# My start to riches..



## avatar (Mar 3, 2013)

I’ve enjoyed reading the Money Diaries pages on this website the last few weeks, It has motivated me to try it out myself.. and I hope to use it as a means to learn and stay on track towards my goals. 

Expenses: 

Mortgage Payment: $1250
Hydro/Cell/Internet: $300
Gas: $120
Insurance/Travel: $270
Food: $350
Eating out: $200
Strata Payment : $210

ASSETS:

Chequing account: $26.94 (used for paying bills, day to day expenses, etc)
Savings: $950 
TFSA: $7,703.16 (Scotia Mutual Funds for now, beginner investor) 

Total Assets: $8,680.10

DEBTS:

Credit Union LOC: $3,694.16 @ 5.5%
Bank LOC: $3,863.77 @ 6.0%

Total Liabilities: $7,557.93

Total net worth: $1,122.17

Currently have monthly automated transfer of $500 to TFSA.
$200 (http://www.scotiabank.com/funds/profiles/FP109850_74_ENG.pdf)
$200 (http://www.scotiabank.com/funds/profiles/FP6627_74_ENG.pdf)
$100 (http://www.scotiabank.com/funds/profiles/FP3722_74_ENG.pdf)
Also made a one-time purchase (http://www.scotiabank.com/funds/profiles/FP4137_74_ENG.pdf)

Goals within 6 months.

1 – Pay down debt to $3,000
2 – Increase my TFSA account balance to $10,000
3 – Have total next worth of at least $10,000
4 – Have TFSA funds invested in ETF’s as opposed to Mutual Funds

Any suggestions, comments are welcome.


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

Welcome.

But it makes no sense to me to be carrying debt while at the same time are spending money on MFs every month. If I were you I would clean out your TFSA and pay off those debts IMMEDIATELY. Stop falling for "monthly payments" rhetoric and try to operate with as clean a slate as possible.

I feel your focus should be on debt repayment and savings, not investing. Get an emergency fund established for yourself and stop relying on credit to function.

Good luck.


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## jcgd (Oct 30, 2011)

I somewhat disagree. Mentally, it was much easier for me to save while paying down debt than it was paying down debt first before saving. Once my net worth was over zero and I had my cash flow under control and most importantly, I had developed discipline, I aggressively paid down my debt.


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## Spudd (Oct 11, 2011)

I agree with The Royal Mail. A 6% interest rate is pretty high, you'd be doing well to beat that return via mutual funds, whereas if you pay off the loans it's a guaranteed return. Then once those are done (which should be pretty much immediately) you can direct the $500/mo plus whatever you were paying to the loans into the TFSA to pay it back (as long as you won't go over the TFSA limit - remember, if you withdraw from the TFSA, you can't pay back what you withdrew until the next calendar year - i.e. January).


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## mind_business (Sep 24, 2011)

TRM (Post #2) is the way I'd handle it. At 5.5 and 6% interest, you're far better off paying off debt. I know that psychologically it's more 'fun' to build up investments, however you'll be farther ahead paying off the loans. Your Net Worth, which is what really matters, still goes up when you pay off debt 

The second thing you should do is build up a solid emergency fund. If you're in a hurry for investments, at least put away a couple months worth of expenses in a savings account, then start adding to investments. You can always build this up farther by contributing some to investments and some to the emergency fund. 

Until your debt is paid off, you can always rely on your LOC if you get into a 'real' emergency (loss of job, etc). Otherwise, I'd recommend a couple of years of LBYM so you can get a good start in life. I have to admit that I'm taking a guess that you're relatively young ... however you didn't mention this in your post.


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## mind_business (Sep 24, 2011)

Btw, I tend to get right into offering advice / criticism, without acknowledging the good work done to date. It's obvious that you're focused on the right things, and I'm sure you already have plans to address what we've recommended ... or something similar. Your goals are sound, even if you defer paying off the loans and adding more to your TFSA. You can't go too wrong either way ... you'd just be farther ahead paying off the loans 

Good luck, and keep us posted. It's always good reading about people's journeys ... especially when they're starting out.


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## rd_aaron (Jun 24, 2011)

You put a mortgage payment as an expense, but you never included your mortgage as a debt. Was there a reason?


