# What should I do next??



## Ihatetaxes (May 5, 2010)

Hi all,

Great website and I have been lurking for a while reading lots of interesting threads. I would love some of your thoughts on my financial situation and what you would do next if in my position to secure my families financial future.


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## shaune (May 2, 2010)

*Steady rate of return*

Check out Greg Habstritt's new book, "The RRSP Secret". Also check out Mortgage Investment Corporations (MIC's). A good one is Axcess Capital in Calgary (eligible for all registered investments). Or for open money, syndicated mortgages from Cedar Peaks Mortgage, also in Calgary. I get 11-14% return.


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## dogcom (May 23, 2009)

Pay off the mortgage is an easy thing to do, in your obvious easy financial position you find yourself in. I would also add some gold and gold stocks as insurance in this crazy world.

After that you could dollar cost average into equities and sit back and let the money pile up for now in safety as we see where this debt crisis ends up.


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## Berubeland (Sep 6, 2009)

In your position if you want to buy investment properties you can do so. Of course I am in favor of this. 

The really important thing is getting qualified help to develop your portfolio. This way you can avoid most of the pitfalls of buying the wrong thing in the wrong area. 

In your case I would even consider skipping the residential market entirely. The laws governing commercial and industrial properties are much more favorable then the residential laws. For instance if the commercial or industrial tenant does not pay rent you have the right to lock them out by the 21st day after not paying the rent. At that point you can sell their stuff to get your money back. Compare that to residential where if your tenant doesn't pay the rent you get to wait 3-4 months to kick them out. 

Renting these spaces is more challenging but once rented tenants stay for years.


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## Four Pillars (Apr 5, 2009)

Our situations are similar - I'm 41 with 2 young kids as well.  Our income numbers a bit different though (unfortunately for me).

$300-$400k of annual income is pretty huge. You can have a pretty good lifestyle and still save a lot.

Are your RRSPs both maxed out? At $400k I'm guessing they are but worth asking. That's a great place to put $$.

I would keep going with the mortgage - while you pay it off you can think about what you want to do next.

Have you looked into a Registered Pension Plan (RPP) for your business? I'll confess I know nothing about them other than that they can increase your tax-sheltered assets beyond the RRSP.


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## Sampson (Apr 3, 2009)

41? I always pegged you as a young lad (well in his thirties anyway)


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> 41? I always pegged you as a young lad (well in his thirties anyway)


You just made his day


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## msimms (Apr 17, 2009)

If your business is successful, I would continue to invest in that, that's unless every dollar invested in the business doesn't translate to greater than a dollar coming out of it.


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## Four Pillars (Apr 5, 2009)

Sampson said:


> 41? I always pegged you as a young lad (well in his thirties anyway)


No, I just act immaturely on a regular basis. 

Most of the Canadian bloggers seem to be in their thirties so it's not a bad assumption.


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## ashby corner (Jun 15, 2009)

I officially know "nuthin' bout nuthin'", but If I was in the enviable position of that type of salary combined with that type of asset accumulation, I'd be...scared...of doing anything too risky and losing it all!

I would take a certain amount of money and say "I can afford to lose this without affecting my life", and put it in high risk stuff. The rest: holy careful batman.


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## Ihatetaxes (May 5, 2010)

Thanks for the comments. Yes our RSPs are maxed out. The business is growing slowly but steadily and I take most of the profit out in salary but do put $2k/month into an ING business savings account that eventually will become a down payment to buy a commercial office rather than leasing forever. My accountant has lots of good ideas for sheltering money from tax but I have wanted the higher income the past couple of years.

Shaune's idea of MIC's is interesting. Hadn't heard of that before but I checked out Axcess's website this morning and seems interesting. Anyone else know anything about this type of investment?

We are getting about $25k back in our tax returns so I am going to put those against the mortgage and get it under $100k.


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## Sampson (Apr 3, 2009)

If you don't already have one, I would make a new plan to get to your $3M in 15-20 years. While it sounds like you tried this in the past and didn't get near where you thought you would, you should have gained some insight as to why your models were limited in the last plan.

Based on your current and future cash flows, and savings rates you should be able to create a couple of scenarios based of varying rates of returns, inflation, and savings rates - you could also try a Monte Carlo simulation if you are so inclined.

This should give you a basis for how much risk/reward you need to expose your assets to in order to reach the goal.


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## MoneyGal (Apr 24, 2009)

If you hate taxes as you say you do, setting up an individual pension plan (as Four Pillars suggested earlier) might be a good next step for you.


