# 22 Year Old Looking to Invest



## 200above (Nov 18, 2010)

Hello everyone,

I'm relatively new to the forum and am activley researching information and advice to apply to my current financial situation. I started to take a key interest into savings after my Grandpa asked if I had started saving my money. I replied "no, but I guess I should start now?". 

I did a little research and reading and I'm amazed at the effects of compound interest and how fixed contributions are simple and easy to do. Needless to say, I was pretty much hooked. I started to put money away, 250 dollars a month, into a TFSA and RRSP mutual fund contribution. (200 RRSP, 50 TFSA)

I bank with Scotia Bank and am enrolled in the "Bank the Rest" program and all my "banked money" at the end of the month goes into mt TFSA. I really like this, I have contributed about $100 in the last 2 months by just using my debit card and rolling the purchases over to the next $5. I can almost guarentee you I would have spent this money.

I've continued to read up on more investment options and ways to put my money into places that will get me good returns but I'm starting to get a little confused as how to move forward with all the options out there. 

I don't have a Financial Planner or Advisor of any kind. I like to do things like this by myself, but I realize that I'm playing with my future savings and retirement, so I want to make the best decisions now. I don't know to much about how planner/advisors work... can I get my foot in the door and when I feel comfortable, continue to invest and manage my savings myself? I realize there are fees that go along with this service, but I'm starting to think these fees may be warrented due to my finnancial backround, or lack thereof.

My goals are for the long term. I'm fairly young and am willing to look into more riskier investments. I've read some articles on ETF's and from what I've read, this attracts me the most. I'm trying to put as much as I can towards RRSP and maxing those out. I've read that for a first time home buyer I can withdrawal up to $25K tax free from RRSP? (with the intent to re-contribute)

My current situation:
- 22 year old. Male. I'm a pilot. I work 2 weeks on 2 weeks off up north in Nunavut
- I have a gf, we started dating in grade 11 (coming up 6 years)
- She has 2 1/2 more years in university, works part time.
- We rent ($1050/month, $525 each)
- I pretty much cover most of the expenses, she tries, but she's not a good money saver. 

Current Money Saved:
- $2000 chequing account
- $400 RRSP mutual fund (just started and contribute $200/month)
- $200 TFSA (contribute $50/month)
- $1750 GIC which matures Feb. 2011- my plan is to put it into an RRSP or some sort
- $2295 worth of stocks in the parent company that owns us and other aviation companies. I have this held within my RRSP. I contributed the maximum of 5% and the company matches 1:3 after 18 months. All dividends also accumulate and are held "in trust" untill the 18 months are up.


Income:
- $48,654 Salary
- $7,200 Per Diems/ year
This equates to ~$3400 month net.

Monthly Expenses:
- $693 Truck payment (3.2 years left, yah I know, I shouldnt have bought it , but I really do like it and I use it a lot)
- $525 Rent
- $35 Life Insurance
- $139 Auto Insurance
- $95 Cellphone
- $90 TV
- $95 Utilities
- $250 RRSP + TFSA
- $120 Quad payment (my brothers and myn, we share, 2 years left)
- $152 Leons furniture payment (no interest just monthly payments for the principle, 8 months left)

Result: $3400- $2200= $1200 after all said and done to play with. I'm over the bar scene, I do go out and drink and stuff a couple times on my times off (flying up there can be stressful) but this is not at the bar where drinks are 5 and a quarter each. I buy bulk now. 

I'm also trying to save up a nest egg, about 3 to 6 months of expenses. This is coming along slowly. I use Quicken to track and graph my expenses and look for areas I can and should cut back on. I've come to the conclusion that the truck is what really kills me.

In Feb I get my yearly salary raise and it will be $54,060 salary plus $7,200 per diems. So I'm looking at what I can do with this extra money besides spending it on more clothes for my g/f.

After looking at this window, what do you think should be my priorities? Invest, pay off my truck quicker, more/less RRSP contrib., go talk to an expert, keep researching and do it myself?

Thanks for the help, hopefully the above makes some what sense.


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## plen (Nov 18, 2010)

Hi, 

You might want to share the interest rate you pay on the truck.

