# Our Situation



## AnAcorn (Feb 4, 2011)

Hello All!

Here is our situation, married and 29 years old:

Income
--------
Combined Salary: $200k/year
Bonuses (on average): $15k/year
Dividends (from small business + stocks): $20k Annually
Rent out our basement for $12k/year

2010 saved $60k
2011 planning on $70k+

All investments are in blue chip dividend paying companies
House value is $640k, owing $540k.
No debt other than the house.
Net Worth $300k

We are fairly frugal (relatively speaking). If you compared us to someone making $60k a year we spend a lot (trips, pubs, dinners). But when compared to someone making $150k we are frugal.

Our net worth doesn't seem very good for our age and salary, especially when we compare it to FT. Instead of focusing on net worth we tried to focus on income. We spend a lot of years and money on university. We wanted to generate good salaries, good dividends and good rent. We would only allow ourselves to have debt for a home. I believe our net worth should be going up much more than previous years.

We aren't sure if we should be paying down our house or continue to invest in stocks and small businesses, both have done very well for us and we can easily afford our mortgage payments.

Any thoughts or recommendations would be great.

AnAcorn


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## Four Pillars (Apr 5, 2009)

Can I assume you are maxing your RRSPs?

You don't mention how much your investment totals are. From your net worth, I'll guess around $200k.

You guys are in pretty good shape - the only red flag is the mortgage.

Are the incomes evenly split?

If I was in your situation, I would probably max the RRSP (unless one salary is fairly low) and put the remainder into the mortgage. 

A TFSA emergency fund is an idea too.

Standard question - do you have a will, life insurance, disability insurance?


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

I don't understand the logic of someone with a combined household income of $200K, living in a $640K house. That is madness. Banks allow that?

Anyway, I don't see why a $200-300K house wouldn't meet your needs.

Your networth is excellent. That's way above average IMO. Well done on saving all that money every year. Do you work long hours?


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## steve41 (Apr 18, 2009)

I didn't get what you currently have saved. Did you save $70K last year, or is that your current savings balance? In RRSP or outside? Also.... breakdown salaries by spouse as well as savings.


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## loggedout (Dec 30, 2009)

Just curious, what field of work are you guys in?

Looks like you are doing terrific. I would assume choosing between paying the mortgage off versus investing more is based around an expectancy that the growth of your investments will be greater than the interest incurred on the outstanding mortgage.


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## Addy (Mar 12, 2010)

the-royal-mail said:


> Anyway, I don't see why a $200-300K house wouldn't meet your needs.


They rent out the basement for $1K/month, which isn't bad, especially if the tenant is paying their share of the utilities. So that 640K house, while still an expensive one, is somewhat offset. Not sure if you could rent out a basement for $1K/m in a $200-$300K house.... maybe you could, but it depends where they live.

We're in a situation where we could pay cash for an inexpensive, not so nice house (but liveable), or get a mortage, buy a nicer house and rent out some of it to help with the mortgage. So I appreciate why people spend more and rent out a part of the house like the OP does.


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## Karen (Jul 24, 2010)

The OP didn't say where he and his wife live. If it's in the Vancouver area, you couldn't even buy a shack for $300,000 because the lot values are greater than that. My house, a 21-year-old 1800 square feet, one-level rancher in Surrey, BC, was assessed at $519,000 for 2011, $393,000 of which was lot value (67 x 110 ft lot). So, for someone in his income bracket, $640,000 doesn't sound the least bit extravagant to me. You can barely buy a decent townhouse for $300,000 here.

And, by the way, Surrey is far from being considered one of the most desirable suburbs of Vancouver.


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## AnAcorn (Feb 4, 2011)

*Re*

Breakout of salaries are about equal. 

RRSP:$92k
TSFA:$30k
Other investmetns:$75k
Savings/checkings Account: $6k

The $60K went into Other investments, RRSP, TSFA. We would have be able to save an addition $30k however we had to do work on the house.

I work normal hours, my spouse works more. There is no chance of buying a small house for 200k-300k where I live. Unless I want to have two cars or use transit and commute 45 mins to work. 

Yes, we bought a more expensive house to have it offset by a renter. Offset by not driving, owning only 1 car (hopefully none shortly), and having more time to devote to work and progress higher within our respective companies. Our house is extremely small - too small for many. 

We have not been maxing out our RRSP.
We have life and disability insurance.


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## CanadianCapitalist (Mar 31, 2009)

My personal preference would be RRSPs -> Mortgage Paydown -> TFSAs. I wouldn't compare my net worth to anyone else because the circumstances are likely to be very different. I'd say you have the basics in place already. $60K savings on a ~$240K income is about a 25% savings rate. That's very good. With savings taken care of, you should try and invest those savings wisely. And pay down debt. Good luck!


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## AnAcorn (Feb 4, 2011)

*Re*

Yes, 2011 we plan on maxing out our RRSP, taking the refund and placing it in TSFA and whatever is left into a non-registered account. Thanks for the advice Pillars.



Four Pillars said:


> Can I assume you are maxing your RRSPs?
> 
> You don't mention how much your investment totals are. From your net worth, I'll guess around $200k.
> 
> ...


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## Plugging Along (Jan 3, 2011)

the-royal-mail said:


> I don't understand the logic of someone with a combined household income of $200K, living in a $640K house. That is madness. Banks allow that?
> 
> Anyway, I don't see why a $200-300K house wouldn't meet your needs.
> QUOTE]
> ...


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## OhGreatGuru (May 24, 2009)

- In your tax brackets, maximize your RRSPs/spousal RRSPs to reduce your tax load, if you have not already done so; 

- Pay down your mortgage.


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## AnAcorn (Feb 4, 2011)

*Re*

Thanks all - seems the general consensus is to max out RRSP then pay down mortgage. Thanks for all your advice.

AnAcorn.


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