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## Cal (Jun 17, 2009)

I would talk to the accountant about an IPP as well.

Also, not sure on how your company is structured, I am assuming it is a corporation. Perhpas your acct can help reduce your tax bill through the corp as well, by having the corp hold some of your investments as well.

Ultimately it doesn't matter how much anyone makes, it only matters how much you keep, or at least don't spend.

Also not sure on what business you operate, perhaps there would be some potential to own property under that umbrella as well.

Now that i think about it, I think there is some tax advantages to selling a corporation as well, but that is something that you should discuss with an accountant.


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## rookie (Mar 19, 2010)

if i am making 200-300k in my business, i would look at investing more into my current business if i can and if there is scope for futher growth rather than handing out money to other people to run businesses that i neither understand how its being run nor have a say in it.


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## Sampson (Apr 3, 2009)

I just looked at your numbers and the math again,

and if your goal is simply to get to NW of $3M, assuming you can put away $100k per year (should be doable on your income, and low mortgage payments) - you get to $3M from your savings contributions alone.

Why bother with higher risk vehicles. I would weight 50-70% in fixed income, the rest in equities, and you'll get to your target at least 5 years early if we assume any reasonable real rate of return.


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## Ihatetaxes (May 5, 2010)

Sampson said:


> I just looked at your numbers and the math again,
> 
> and if your goal is simply to get to NW of $3M, assuming you can put away $100k per year (should be doable on your income, and low mortgage payments) - you get to $3M from your savings contributions alone.
> 
> Why bother with higher risk vehicles. I would weight 50-70% in fixed income, the rest in equities, and you'll get to your target at least 5 years early if we assume any reasonable real rate of return.


Good advice. We are around 80% equites right now, probably a little heavy. I have read that your age should be the same as percentage of fixed income so maybe some more GICs are in order


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## Ihatetaxes (May 5, 2010)

Sampson said:


> If you don't already have one, I would make a new plan to get to your $3M in 15-20 years. While it sounds like you tried this in the past and didn't get near where you thought you would, you should have gained some insight as to why your models were limited in the last plan.
> 
> Based on your current and future cash flows, and savings rates you should be able to create a couple of scenarios based of varying rates of returns, inflation, and savings rates - you could also try a Monte Carlo simulation if you are so inclined.
> 
> This should give you a basis for how much risk/reward you need to expose your assets to in order to reach the goal.


Thanks Sampson. Good points. Ended up losing a ton of money when the markets crashed in 08 and also owned too many underperforming funds thanks to an Advisor who was obviously chasing the highest commissions before I got rid of her and moved most of that money into ETFs.


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## Ihatetaxes (May 5, 2010)

MoneyGal said:


> If you hate taxes as you say you do, setting up an individual pension plan (as Four Pillars suggested earlier) might be a good next step for you.


Time to look into this IPP. Thanks.


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## OhGreatGuru (May 24, 2009)

_Neither of us has a pension but I am building equity in my business that could be worth quite a bit in 10 years if we keep growing._

Is the nature of your business such that it would actually be marketable at a good price in 10 years? A lot of small businesses are only good profit makers as long as the original owner is pouring his heart & soul into it. When you retire, would someone actually buy your business, or would your competitors just take over your customers?


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## Berubeland (Sep 6, 2009)

Buying your own location is an excellent use of some of your money. Many people do not realize that many companies get rich because of the value of their real estate. 

Owning your real estate has another beneficial effect. It can actually reduce your costs over time. It also insulates you from the risk of your landlord increasing your rent or terminating your lease. Both these things happened to me when I was in business. Moving is very expensive and every space has to be outfitted at your expense. Reducing costs is essential to longterm success.

There are some very attractively priced office and industrial condos for sale. It depends on your business needs. 

In short you will be your own tenant.


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## OhGreatGuru (May 24, 2009)

_We could buy an investment property ..._

From what I read on this site and others, being a landlord can be pretty time & energy consuming. Do you have the time & energy for this while running a successful small business? But buying a commercial property for the use of your business would make sense.


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## Ihatetaxes (May 5, 2010)

OhGreatGuru said:


> _Neither of us has a pension but I am building equity in my business that could be worth quite a bit in 10 years if we keep growing._
> 
> Is the nature of your business such that it would actually be marketable at a good price in 10 years? A lot of small businesses are only good profit makers as long as the original owner is pouring his heart & soul into it. When you retire, would someone actually buy your business, or would your competitors just take over your customers?


Traditionally companies in my industry sell for 2x revenue.


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