# 37 and just starting...if you had $3000K/month to put somewhere...



## tiffbou2 (Jul 4, 2013)

Where would you put it? 
We are debt free except mortgage after a long haul to get there. We have limited assets for our age. 
Here's what we have:
$18K RRSP invested in Quadrus (2.5% fees)
$9K invested with CST group plan (I know- bad - but we're locked in) for 2 kids ages 6 and 8
$70K equity in our home, but 16 years left on mortgage at 4.1%
My pension (Ontario teacher - I contribute $800/month - non-negotiable amount)

We've been good at budgeting the last year to get our debt taken care of, but I am really new to investing and trying to build my knowledge and get us going. 
Here is my plan for our $3K/month that we had previously been socking on the debt: 

We already put $100/month and $150/month into Quadrus and CST respectively– I’m thinking we’ll just keep contributing that and see what happens.

Put $500/month into an RRSP via a passive investment portfolio – I recently read The Beginner’s Guide to Saving for Canadians, which was co-authored by the Canadian Capitalist, and I thought for now, while I am still trying to build knowledge, I might just go with his recommended products and portfolio. 
Should we be opening a spousal RRSP? Right now our RRSP is in hubby’s name as I will draw my pension later on. 

Put $200/month into a self directed RESP for the kids. 

The additional $2000, we will put into a TFSA to build an emergency fund. Hubby works in a volatile industry. His job looks secure now, but there is no guarantee it will be there in 5 years time, or that he could get something in our area making the money that he does right now. I’d like to maximize this sweet spot we are in income-wise while I can. In a year, we can re-evaluate the TFSA, and maybe direct more of those funds toward RRSP.

Our house needs some repairs eventually – new windows and bathrooms – everything is original circa 1982. I am really tempted to borrow against our house equity in 3 years’ time when our mortgage needs renewal to do it, but I think a better plan is to probably draw the needed $$ out of the TFSA once that is built up in a few years’ time if hubby’s job is still secure.

How would you allocate the money? If you were a real beginner like me? I would love any helpful advice and suggestions and please no judgement on my past decisions or current ignorance.  I am trying. I don’t have anyone really to bounce ideas off of. All my friends are comfortably 50K or more in debt above their mortgages and hubby is not all that interested in the nitty gritty. I’m starting not to trust financial advisors since they seem more like salespeople.


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## MoreMiles (Apr 20, 2011)

tiffbou2 said:


> Where would you put it?
> We are debt free except mortgage after a long haul to get there. We have limited assets for our age.
> Here's what we have:
> $18K RRSP invested in Quadrus (2.5% fees)
> ...


Have you heard of "rule of 72"? You should google it. It's a simple estimate to say, if you have 2.5% rate, you will double its amount in 72/2.5 = 29 years. Why did I mention that? You are 37 years old, you will likely retire in about 29 years, that is around 65-66 years old.

Your mutual fund fee will take up 100% of your principal when you retire. If you invest a lump sum now, your retirement will be significantly smaller when you retire. If you have a low fee, you will likely have double the money left given everything else remains the same. Obviously, with gradual contributions, the calculation is different... but the idea is the same. 

So do not "let's keep buying 2.5% fee fund and see what happens" You know what will happen! We are not talking about small amounts... it's like losing half of your assets to your fund salesperson.

Also, house equity should not be considered as an investable asset. You should look at that as credit card limit. It's nice to have but don't spend it. Leave it out of any investment calculation in my opinion.


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## MrMatt (Dec 21, 2011)

TFSA for you to feel better about husbands job security.

However if you have a mortgage that allows you to make a payment/miss a payment, I'd prepay the mortgage quite a bit, 4% after tax savings is quite good, and still potentially functions as a bit of an emergency fund with the miss a payment options.


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## tiffbou2 (Jul 4, 2013)

MoreMiles said:


> Have you heard of "rule of 72"? You should google it. It's a simple estimate to say, if you have 2.5% rate, you will double its amount in 72/2.5 = 29 years. Why did I mention that? You are 37 years old, you will likely retire in about 29 years, that is around 65-66 years old.
> 
> Your mutual fund fee will take up 100% of your principal when you retire. If you invest a lump sum now, your retirement will be significantly smaller when you retire. If you have a low fee, you will likely have double the money left given everything else remains the same. Obviously, with gradual contributions, the calculation is different... but the idea is the same.
> 
> ...


Thank you for your reply. I will definitely look into the "rule of 72". I was only going to keep contributing the $100/month to the high fee fund, and put $500 into a new passively managed RRSP. The "let's see what happens" meant not over the long term, I meant I would like to compare the two RRSPs in a year's time. I am also not sure the process of rolling my RRSP out of the Quadrus fund...baby steps for me! 

I hope to retire around 55, when I'm eligible to receive my full pension. Well, from my career, but probably not the working world entirely. 