I'm new here too but I can assure you from doing my own research over the last couple months you're much better off doing that than listening to what many experts will try to sell you.

Things are looking pretty good so far though. Taking the time to lay things out in search of constructive feedback for you to decide upon at the age of 22 is a great step.

Good luck!


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## Sherlock (Apr 18, 2010)

I think mutual funds in your TFSA and RRSP is fine for now. But if you want to put stocks and ETFs in your RRSP/TFSA, then you will need to open a self-directed TFSA or a self-directed RRSP. You can open one with any of the major banks (I think they just convert your existing one into a self-directed one), or with a discount brokerage like Questrade. However, these types of accounts usually have annual fees unless your balance is above a certain amount (for example CIBC Investor's Edge is $5000) so you might want to wait until you have that much saved up. Since you seem to invest by making small monthly contributions, I think mutual funds are the way to go for now because there are no fees to buy or sell them, unlike ETFs. I did some calculations for myself and determined that I needed around $30,000 before it made sense to switch to ETFs.

I would definitely recommend paying off your truck sooner, you can easily save hundreds of dollars in interest charges. Also your cellphone and TV bills are HUGE. I am paying $15/month for my phone with Wind. I know they don't have Wind Mobile where you are but still, there's gotta be something cheaper than what you're paying. Same with TV, I could never pay that much for cable, although I guess if you're a big TV watcher it might be worth it to you.


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## ramy98 (Sep 20, 2009)

One thing I would recommend as a somewhat young fellow myself is that since you are in the financial position you are in now I would focus most of my energy on building up my savings.. With large savings you can invest; I know its not sexy and savings pay little interest but its the best way to start to grow wealth as opportunities arrive.


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

Don't be in a rush to get a "financial advisor" - the ones I've dealt with were anxious to sell high-fee funds. You are better off to stick around in this forum, ask questions as you have done, read up on what others are saying and keep up what you are doing. I agree with 98. Learn to save and learn to NOT spend. One of the best things you can learn at this stage is to practice restraint and NOT buy everything you want. The amounts saved go right to your savings which will be needed later. And later could come sooner than you think.

Predictably, I would personally recommend the 3 tiers of savings. That should keep you quite financially busy for a while.


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## MoneyGal (Apr 24, 2009)

Huh. Life insurance for an unmarried 22-year-old with no dependents. How much death benefit are you buying for $35/month and who is the beneficiary?


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## 200above (Nov 18, 2010)

MoneyGal said:


> Huh. Life insurance for an unmarried 22-year-old with no dependents. How much death benefit are you buying for $35/month and who is the beneficiary?


 300K, my mother. Too much? 

Thanks for the replys. Exactly what I was looking for. 

I'll keep reading.


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## 200above (Nov 18, 2010)

truck finance is 4.7% and I have 26K left. 

Should I be more worried about that?


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## 200above (Nov 18, 2010)

I posted a reply yesterday but I'm not sure where the post is... But anyways, to answer your question MoneyGal my $35 covers $300K and my mom is the benificiary.

I`ve been looking at the Tier system and for now that looks to be the best option, save and learn more about investment options. 

I looked at ING, and it seems to be a good place to add to the TFSA and RRSP I have with ScotiaBank. It also seems easy to use, and transfering of funds is easy and fee-less.

My truck is financed at 4.7%. 

The tier system seems to be simple and straight forward.

Any other opinions or options at this point?


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## Saniokca (Sep 5, 2009)

Sherlock said:


> I did some calculations for myself and determined that I needed around $30,000 before it made sense to switch to ETFs.


How did you come up with $30,000?

I would just save $50/m and buy an ETF/Stock every 4 or 6 months or so


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## kcowan (Jul 1, 2010)

To avoid the fees associated with ETF purchases, you might want to consider TD efunds. Once you have built up a substantial balance, then you can be more selective about purchases. If you have the aptitude, I recommend DIY.


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## 200above (Nov 18, 2010)

woops, looks like I double posted a couple times...


