# Our goals!



## jwsclark19 (Nov 24, 2014)

We are getting married in 1.5 years, we're both 25 years old, and here is our situation:
Combined income: 104k/year gross = $6100/month net
Here are our liabilities:
[email protected]% - Mortgage
[email protected]% - Personal LOC
[email protected]% - Student LOC
[email protected]% - Her student loan
$17k - Car loan (0% interest)

The plan is:
$1000/month on the mortgage (an extra $220 on top of the original payment)
$825/month to debt repayment
$250/month to emergency fund. Once we have a $10k emergency fund saved, start putting the $250/month towards mortgage. 
$300/month to wedding fund (we are also receiving some money from family for the wedding
$150/month goes into my work RRSP which is matched by my employer
This leaves us enough money left over for enjoyment, groceries, gas, insurance, condo fees, property tax, cell phones, utilities and all of the other expenses encountered each month.
This way, we should have all of our loans, aside from mortgage and car loan paid off in 4.5 years. Once our loans are all paid off, and our wedding is done, the idea is to take that $1125/month and split it between the mortgage and RRSP contributions. We are happy in our two bedroom condo, and the mortgage payments, property tax, condo fees, and utilities amount to 27% of our gross monthly income. The bank approved a $300 000 mortgage, but I said screw that, because when interest rates go up, that's going to hurt. No point living beyond our means.


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## nobleea (Oct 11, 2013)

If you can stick to that plan, you'll be golden. At 29 or 30 when you'll be thinking about kids (if you are), your mortgage balance will probably be under 100K and likely no other debts. What a great position to be in. I assume you are both fairly fresh in your careers, which means some increases in income and responsibilities in the future. For debt repayment, optimize your payments to get the biggest bang for your buck. If her student debt is from the govt, the effective interest may be lower (since its tax deductible). If you really want to optimize, you should take the $220 extra you put on the mortgage and put it against the higher interest loans.

Resist the urge of lifestyle inflation. A 2BR condo is great for now, but in a few years when your friends start getting shinier/bigger places, don't feel like you have to as well.


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## peterk (May 16, 2010)

Things are looking good for you guys. Your balanced approach to saving and paying down debts and mortgage is a good one, as you get to see improvements in all categories as you go.

From a strictly mathematical point of view, you would be best focused on paying only the minimum required on the Mortgage, student loan, and car, and putting all the extra money against the LOC and her loan. Similarly, it would be best to forgo the wedding savings currently, and then increasing the wedding savings closer to the date. Doing these things will net you more money in the end as it takes best advantage of the various interest rates on debt and savings. But what you are doing is also solid.

Is your wedding fund going into a TFSA with a high interest savings account?


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## jwsclark19 (Nov 24, 2014)

Thanks for the input guys! All great tips! Thanks peterk for the insight into reducing the wedding savings now, and increasing later. I never considered that. For the wedding, yes it is currently going into a TFSA with high interest savings. Also, I am currently doing exactly as you mentioned and only making the minimum payment on the student LOC ($115/month), and the remaining $400/month on my LOC, and $300/month on her student loan. The reason we're paying extra on the mortgage is because we are expecting interest rates to go up. Since we got a fantastic mortgage rate locked in for 5 years, we want to take advantage of that as much as possible before we have to renew our mortgage in 3.5 years, when interest rates will be higher.


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## jwsclark19 (Nov 24, 2014)

Another thing I would like to look into is getting a consolidation loan. If we can get a $38000 consolidation loan with an interest rate that would cost less than the combined interest we are paying on the current debt, that would put us in a better position as well.


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## nobleea (Oct 11, 2013)

jwsclark19 said:


> Another thing I would like to look into is getting a consolidation loan. If we can get a $38000 consolidation loan with an interest rate that would cost less than the combined interest we are paying on the current debt, that would put us in a better position as well.


I've always considered consolidation loans to be one step above bankruptcy, but maybe that's not the case. I doubt you would get a better rate. Your weighted average interest rate is about 4.85% on the 38K you owe (accounting for the tax benefit of the student loan). I think you'd be hard pressed to beat that rate in a personal, unsecured loan.


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## jwsclark19 (Nov 24, 2014)

I think you're right. After doing some research online, it seems consolidation loans are more for people starting to get in trouble with credit card debt. So I doubt they would be under a 5%, or maybe even 10% interest rate.


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## My Own Advisor (Sep 24, 2012)

Overall, impressive goals for someone in their 20s. 

You are focused on killing debt, this is a great attitude to have. 

Good luck on the consolidated loan and slaying the debt dragon


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## hboy43 (May 10, 2009)

jwsclark19 said:


> The reason we're paying extra on the mortgage is because we are expecting interest rates to go up. Since we got a fantastic mortgage rate locked in for 5 years, we want to take advantage of that as much as possible before we have to renew our mortgage in 3.5 years, when interest rates will be higher.


I don't follow your logic here. I see no sense in paying on the mortgage at ~3% when you have another loan at 6% that will be discharged by the time the mortgage comes due (as per your plan as stated). Same for the 5.5% loan (give or take, I did no calculations here). So now consider the 4.5% loan. You are speculating that the mortgage renewal rate will be > 4.5%. Might be, might not be. Personally, I'd take a bird in hand is worth 2 in the bush and pay it down before the mortgage. In any case, you do not need to decide this at this time, but at the time between when the first 2 loans are paid off and 3.5 years.

I think peterk's point was, might as well pay down the LOC now and ramp it up later for wedding expenses, and I agree with this point.

Finally, you might give consideration to arranging a home secured LOC which might be had at a 3% interest rate in contrast to the unsecured 6%. This will cost up front ~ $1000 for fees and home appraisal, but might work out in the long run, especially if you are staying in that home for a good long time. I would even suggest you talk to banks on this matter even if you know you do not want to follow through. A year or 2 down the road, one of them might offer to waive some/all the fees if they are desperate for some new business - it happened to me once. Many disagree, but to my way of thinking a secured LOC is a mighty fine emergency fund too.

hboy43


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## jwsclark19 (Nov 24, 2014)

Thanks everyone for the helpful input! Here's an update on our situation:
Here's what we're paying:
- $1000/month on the mortgage plus condo fees/property tax = $1439 total
- $400/month on the personal LOC (5.99% interest)
- $300/month on her student loan (5.5% interest)
- $116/month on my student LOC (minimum payment at 4.5%)
- $550/month to savings, of which $300/month goes into TFSA for the wedding

I've considered everything you guys said, and I think I will change my mortgage repayment to the minimum payment, since I still have it at 2.89% for 3.5 more years, and by the way things are looking, interest rates might stay down for a while. I will take this $200, and start paying $600/month on my line of credit. Also, we should be getting about $6000 in tax refunds every year for the next 3 years at least, and we are going to put all of our tax refund money towards debt repayment. If everything goes to plan, I'm expecting we will be debt free (aside from the 0% car loan and mortgage) in about 2.5 years. This still gives us some money left over for a reasonable level of enjoyment, which is important, because we won't be in our 20s and without kids forever. Once our wedding/honeymoon is done, we will take the $550/month, continue putting $250/month into our emergency fund, and the remaining $300/month will start going towards debt repayment, making our debt payments $1315/month. Once the debt is gone, roughly a year later or less, we will start doubling our mortgage payments. The remaining $600/month will be deposited into our individual TFSA's. 1 year later, our mortgage on the condo will be coming due, and we should be in a good position to upgrade to a house. We will likely have a kid around this time as well. I will keep this thread updated every couple of months. Thanks again for your helpful insights!


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