# Young Couple Next Steps



## Azrie (Oct 19, 2011)

After starting to read about personal finance my wife and I decided we should start saving and investing the money we have. But being new at all of this we are a little confused and some general thoughts would be welcomed.
We just got married about 6 months ago both university graduates with full time jobs and both 23. 

Numbers:
My income is around 46K a year and hers around 42K for a combined of 88K after taxes.
As of right now we have absolutely no debt, paid off student loans and bought a used car with cash.

Assets:
22K in chequing account
500 in savings account
10K in my TFSA
10K in her TFSA
2008 Car paid in full

As of right now we are saving around 2000 a month after rent, groceries, gas etc.

Financial Goals:
1.	Save for a down payment on a house probably around 30-40K for a 10% down payment.
2.	Save up for travel
3.	Start investing some of our savings to compound over the long term
4.	Have an emergency fund

After reading I have a few questions about a couple of different options:
1.	Would setting up a DRIP in one of the TFSA be beneficial? And is there any reading I can do on how exactly this works within a TFSA? I’m a little confused on some of the details like contribution room and taxes when it comes to making money from investments in a TFSA.
2.	Should we start contributing to a RRSP? Is the tax break worth it at this point especially considering we both have probably several years worth of tuition tax credits both provincially and federally?
3.	What about a TD eSeries? And what combination of the above?

Thanks!


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## Montrealer (Sep 13, 2010)

Good job and all the best to you and your wife. 

Question for you though, why would you have $22,000.00 in your checking account and only $500.00 in your savings account, it should be the other way around and if I were you, I would take that $22,000.00 and save another $18,000.00 and invest $40,000.00 as a down payment for a condo or house.

My advice, invest in real estate at a young age and your money will make money over time and will appreciate in the form of real estate. 

Good luck!


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## Young&Ambitious (Aug 11, 2010)

For starters:

I would recommended maxing out your TFSA, your new limit is likely $20k each. You should divert your cash funds here so your interest will be tax-free. These funds you should keep in a high interest TFSA savings account (Ally offers 2%). Because you have short term goals I would stay away from stocks etc for this account. Some of these funds should be untouched as an emergency account as well. 

For your RRSP you are able to contribute *but not claim* the deduction in the current year and can defer it to a year if you believe you will be making more money. As new grads I would assume this scenario is likely. 

Finally, don't put all your eggs in one basket. Start a monthly PAP into ETF's or mutual funds etc, which could be held in your RRSP or a TFSA. These should be marked as long-term investments as part of your longer term goals. 

Goodluck.


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## Guigz (Oct 28, 2010)

Good job on the early foot hold and congrats on the wedding!

I would recommend that you save 20% instead of 10% for the downpayment. That way, you save several thousands of dollars in CMHC insurance. 

My other tips would be to tame lifestyle inflation (maybe setup automatic contributions so that you do not even see the money) and go for something easy for investing in the beguining before delving in the more complicated stuff.

The TD e-series are a great choice for starting to invest.

As others have said, don't tie too much money in your investments as you have many shorterm goals and you would not want to be in a position where the markets drops and you have to sell.

as for your questions:

1) DRIPing is fine in a TFSA. For example, if your initial contribution of 10K grows to 11K due to capital appreciation and DRIPing, you can withdraw 11K tax free. The withdrawal also triggers a 11K increase in your contribution room.
2) If your gross salary is 46K, it might not be worthwhile to contribute to your RRSP right away given the low tax bracket you are in, especially if you expect a growth in your salary. It was not clear wether your salary was gross or net (i.e., you list your combined net salary at 88K). 
3) I really like the e-series. It is a very good place to start.


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## Saniokca (Sep 5, 2009)

Great start!

I would advise against buying any real estate at such young age.

So many things could change, you don't want to be tied to your condo/house. Look around this forum and see all the pros and cons.

I would also max out the TFSA before putting anything into RRSP.


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

*another biased reply*

It should be noted that the vast majority of replies from user Montrealer come with extreme bias to promote purchasing real estate. This "advice" is not objective. These posts are borderline spam.


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## Causalien (Apr 4, 2009)

Invest in your social connections. Actively spending money to meet new ones and build it out. 