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## Feruk (Aug 15, 2012)

Ok I see a few issues:
1) The MERs on those funds are from 1.73% to 2.77%! The MER on the blue chip fund is 2.77%. I own an ETF that gives me broad exposure to the US market (VTI:US) and I pay 0.05% MER. You pay 5500% more in fees for a product that will likely do worse over time!! Shame on you for hating your money so much. If we say an average yearly return is 6%, why would you wanna give half away to the bank? General rule: ANY product with a MER over 0.5%, don't even look at as an option.
2) To beat the dead horse, debt payment should come before savings. Pay that off and suddenly you'll have free cash flow to spend that was previously going to debt repayment.
3) Your largest asset is usually your house. You should have it in your total assets and the mortgage in total liabilities.
4) The amount in your combined accounts minus your TFSA is not even enough to cover one mortgage payment, which means you live paycheque to paycheque

Basically, if I was in your shoes, I'd stop contributing to those funds immediately, sell what's required to pay off debts in full, and build up at least $5K in an account you have immediate access to (chequing) before starting to put anything away.


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## avatar (Mar 3, 2013)

thanks for the advice. - *~ walks away from computer, jumps off the cliff ~*

lol. all kidding aside ..

Obviously the biggest thing that jumps out to me is the debt/LOC issues. You guys are right. I will figure out a more progressive approach to repay my debts. As of last year it was as high as $15,000 (including a $4,800 credit card) - but once I paid off the CC, I've slowed down my re-payment plan - oversight on my part. 

mind_business - i'm 27.. and I've started to take finances seriously only in the past year. so I feel like I've started a bit late. 

I'll post my new plan tomorrow. after I climb up that cliff I jumped off earlier. :biggrin:


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## KrissyFair (Jul 8, 2013)

Hang on avatar *pulls you back from the ledge*

You're doing a good job  Especially with that amount of debt repayment. But a couple of things:

1. your net worth math is a little off. As someone pointed out, you don't have your mortgage listed as a debt. To that I'll add that you don't have your home value listed as an asset. I'm going to assume that you're not under water on your home, so once you do that you may find that your net worth already meets your goal of $10k. Yay, mental boost!

2. Obviously, the absolute best return you could get is to pay off that debt today, then start fresh with savings with your increased cash flow. But it also seems you're not comfortable with that, and that's your prerogative. You've listed paying all but 3k of it off in 6 months, and putting $500 into your TFSA each month. If you add that $500 to your debt payment, you'll kill it in 6 months without having to watch your savings go to 0.

3. Does your chequing account charge you fees? If it does, then consider building up a float of whatever amount your bank needs to waive that fee. It'll act as your cash emergency fund (as long as you don't inadvertently spend it) and give you the equivalent of a 6 or 7% return via the fee savings.


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## avatar (Mar 3, 2013)

*pallas madamel*

Thanks Krissyfair.

That's a good point. If I consider my home as an asset I would be up $21,000.! (ahh.. time to retire!) I figured I'd leave out the home as an asset/liability just to focus my attention on short term investments vs. short term debts. 

My new plan of attack will be the following - 

Goals within 6 months.

1 – Pay down debt to $0.00
2 – Increase my TFSA account balance at $9,000
3 – Have total next worth of at least $10,000
4 – Have TFSA funds invested in stocks/ETF’s as opposed to Mutual Funds

I've decided to place extra money from my paycheques on debt payments - plus - $500 monthly payments to TFSA will be stopped and moved towards debts payments. I`ve decided that the only way I`ll add to my TFSA is only if I figure out ways to make side income. Looking forward to making this work.


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## none (Jan 15, 2013)

Bah - empty your TFSA and pay off those LOC. 6% return with no risk - DO THAT.


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

Well done avatar. I think you've got the right idea. Go forth and implement and post back in a couple months and let us know if you're on track.


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## Xoron (Jun 22, 2010)

none said:


> Bah - empty your TFSA and pay off those LOC. 6% return with no risk - DO THAT.


IF you do this, be careful of any back end fees / short term holding fees for selling those mutual funds. Check the fund's prospectus to see what the min holding period is (typically 90 days) and whether you'd owe any fees for selling them.


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## avatar (Mar 3, 2013)

ok.. time to update the thread. 2 weeks away from the 6 month mark.

Did i reach my goals? - No.... not even close. but it wasn't a complete failure either.

update as follows...