MrMatt said:


> TFSA for you to feel better about husbands job security.
> 
> However if you have a mortgage that allows you to make a payment/miss a payment, I'd prepay the mortgage quite a bit, 4% after tax savings is quite good, and still potentially functions as a bit of an emergency fund with the miss a payment options.


Thank you MrMatt, I appreciate the feedback.


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## cainvest (May 1, 2013)

tiffbou2 said:


> I hope to retire around 55, when I'm eligible to receive my full pension. Well, from my career, but probably not the working world entirely.


tiffbou2, I think it would be a good idea to step back and view your retirement goals first. Most banks will have investment people that do this for free and will give you an idea of what the planning is. Of course, avoid their investment advice and stay self-directed and you can always do this process yourself, there are some online tools that can help. 

As an example of some of the things to consider,
- How many years till you plan to retire (retire means living mostly off you investment/pension)
- Your estimated income level when you retire (expenses, living and have fun money)
- How long you think you'll draw off your retirement investments


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## tiffbou2 (Jul 4, 2013)

cainvest said:


> tiffbou2, I think it would be a good idea to step back and view your retirement goals first. Most banks will have investment people that do this for free and will give you an idea of what the planning is. Of course, avoid their investment advice and stay self-directed and you can always do this process yourself, there are some online tools that can help.
> 
> As an example of some of the things to consider,
> - How many years till you plan to retire (retire means living mostly off you investment/pension)
> ...


Thank you very much for the advice - I will do just that so that I can get some numbers (not my strong suit - I teach literature)
A lot of people at my place of work who are around my age or younger think that that they don't have to worry about retirement since we have our pension. My father is a retired teacher and actually makes more now drawing his pension and working part time than he did on his full income. Our pension is a good one, but I took a hard look at my pension statement today. I've put $72K into my pension to date. I can retire with full benefits at 55, and estimated annual salary would be $58K. There are cost of living increases associated with that amount - that would be what I would have if I were ready to retire today. That sounds great, but our household income right now is three times that amount. I would love for my husband to retire from full time work by the time he is 60 (we are the same age). As well, with so many retirees, nobody can really predict the future of our pension plan, though it has had a strong history. 

I still think my first priority needs to be my TFSA.


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## Feruk (Aug 15, 2012)

tiffbou2 said:


> I still think my first priority needs to be my TFSA.


I would think that if someone was practically stealing from me (as is the case with your 2.5% MER account), I'd want to do something about that first.


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## KrissyFair (Jul 8, 2013)

Rather than trying to parse it all out right now, why not just slam it all into a TFSA savings account? That way, you'll quickly build up the emergency fund that you're keen on anyway and it gives you a few months to formulate a plan without putting it into accounts that a)you're not sure you want to keep and b) you're not sure how to get out of if you don't want to keep them.

And while it's good to look at your big picture, it can be overwhelming. You don't need to have the complete plan implemented right now. Take it one savings need at a time.

Also - huge pat on the back! You have a pension, an RSP, a mortgage set to be paid off BEFORE you retire, no additional debt and a large savings allocation going forward... that deserves nothing but positive judgements :encouragement:


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## tiffbou2 (Jul 4, 2013)

Feruk said:


> I would think that if someone was practically stealing from me (as is the case with your 2.5% MER account), I'd want to do something about that first.


Tell me how you really feel? each:
You'll be horrified to know that six months ago we were with London Life and the fees were 3.1% :frown:
Ignorance not necessarily bliss...


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## Ponderling (Mar 1, 2013)

Every journey begins with a small first step.

I am pleased that as a member of a vey well pensioned group you have the wisdom to look beyond your pension plan. It is not all to all of its members.

I would recommend a book put out by a Canadian financial planner Dianne McCurdy a few years ago. From the library. I think it was called 'How Much is Enough'.
It will counter the tendency of most advisors to have you pouring too much into their investment vehicles. 

Realise that TFSA is just a shelter, and that assets of all sorts can go into it. Get a self directed one, even if you don't use it for fancier investments right now. 

Track your expenses is the most powerful tool I have done. Writing it down makes you relaise where earning go.

After a year ot more of that you see what you can allocate to investment and rainy day accounts and then get on with living on what you have left over. 

Investing does cost. Either your time or your money. Fortunately the bulk of your investing happens via the teachers pension fund, so that has a low MER. 

I invest though an adviser, and pay 2.5% and more on some well managed mutual funds. 1.25% straight to my advisor, and the rest to fund managers. I prefer direct payment of my advisor so our goals are better aligned.

I also have the benefit of a stock ownership plan at work so that is a zero MER investment for about 40% of my equity/bond holdings. 
The management owns about 45% and the other 55% is one of the OMERS vehilces seeking out pension returns in what was until quite recently a low and stable interst rate environment.