This is from me, as I look back to understand the #1 contribution to my life. Of course being able to do so implies you are responsible with your finances.


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## Sherlock (Apr 18, 2010)

Azrie said:


> 22K in chequing account


This is a huge waste, you could be earning interest on most of that 22k.

My advice: since you can save 2k a month, you will want to avoid investing directly in stocks and ETFs due to the trading fees, and instead invest in some index mutual funds, because mutual funds don't cost anything to buy or sell. The TD e-series funds are highly recommended around here, look into those.


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## eulogy (Oct 29, 2011)

> My other tips would be to tame lifestyle inflation


This is really good advice. I owe a lot to keeping my lifestyle expenses as flat as I could as my income took a big step up. The problem a lot of people suffer from is that they start getting a bigger paycheck, so they get a more expensive lifestyle. Makes it hard to save.



> I would advise against buying any real estate at such young age.


I also agree. Houses will always be for sale, so there never should be a rush. If you can't save 20% for the down payment, plus a nice emergency fund than you probably shouldn't get one. For me, being young I didn't want to be tied down to a house. It gives me much more financial room to travel, take risk, and I know that there will always be houses for sale when that time comes.

My advice, save up some money, do a little traveling, get a head start on your retirement savings. You're a young couple. Have fun.


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## Sampson (Apr 3, 2009)

the-royal-mail said:


> This "advice" is not objective.


No advice given here is objective, it is all opinion. The purpose of discussion is to get a breadth of opinions.


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> It should be noted that the vast majority of replies from user Montrealer come with extreme bias to promote purchasing real estate. This "advice" is not objective. These posts are borderline spam.


For once, I agree with TRM 100%. Montrealer should be banned.


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## Plugging Along (Jan 3, 2011)

Though I don't agree with Montrealers advice, and think it is extremely biased. Its a little unfair to ban someone for giving poor advice. His advice isn't the most awful I have heard, it applies to some, but it's just rather tunneled visioned and fails to factor the fact that real estate is not the best investment for every one.


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## marina628 (Dec 14, 2010)

I thought the plug for real estate was a big obvious considering they only got married six months ago and all it will take to change their ability to save is one baby and a year maternity leave.Enjoy your life and do your traveling now before you get tied to mortgages ,debt and children.


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## Plugging Along (Jan 3, 2011)

Back to the op. 

Congrats on being in our position of debt free after school, and having some assets. I think putting money in the Tfsa to max it is a great idea and you have the flexibility to take it out.

Honestly, I think the most important things is learning to save, which you have done well, invest in your careers, this to me is the biggest return one can make especially early on, enjoy the wedding and all that stuff, keep it under check, and then you will have another whole new phase of life to plan for.


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## Maybe Later (Feb 19, 2011)

I agree with marina and Plugging along. I will only add that I would prioritize your goals and as your life situations change (house, kids, etc.) make sure your family is protected accordingly (increased savings, insurance, wills, ...)

Best wishes.


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## Montrealer (Sep 13, 2010)

With all due recpect to all of you, I know people in their 20's who have purchased and sold real estate and made up to $100,000.00 profit and don't even have kids yet and that's not here in Quebec, it's in Ontario, B.C and Alberta as well. 

I am 29 and I have done the same in the past, if your all older and made mistakes when you were younger, it's your fault and people like the OP should be given the best advice for THIS DAY IN AGE!

FYI: I am not soliciting my services on this forum, I am here to gain more wisdom like all of you.


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## Jon_Snow (May 20, 2009)

Buying real estate now in Canada means buying at the height of a real estate bubble. Not a good idea.


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## balexis (Apr 4, 2009)

Like many others, I would advise the OP to think about purchasing real estate very seriously before doing so. Lock-in to a location early in your career, increased burden if you want to leave for a long trip, etc.

@Montrealer: everyone is entitled to their opinions. However, most of your interventions are short and sum up to "Buy real estate, trust me you won't regret it". That is, IMO, a zero-value contribution to this forum.