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## humble_pie (Jun 7, 2009)

it's always amazing to find so many young people in this forum who are functioning so well in the challenging area of planning for their financial lifetimes. Kudos to you. Your situation looks very good. I'd probably like your truck - if i could see it live - and i like the fact that you're a bit nervous about its financing. This means it's a responsible, affordable luxury.

could you please push the max into your tfsa as quickly as you can. Never mind the rrsp for the time being. That $1750 GIC maturing in february 2011 should go into the tfsa, not the rrsp imho. The goal would be to have the full 10k already contibuted to the tfsa and to be near the end of saving up the 5k for 2011 (ok 5000.00 less the 1750.00 GIC.)

there are a couple easy things to cut back on. If it's ok with your mom could you stop the insurance totally. I'm assuming it'll be ok because she obviously doesn't need the money now. At least she's not receiving any benefit now. And can you get your telecommunications costs down. If it were myself i'd even consider going without tv for a year, on the grounds that the internet is the new tv.


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## 200above (Nov 18, 2010)

Ok, I'll consider putting the $1750 into a TFSA. After reading some of the comments and the importance of maxing out the TFSA, I looked into some options online. At first I looked at ING, and their rates seems really good as compared to my 1.25% TFSA with ScotiaBank. Then I looked at Ally and they offer a 2.0% interest sitting in TFSA. My plan is to contribute to this account @ $200/month in addition to the ~$80 I put into my ScotiaBank TFSA. 

When I have say $1000, should I buy a 5 year TFSA GIC @ 3.3%? This seems to be the best rate I could find for that term. I like this savings plan. I dont plan on needing the money, but emergencies do happen, but I am going to try and budget accordingly to just "save and hold" without having to tap into my savings.

And in regards to the $90 tv I pay, I should clarify that a little bit. This $90 includes TV, internet, and unlimited long distance phone (which is important for me when I'm home but more importantly for my g/f as she calls home quit often and, well she's a girl, and myn talks a lot  ) So considering this, do you all think this is to high? 

I do agree that my cell phone is considerably high. I'm in the process of looked at my current plan to what I actually use monthly. Although I think I've streamlined it as good as I can, but I'll check it out again.


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

I think you're doing just fine. $90 for all of that is actually a really good deal. I pay $87 just for the TV and LD. As for the TFSA, yes, you've got the right idea, prioritize that. RRSPs are a bit risky at your age as they put a definite barrier between you and your money. TFSA is much more accessible in case of emergency. Plus if you can get 3.3% in a TFSA GIC that is really good. I wasn't able to find such a good rate with my bank. Just make sure the GIC is CASHABLE. If not, 3 years will be a heck of a long wait for your money in case of adversity.


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## Rysto (Nov 22, 2010)

Saniokca said:


> How did you come up with $30,000?
> 
> I would just save $50/m and buy an ETF/Stock every 4 or 6 months or so


You're not really going to get proper diversification buying only one ETF. And even if you do buy only a single ETF, the commissions will still eat you alive. One $9.99 trade is 3.3% of the amount that you'd be investing every 6 months -- the MER difference between the ETF and the mutual fund would have to be more than 3.3% to make the ETF a better choice. At such small amounts, you're much better off to buy mutual funds.

Here is a spreadsheet that I did to help me decide when to switch CC's Sleepy Mini Portfolio from Mutual Funds to ETFs. For the whole portfolio it only becomes cost effective at about $26 600.


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## humble_pie (Jun 7, 2009)

after looking again at your first post, i am wondering where are your expenditures for food, clothing, travel & entertainment. Surely these must add up to at least another $500-700/month.

2 sectors still stick out & draw attention.

1) at your age the rrsp doesn't matter so much. The tfsa is a more flexible plan esp if you plan to withdraw a chunk of it later to purchase a house. However that 5-year 3.3% rate looks like it might be locked in, though.

in your place i would drive far more of my spare dollars into the tfsa. Just saving for next year's contribution is $400-425 per month. However, for you the window is much bigger because you have contribution room from the past 2 years to fill in. It seems to me that if you included your february-maturing GIC & your anticipated salary increase, you might be able to max out your tfsa by late 2011 or early 2012, at which time you could resume more even-handed contributions to both tfsa & rrsp.

digging for the contribution funds: in addition to ending the life insurance, i am not sure what is a Quad payment. The phone/tv combo expenditure looks about right, though, now that you explain it.