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## CanadianCapitalist (Mar 31, 2009)

If I had $3000K/month, I'd be on a beach somewhere 

Firstly, you are doing great on the savings front. Keep it up!

Some points for you to consider (thanks for the plug for The Beginner's Guide BTW):

1. You seem to have realized that it is important to keep fees low. You should act on it by only investing in low cost products in the future. Therefore, 2.5 percent fee products are out. Think of it this way. Expected returns from your portfolio might be as low as 5 to 6 percent. How do you feel about giving half of that away in fees (while assuming 100% of the risk!)?

2. If I were you, I'd continue contributing aggressively to spouse's RRSP because it looks like he might be in a high tax bracket. Since he is also in a volatile industry, tax deferral is a good idea. Since you have a DB pension, TFSAs take priority.

3. It's fine to max out TFSAs but consider paying down the debt aggressively. Maybe a 50/50 split between RRSP/TFSA savings and mortgage pay down. Mortgage debt is debt too! 

Lastly, you don't have to over think how to invest your savings wisely. As long as you keep costs low and don't chase the fads or panic out of good investments, you'll be fine. If you settled on maxing out your TFSAs and RRSPs and found there is nothing left over to do extra mortgage payments don't sweat it. It will turn out ok.


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## CanadianCapitalist (Mar 31, 2009)

cainvest said:


> tiffbou2, I think it would be a good idea to step back and view your retirement goals first. Most banks will have investment people that do this for free and will give you an idea of what the planning is. Of course, avoid their investment advice and stay self-directed and you can always do this process yourself, there are some online tools that can help.
> 
> As an example of some of the things to consider,
> - How many years till you plan to retire (retire means living mostly off you investment/pension)
> ...


For someone close to retirement, I think your advice is sound. But OP is 37 and at least two decades away from retirement. IMO, the best she can do now is save a good portion of her income (she's already doing that) and invest it wisely (she's taking the first steps to do just that). As she gets closer to within a decade or so of retirement, she should definitely look into these issues.


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## cainvest (May 1, 2013)

CanadianCapitalist said:


> For someone close to retirement, I think your advice is sound. But OP is 37 and at least two decades away from retirement. IMO, the best she can do now is save a good portion of her income (she's already doing that) and invest it wisely (she's taking the first steps to do just that). As she gets closer to within a decade or so of retirement, she should definitely look into these issues.


I hear what you're saying CC and "just saving a good portion" is always good but I find a big picture helps some people get their head around things. It doesn't have to get really complicated and often has guess work as many don't have concrete plans for retirement. Do you want to save more now to spend more later? How much could I spend a year after 18 years of savings/investments @ a set rate .... these "what if" type questions can help clarify the big picture and what you really need to save to meet your retirement plans.

Knowing ones income now and proposed retirement income (for both here) helps with current and future tax planning, RRSP vs TFSA vs other. With the OP already sitting on a good pension, some planning or shifting of RRSP might help them for later.

As I mentioned, some of this info you can get for free through ones bank, well at least a general idea.


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## tiffbou2 (Jul 4, 2013)

KrissyFair said:


> Rather than trying to parse it all out right now, why not just slam it all into a TFSA savings account? That way, you'll quickly build up the emergency fund that you're keen on anyway and it gives you a few months to formulate a plan without putting it into accounts that a)you're not sure you want to keep and b) you're not sure how to get out of if you don't want to keep them.
> 
> And while it's good to look at your big picture, it can be overwhelming. You don't need to have the complete plan implemented right now. Take it one savings need at a time.
> 
> Also - huge pat on the back! You have a pension, an RSP, a mortgage set to be paid off BEFORE you retire, no additional debt and a large savings allocation going forward... that deserves nothing but positive judgements :encouragement:


Thanks for the pat! I do wish that I hadn't put off proper budgeting and future planning for most of my 30s. 
The bulk of my $$ will be going into TFSA, at least for the first year until that is built up. I get nervous thinking that we should have more in the kids' RESP and our RRSP and that we need to get a move on. Our Quadrus investment guy actually suggested last year that we borrow money to put into the RRSP (at his 2.5% fee of course). I am just not comfortable with that being so recently out of consumer debt, but I would feel more comfortable knowing we are putting at least SOMETHING into RRSP. 



Ponderling said:


> Every journey begins with a small first step.
> 
> I am pleased that as a member of a vey well pensioned group you have the wisdom to look beyond your pension plan. It is not all to all of its members.
> 
> ...


Thank you for all of this advice. I will look up that book. I didn't realize that about the TFSA - I thought it was merely savings, I didn't know you could put different things in it. Head spinning a little. 



CanadianCapitalist said:


> If I had $3000K/month, I'd be on a beach somewhere
> 
> Firstly, you are doing great on the savings front. Keep it up!
> 
> ...