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## GOB (Feb 15, 2011)

Montrealer said:


> With all due recpect to all of you, I know people in their 20's who have purchased and sold real estate and made up to $100,000.00 profit and don't even have kids yet and that's not here in Quebec, it's in Ontario, B.C and Alberta as well.
> 
> I am 29 and I have done the same in the past, if your all older and made mistakes when you were younger, it's your fault and people like the OP should be given the best advice for THIS DAY IN AGE!
> 
> FYI: I am not soliciting my services on this forum, I am here to gain more wisdom like all of you.


That's like saying "I know a friend who bet $100,000 on roulette and won. You should do it too!"


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## Montrealer (Sep 13, 2010)

Everyone is entitled to their own opinion, thank you.


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## Saniokca (Sep 5, 2009)

As much as I disagree with Montrealer regarding real estate, his voice should be heard.


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## Plugging Along (Jan 3, 2011)

Montrealer said:


> With all due recpect to all of you, I know people in their 20's who have purchased and sold real estate and made up to $100,000.00 profit and don't even have kids yet and that's not here in Quebec, it's in Ontario, B.C and Alberta as well.
> 
> I am 29 and I have done the same in the past, if your all older and made mistakes when you were younger, it's your fault and people like the OP should be given the best advice for THIS DAY IN AGE!
> 
> FYI: I am not soliciting my services on this forum, I am here to gain more wisdom like all of you.


Don't get me wrong, I actually like real estate as an investment. My family loves real estate and I have been managing it for them since my early teens. I have multiple properties, and have done very well in real estate, and more than half my net worth is in real estate. However, I do think it is irresponsible to think that everyone should be in real estate and that it is a good investment for all people.

When many go bankrupt, it's often not just consumer debt that causes this. Often they are anchored with a mortgage that is inflexible, and payments that are too high. 

Your advice isn't awful, but it doesnt factor the specifics of the investor. One shouldn't be in real estate if they are not financially stable, have money saved up, and are in it for the long term. I am actually huge believer that real estate will always make money, but you may have to hold it for a very long time. This long time could be as long when I am know longer around, and have passed on the estate to my children. In order to be gaurenteed a return, one has to have the ability to weather the ups and downs of the cycle, and hold as long as it takes. I know people who have lost money on real estate because they had to move, could no longer afford the payments, didn't have the money to float repairs, etc. A real estate investor to either have the capital to weather through the times, so cash, or the time to weather it through. Telling someone just starting out in their lives to buy real estate without knowing their over profile is just irresponsible.


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## Guigz (Oct 28, 2010)

Montrealer: The problem with your advice is that it is completely based on anecdotal information (i.e., you know a guy that made 100,000$ investing in a house). The problem with anecdotal information as an argument is that you look at a specific example that is not a representative sample of the population and then you use that to generalize this example to the entire population. Clearly, there is a disconnect there.

Only when you look at representative segment of the population can you make generalized claims. For example, based on general statistics, real estate was indeed a good asset class in the late 90s, early 00s. Another example is that real estate made a whole lot of people lose a whole lot of money in the last 2 years in the states. This is not anecdotal information.


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## Causalien (Apr 4, 2009)

Montrealer said:


> With all due recpect to all of you, I know people in their 20's who have purchased and sold real estate and made up to $100,000.00 profit and don't even have kids yet and that's not here in Quebec, it's in Ontario, B.C and Alberta as well.
> 
> I am 29 and I have done the same in the past, if your all older and made mistakes when you were younger, it's your fault and people like the OP should be given the best advice for THIS DAY IN AGE!
> 
> FYI: I am not soliciting my services on this forum, I am here to gain more wisdom like all of you.


I am one of these ppl you are referencing and I do not endorse buying real estate now. 

BTW you can't make 100k in Quebec but you can at least make 50k with RE. More if you milk it good with renters.


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## Montrealer (Sep 13, 2010)

Causalien said:


> I am one of these ppl you are referencing and I do not endorse buying real estate now.
> 
> BTW you can't make 100k in Quebec but you can at least make 50k with RE. More if you milk it good with renters.


Who said you cannot make $100K in Montreal or Quebec? Do you have statistical proof saying that it's impossible? Back it up!


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## Sampson (Apr 3, 2009)

Disclaimer: I in no way endorse the advice that Montrealer is dishing out.