2) the $2295 in stock of the parent company is begging for your attention. There's another thread nearby in which all posters agree that keeping the stock of one's employer beyond the period in which it will vest means that too much of an individual's financial well-being is now concentrated in that employer. It's not a good idea to have both your job & your retirement funds tied up in one company.

it appears that for you, the holding period for vesting is 18 months. After that could you inquire, as the other poster did, about the terms that govern the transfer of these aviation shares to another self-directed rrsp that you would open outside the company plan. Note that you will not be making an rrsp withdrawal, and the shares would have to transfer in kind, or else cash from the shares' sale would have to transfer, from rrsp to rrsp. In some cases, and with some companies, it is not possible to transfer out either shares or cash. This would be a setback wherever true, because it means a hostage rrsp.

assuming you have transferrable rrsp aviation shares that you've held longer than 18 months, these could go to an outside self-directed rrsp, or they should be liquidated within the company rrsp & the cash transferred to the self-directed. The idea is to diversify. You'd buy an investment in a different sector. A savings type instrument, if you like guaranteed interest rates, or an investment with an equity component. For a small self-directed account the td e-funds platform is a good deal.


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## Saniokca (Sep 5, 2009)

Rysto said:


> You're not really going to get proper diversification buying only one ETF. And even if you do buy only a single ETF, the commissions will still eat you alive. One $9.99 trade is 3.3% of the amount that you'd be investing every 6 months -- the MER difference between the ETF and the mutual fund would have to be more than 3.3% to make the ETF a better choice. At such small amounts, you're much better off to buy mutual funds.
> 
> Here is a spreadsheet that I did to help me decide when to switch CC's Sleepy Mini Portfolio from Mutual Funds to ETFs. For the whole portfolio it only becomes cost effective at about $26 600.


I'm sorry I read it as $50/w... Which I think the OP should do - I would drop the RRSP until the tax bracket is higher.

Also, I pay $5/trade at questrade.


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## 200above (Nov 18, 2010)

@ Humble_Pie: I checked Quicken and it looks as though I've been averaging a spending habit of ~$700/ month on groceries and entertainment (entertainment includes eating out, washing my truck, beer, and other small luxuries like starbucks and timmies coffee). I only spend $150 for my rotation up north in terms of food. So everything I make on per diems I consider income. And thats and extra $600 bucks in my pocket when I rotate out. 

I totally understand where you're coming from in terms of investing and being employed by the same company. In the future I dont think I will contribute as much as I did just recently, 5% of my salary. In 18 month, if everything stays the same (hopefully it will go up, it has been lately) I'll be looking at around $750 in contributed stocks. (currently at $17.40/ share, .13 dividends and a yield of 8.9%) So in the future I'll be carefull as to how much I invest.

Your concern about the RRSP contribution has made me think. I looked over my spreadsheet of monthly expenses and have come up with a plan. Tell me what you think.

1) I want to max out my TFSA. In order to do that I would need to contribute $416 a month. I have the $50 I contribute in my Scotia account, so I have a difference of $366. I have been averaging $35/month with my Bank the Rest program which also, at the end of the month goes into my TFSA. Therefore I would need to contribute a difference of ~$350/ month. More on this in bullet 5.

2) I have some furniture from leons (that I didn't include) that is interest free, but I just have to pay monthly principle payments over one year ($152/month). I have 8 months left, but I have the resources to put an extra $150 and I will pay it off 4 months earlier. Now, this will put me into April.

3) With my pay increase in mid Feb, I will net approx. an extra $250 a month. If you include this $250 + $152 that I`m currently paying a month for the furniture, I will have an extra $400 a month to put somewhere.

4) If you all think that I should hold off on the RRSP contribution, how about I stop the $200 I pay into it, and put that towards my truck loan. I put it into a calculator and it will pay my truck off 9 months early and save $521 on interest.