1 – Pay down debt to $0.00 --------- * FAILED - $9,000 balance owing.*
2 – Increase my TFSA account balance at $9,000 ---------------- * PASSED - $11,300 currently in TFSA*
3 – Have total next worth of at least $10,000 ------------ *FAILED - currently sitting at $2,300*
4 – Have TFSA funds invested in stocks/ETF’s as opposed to Mutual Funds *PASSED - Mutual Funds cancelled, starting to learn and invest in stocks*

Overall it's obviously a pretty big fail on my part.. Things did come up unexpectedly, but no excuses.. I'll need to do better.

It's funny.. before I logged in to this site today, my personal feeling was that I'm doing pretty well.. Now, as I look back at my goals from 6 months ago, I realize I've barely made any progress, certainly disappointed with myself. Oh well, looking forward to new goals for the next 6 months. Have a few days off to think things over.


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## GoldStone (Mar 6, 2011)

avatar said:


> 4 – Have TFSA funds invested in stocks/ETF’s as opposed to Mutual Funds *PASSED - Mutual Funds cancelled, starting to learn and invest in stocks*


Mutual funds are fine as long as you keep the fees low. You are not likely to do dramatically better picking your own stocks. Are you the next Warren Buffett? Probably not.

Focus on making more money. Do whatever you can to advance your career. That would be a much better use of your time than learning to pick stocks.


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## My Own Advisor (Sep 24, 2012)

Unless your only debt is a mortgage or a car loan, and the mortgage should include lump sum payments, I would suggest killing off all LOC debt before even thinking about putting money into a TFSA or RRSP or anything else.

I can appreciate you are trying to save, but keeping the LOC debt when you could pay it off with your TFSA is not practical.


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

Hi avatar,

Thanks for coming back and updating the thread. I haven't been here in a while and appreciate the update. To echo most comments above, please do not feel you need to jump off any cliff. The tone and advice may seem a little harsh but I think most people around here mean well and have the right idea. That said, I am personally confused as to why you continue to carry the $9000 debt. What interest rate are you paying on that? Why not pay it off right now? You have TFSA money to do it. All you have to do is sell whatever investments the TFSA has and transfer the cash to the lender. It's that easy.

Please remember that investing is only one small part of proper household money management. You are not failing but I don't think you fully understand money management. That needs to be a TOP priority in any plan such as yours. I feel the proper order of steps is as follows:

1. pay off all debt (except possibly mortgage as that tends to be a very large expense and you need to live in the meantime)
2. save tiers for emergency (6-12 months living expenses unaided)
3. save money for investment/retirement purposes and invest in equities etc as you seem to have done

This is not instant gratification. Slow and steady but we need to get you on the right track first. Keep trying.


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## Janus (Oct 23, 2013)

I'm 100% in agreement with Royalmail - kill the debt. It's a simple plan and when you get rid of the debt, you'll feel great psychologically. Especially since you're coming up on the end of the year - come 2014 you'll be able to put all that money back into the TFSA as you save aggressively. You'll be investing soon enough - another motivator to save towards a nice TFSA balance after cleaning house to kill the LOC.


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## Xoron (Jun 22, 2010)

Janus said:


> I'm 100% in agreement with Royalmail


Another one in agreement here. Unless you're shooting the lights out on your TFSA investments, paying off the debt is a wise choice. Plus, you can funnel all that money, which was going to debt payments, into your TFSA account on a regular basis. Before long, you'll have that 9k back in there and more besides.


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## wendi1 (Oct 2, 2013)

Looking over the back-and-forth here, it's pretty obvious - the difference between most people, and posters here is the normalization of debt.

Most people think there is nothing wrong with a car payment, or a LOC, but here there is usually a very distinct dislike for debt of most kinds.

Incidently, getting rid of $9K worth of debt in 6 months will require payments of $1500 a month, plus whatever interest is charged on it. Is that reasonable given your income and expenses? Seems like a lot to me.


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## donald (Apr 18, 2011)

I saved/invested while having debt in my late teens/early 20's.I would even be in overdraft(while contributing to rrsp).YEAH i know it does not make sense but for ME it did(mentally).
I looked at it like if i waited till everything was squared away and my debt was removed i would never get started.
I almost had a reverse bucket compared to say royal mail(when i was young)
Habit formation/building momentum is huge imo......even though it did not make sense.I wanted to get in on the magic of compounding and i needed to start.
One slight problem with life is-sometimes you got to start where you are,had i waited till everything was perfect(debt free) i wasnt sure the day would come.
i had a investment ''bucket'' and i did not deviate,no matter what.


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