However, I see no less value in his suggestions (i.e. he has made money doing something and now advocates it) than when I offer my advice/opinion on diversification and the utility of fixed asset allocations in your portfolio. I don't consider myself a troll for pushing fixed asset allocations, maybe others see me that way, but if they do, they should punish CC even more 

From time to time, I try to back up using academic references and explain why I hold those beliefs, but they are as valid as those offering suggestions of using tactical asset allocation. The onus is always on the person asking the question to weigh the opinions and make up their own mind.

If you are tired of weighing in on the 'is real estate a good investment now', then DON'T PARTICIPATE, but it does no good to try and eliminate the unpopular voice.


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

I'll have to disagree with you Sampson. If you look back through the thread you will see that the vast majority of us disagree with Montrealer, not based solely on his opinion, but based upon his extreme bias and obvious agenda here in CMF to push RE at all costs through sensationalism and speculative stats. His posts are irresponsible and are not sensitive to the situation at hand. He is a RE broker and despite everyone here who takes issue with both his message and approach, continues posting bogus articles and further pumps RE at any cost. This compromises the integrity of CMF and is akin to spam.


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## Barwelle (Feb 23, 2011)

Montrealer: Do you have statistical proof saying that markets sustain bubbles?

Buying a house right now means taking a likely risk that you'll be paying a $400,000 mortgage for a house that is worth much less than that.

Yes, that is a risk with anything you buy and expect to make money from. But, at this point in time, that likelihood is much greater because of the runup in house prices and household debt compared to the relatively slow increase in wages.


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## Montrealer (Sep 13, 2010)

the-royal-mail does not seem to understand basic english and my private message to him earlier this morning. 

Oh well, here it is again in simple*laymen terms, in bold so it is understood by everyone here. 

*Most people on this forum DO NOT live in Montreal or Quebec, I am NOT pushing real estate or my services to anyone here nor do I want to make a buck off of anyone here. I am simply offering my opinion since I am entitled to one and am saying that I have profited from real estate in my 20's and will continue to do so in the future because I do not believe in the stock market and I do not believe in other investments. For those of you that don't know or are new, YES, I am a Real Estate Broker but I also have another career and my real estate license is a tool I use to invest for myself, friends and family.*


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## Montrealer (Sep 13, 2010)

Barwelle said:


> Montrealer: Do you have statistical proof saying that markets sustain bubbles?
> 
> Buying a house right now means taking a likely risk that you'll be paying a $400,000 mortgage for a house that is worth much less than that.
> 
> Yes, that is a risk with anything you buy and expect to make money from. But, at this point in time, that likelihood is much greater because of the runup in house prices and household debt compared to the relatively slow increase in wages.


I agree with you, but I am asking why it's not possible in Montreal when I have done it, I have seen others do it and it happens everyday. 

My last property was purchased for $140,000.00 and sold for $289,000.00 in Montreal, in Quebec and during a so called recession. 

Do the math!


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## Barwelle (Feb 23, 2011)

Oh, sure, it's possible. But what everyone's saying here is that it is very unlikely.

You were fortunate, or perhaps you did very well with your research and sales tactics. But can everyone do that? You are an RE broker, so you have insider info and connections. 

Are there enough deals like that to go around? Can we really expect house prices to keep going up and up? Then there are also the costs associated with buying and selling houses that the average person has to pay.

Just because you've done it once (or a few times), doesn't mean that people (yourself included) can do it again.


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## Young&Ambitious (Aug 11, 2010)

*cough cough* and going back to the OP.... regardless of everything that has been said here, you should do what makes sense to you and you believe in. Sometimes it's nice to have a place you own, can't get kicked out, can paint every wall a different colour, and even have as many cats etc as you would like in it if you so care. 

Stick around CMF and read everything with a grain of salt and do your own independant research and analysis. You're off to a good start. 

Cheers


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## Echo (Apr 1, 2011)

The OP should be commended for having no debt, $20k in TFSA and $20k+ in cash at such a young age. That's incredible! And saving $2k per month is fantastic.

Your goals are very reasonable. I don't want to speculate which way the real estate market is headed, but I don't think you have much to worry about. The average home price in Edmonton is $366k, and with your current savings (and savings rate) you should have a nice down payment.

There shouldn't be any issues setting up a DRIP inside your TFSA. There are no tax issues to worry about, any growth will be tax-free and the dividends that you are reinvesting don't count as contributions.