*5) Conclusion*: The $400 extra I will have minus the $350 I plan on putting towards the TFSA will give me another $50 to buy more beer (because I`m working so hard right now) and still max out my TFSA contrib. and pay my truck off 9 months early and save $521 on interest! And to go back to your comment on how much I spend on monthly supplies/groceries Humble, I will still have $500 or so left in my chequing account a month for whatever. ($1200 is what I have left when all my savings/truck/rent and utilities is paid minus the ~$700 I told you about up top) 

I hope this makes sense, I spent a lot of hours researching this. I'm still getting paid either way  (I'm up north)


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## humble_pie (Jun 7, 2009)

you are asking if this makes sense ?

i think it's wonderful. Right down to washing the truck. When one considers your young age - only 22 - it's pretty darn near unbelievable. And you're a pilot already. Your parents must be so proud of you.

with respect to stopping your rrsp, there are real experts on this forum who can advise you on the right to carry forward unused contribution room and so on (come forth come forth, FT & stardancer wherever you are.) Tentatively i think you could manage without rrsp contributions for a few years, using funds to pay down your truck instead as you say. The only thing that stops me, 200above, is that this could become the story of your life. I mean, when this truck is paid for, you'll probably be itching to buy another gorgeous new vehicle on off-the-road wheels; and the whole payments thing will start up again. Oh, well. You can always jump off that bridge when you get to it.

i myself am exceptionally partial to tfsas because i feel the federal govt might modify them downwards in years to come. Right now they are a steal, especially for a young person. So i would grab one asap, even if it means pinching a bit somewhere else (less beer ? less washing ?)

re your employer's shares in the company rrsp, once i realized which company it is, i remembered that there is a member of this forum who used to praise this airline as an investment. I believe he still does. I wonder if he knows you are posting here. Perhaps i might send him a PM & ask him to please fly by & post his ideas here on your thread.

for now, in the light of all this, and considering the high yield you are receiving from these shares, i think i'd wait on any decision to move them out for sale. Perhaps, for now, you could simply find out what the mechanics are, should you decide to liquidate these shares in the next year or 2.

where are you when you're up north. I've been to yellowknife & inuvik with a government delegation. I remember the plane took off from yellowknife for inuvik & turned to fly on its side. We could look straight down the wing at the black mackenzie river curling through the white snowfields below us. It was terrifying. Do you suppose the pilot did it on purpose ...


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## 200above (Nov 18, 2010)

Yah if you could track him down that would be awesome. I truly believe that EIF is a good investment. They have the diversity of multiple aviation companys, which I'm a part of, and their manufacturing side. I flew the executives to Thunder Bay when they took over their latest aviation company, Bearskin, and just talking to them and listening to their goals and vision, I really think their going to be around for years. And because I dont think I'm a major airline guy like the Air Canada or WestJet, I'm probably going to try and join their largest (in terms of size of aircraft) company, Calm Air.

As for your experience going to Inuvik, they were probably just letting you get a good look at the territory. I still look out the window sometimes and shake my head at how the settlers ever survived finding these places. I'm not sure if you went up in winter or summer, but the winters are crazy. Do you remember what the airplane looked like or the name? 

My plan is to keep these shares even if I leave, because of the yield and dividends. My plan is to start investing once I have my safety net like royal_mail suggested and in the mean time I'm going to continue self teach myself...

The RRSP contribution was just a blind move to be honest. I didn't know what to put the money into and didn't even have an idea of what I wanted to do with my money when I went into Scotia. But the above plan I think is good, and I'm actually excited to start this up. 

I just have to sit the g/f down and convince her!! :l

But really this doesn't change anything from what I normally buy ie my entertainment and going out, it just channels the money into the right spots so I can be debt free (hopefully) by July 2013 with a nest egg of ~ 12K in my TFSA. Just to jump into a house presumably.


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## Sherlock (Apr 18, 2010)

Instead of opening a savings account TFSA with Ally or ING that earns 2% or whatever, why not open a mutual fund TFSA? Did you consider ING Streetwise? It will almost certainly earn you more money than any GIC. And it is dead simple to open an account: http://www.ingdirect.ca/en/save-invest/mutualfunds/index.html


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