Thank you for replying! I have to say, your chapter in the book was one of the most comprehensive pieces of reading material on investing that I have read on my journey to financial enlightenment. 
I am trying not to overthink, or even over-read at this point to avoid confusing myself.


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## humble_pie (Jun 7, 2009)

tiff i skimmed through your interesting thread & my overall impression goes something like this:

here is a talented, energetic woman in excellent financial shape, who has mostly used financial advisors. These have done no harm, although they are indeed expensive to keep on the payroll year after year.

recently our teacher has discovered that the world of finance is highly complex, endlessly intriguing & - for a literary gal - chock full of fascinating stories, even romantic stories. She wants to plunge in!

my suggestion would be to plunge away but start by dipping carefully in the shallow end. Open up that TFSA you've had your eye on. It will be a great teaching flutter board.

you could have an all-savings TFSA with a HISA and/or GICs at a place like ING at first. If you do a GIC ladder, it would be a good idea to make it lopsided & keep everything short-term, as in less than 2 years. The reason for lopsided is that you will be learning as you go along & within a year or 2 you are likely to think of better longer-term places for your new investments; in the meantime they will incur no harm sitting in 6-month to 2-year GICs.

or you could have a self-directed TFSA at a discount broker. In this account you might also want to place ultra-conservative investments at first, such as the HISA and/or the short-term GIC ladder. You could also have a smidgen of equity etfs or index funds. Perhaps 2, one canadian equity & one US equity.

2 tiny hints:

1) if you do an all-savings TFSA at first, know that better rates can be obtained by going directly to the HISA/GIC offerors such as ING. Another particular advantage of ING is that they have no fee for transferring out the entire TFSA, which you might want to do in a year or 2 in order to move the account to a discount broker. Check if other HISA TFSA offerors have this no-fee feature;

2) if you first open the account at a discount broker, choose wisely because there could be a transfer out fee if you later decide to move this account somewhere else.

over time, you'll learn from firsthand experience what kind of investing style suits you & your family best. Learning will last all the rest of your life. It will be endlessly fascinating & rewarding. Forever wilt thou love/ And she be fair.

as others point out, there doesn't seem to be any particular benefit from focusing on retirement at the present moment, other than adding to high-salary husband's RRSP in order to obtain current tax reduction.


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## KrissyFair (Jul 8, 2013)

tiffbou2 said:


> I get nervous thinking that we should have more in the kids' RESP and our RRSP and that we need to get a move on. Our Quadrus investment guy actually suggested last year that we borrow money to put into the RRSP (at his 2.5% fee of course). I am just not comfortable with that being so recently out of consumer debt, but I would feel more comfortable knowing we are putting at least SOMETHING into RRSP.


Hey, no need to be nervous!! But, if it were me I would (in fact, I do, since I have 2 kids too) prioritize the RESP. The reason: government match. I make it a rule to never turn down free money. Even if you put it in a 0 interest holding tank at a regular bank, you'll still get a 20% return thanks to the government and that's hard to beat. Plus, the RESPs have a much shorter time horizon than the RRSPs, so that should nudge them a bit higher on the priority scale.

As for that whole borrow to invest thing... boo! You're putting away $3800 a month as it is (counting your pension)!!! Like CC said, whether you put it here or there matters way less than the fact that you are indeed putting it away. Keep putting it away - DON'T pay anyone fees for the privilege of putting it away! - and you can iron out the other details as you go.


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## realist (Apr 8, 2011)

Sounds like you are at least looking at the right questions. Personally I like the idea of paying down the mortgage faster, at least partly for emotional satisfaction as much as the guaranteed rate of return!

One cyncial "Debbie Downer" comment that I apply to my own savings plan - Don't rely on your pension looking exactly the same in the future as it does today. Twenty years of people voting in governments to pick away at all those "lazy public servants" and teachers may leave it looking very different.


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## HaroldCrump (Jun 10, 2009)

realist said:


> Twenty years of people voting in governments to pick away at all those "lazy public servants" and teachers may leave it looking very different.


Ha, chance would be a fine thing, innit?


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## Kilbarry20 (Aug 19, 2020)

tiffbou2 said:


> Tell me how you really feel? 🍑
> You'll be horrified to know that six months ago we were with London Life and the fees were 3.1% :frown:
> Ignorance not necessarily bliss...


Any number of Questrade commercials (not the discount I use... but) should have spelled it out. Gas the gougers. Within your own low cost accounts- TFSA/RRSP & Non Registered, get to work! It is easy to divide up any cash into various coverages, including generic Top 500 S&Ps, ETFs like ZSP & VFV, the Banks, BCE, etc. I own ALL those btw.

Never get nervous about Covid or Depression drops. They happen, from time to time. DON’T sell outstanding equities if on the rare occasion they crash 25%, especially Dividend paying ones. They will come back. They always do.


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