight from debt into investing? Uhmm no.
> 
> 1. pay debt
> 2. save up a tiered emergency fund
> ...


Fair enough, I'm not in a hurry to invest by any means. I just want to be smart with the money I am making and make informed decisions. Could you explain a tiered emergency fund for me please?


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

Hi tafraser, sounds good. Slow and steady is better than speedy and bankrupt. Please see my sig file for an explanation of the tiered concept. Life events tend to happen in batches and not in isolation and the tiers can go a long way to self-preservation. The cash you have right now would be an excellent candidate for debt repayment and start towards tier 1.

P.S. No need to quote replies, use ^ or address person by name.


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## Homerhomer (Oct 18, 2010)

Congratulations, you will do well in life (financially at the very least).
Learn as much as you can about finances from this and other available sources and then make up your own mind about what works for you.

PS, you can use quote replies as much as you like, makes it clear for everyone except the-royal-mail.
^>< confuse a living crap out of me, especially if there happen to be posts in between.


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## Tafraser (Sep 14, 2013)

Thanks Homerhomer, I appreciate that and hope you're right.


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