I wouldn't start an RRSP yet - wait until you take care of the 4 financial goals you stated first.

TD E-Series is a good choice if you want to go the passive investing route.

My questions to you are - will you be using the $20k inside your TFSA for a down payment along with your $22k in cash? Or is your plan to leave the TFSA for the long term and continue saving up $2k per month in cash until you have enough for a down payment?

Nothing wrong with either choice, just curious.


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## Sampson (Apr 3, 2009)

@ TRM 

I have no issue with someone biased pushing their ideals. Until the poster starts linking to a commercial site or link, they are not violating any of the CMF rules.

Even if the poster was a RE broker, so what? their opinions should be heard also - this is a free public site for discourse, Montrealer, nor you, nor I have any obligation to reveal our background or agenda.

I have an analogy of your criticism - it would be like saying a medical Dr. giving advice to use antibiotics is biased, sensational, and not-trust worthy because a naturopath's advice is better.

I've read most of Montrealer's posts, and truthfully, most people disagree with the advice because they believe/assume the Canadian RE market is experiencing a period of over-valuation. What is the evidence of this? Here in Calgary, the average single-family house costs over $415,000 - expensive no doubt, but the average family income is easily over $120,000. Debt servicing ratios in this city are well within the 'recommended' 30-35% level. Unemployment rates are amongst the lowest in the Country. Most large corporations continue to hire AND grow salaries - and Northern Alberta is still experiencing a shortage of workers. Housing prices have also stagnated since 2008/09.

So is RE a good investment?
Affordable? - check
Jobs to be found? - check
Incomes rising? - check
Migration into the city? - check

There are really 2 issues here. Does Montrealer have an agenda? maybe, but that's doesn't mean the opinion shouldn't be voiced/heard. Is the advice so bad that people reading it face personal financial risk? maybe, but the same could be said about people touting stock purchases, options strategies as investment strategies, people touting using HISAs and losing the earned value of their money to inflation.


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## humble_pie (Jun 7, 2009)

sampson it's great to uphold freedom of speech as a driving principle & i'm grateful you did just that.

but there's more to this story than has come out in this thread. Montrealer used to invite prospective clients to send him PMs so he could "explain" in detail about all the money they could make in real estate.

same party also has a history of picking on the same victim profile. Young university graduates with brand-new jobs but not yet, because of their youth, much investment knowledge. In other words, people who are easy to prey upon.

and the story gets darker. Montrealer also has a history of sending vile, repugnant assaults by PM to parties who might question his presence here in cmf forum. I've received one of these delightful billets-doux & i sent it to the moderators. You will note upthread that, rather incredibly, he boasts that he is still doing this.

montrealer, here's an open message for you by public post rather than via the dirty little PMs you indulge in. You are harming your real estate career by behaving as you do. You will continue to cripple your business reputation until you learn how to get yourself under control. The way to serve clients properly imho is by addressing their true needs, not by pushing an inappropriate sales agenda upon them.


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> So is RE a good investment?
> Affordable? - check


I heartily disagree.
RE today in Canada coast to coast is highly unaffordable (except maybe a few pockets with low growth and high unemployment, but who wants to live there anyway).

Mortgages in mid to high 6 figures at 2.99% is _not_ affordable.
Once you add in the fact that many of these home owners already have HELOCs taken out against whatever equity is in there, that makes the situation worse.



> Jobs to be found? - check


Only in certain sectors and regions.
Noticed our unemployment rate recently?
See how it is slowly and gradually creeping up, inspite of all the shell games that the govt. is playing to pump the RE market?
The largest provinces of Ontario and Quebec are amongst the worst in terms of increasing unemployment.



> Incomes rising? - check


Nope, data by the conference board and other institutions show that _real_ wages are actually falling.
Real median incomes in te last 25 years have risen very little.



> Migration into the city? - check


True, but is that a good thing?


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## Sampson (Apr 3, 2009)

@ h_p - fair enough - I'm not privy to those PMs 

@ HC - I was only referring to what we are seeing in Calgary. Certainly people have to be cautious in these times, but everyone speaks of the pending doom as if was certain. We've all been around the block to know how reliable our instincts about money matters is.


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