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Thread: Investing/saving

  1. #16
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    Default Re: Investing/saving

    Quote Originally Posted by Invictus View Post
    To add:
    I believe your TFSA contribution limit starts from when you turn 18 (not when you open an account). (Each years contribution limit has been already provided here in previous post).

    So by Butch's profile I can see that he is 22 So:
    Turned 18 in 2017:
    2017: 5.5k
    2018: 5.5k
    2019,2020: 2x 6k
    2021: I'll assume 6k
    29k limit.

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    Default Re: Investing/saving

    Lots of great advice. Not sure I'm adding anything new but:

    1. Write a reasonable budget and stick to it. Budget should include Savings/Debt Repayment. Move the Savings/Repayment with every paycheque automatically, it is not something to do with "leftover" money, it is an expense.
    2. If your employer has any RRSP matching signup to maximize same. a 50% match is an instant 50% return.
    3. Beyond employer RRSP matching further savings should be either RRSP or TFSA. These accounts are very different. RRSP's are designed for individuals with current income higher than it will be in retirement and generally you only withdrawal on retirement. TFSA's are designed for shorter savings (money you need before retirement) and benefit those who have lower tax brackets.
    At 22, without any more information you probably would prefer a TFSA to RRSP.
    4. Watch for lifestyle creep. the idea that the more you make the more you will want to spend. This is also a reason why Savings/Repayment is in #1 so that it does not get diminished away and forgotten.

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  3. #18
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    Default Re: Investing/saving

    For the TFSA, check your tax return (Notice of Assessment) or the CRA website, it'll have your allowable TFSA limit as of January 1st of this year. It's updated annually. It's a great account for emergency funds as you can take money out without tax consequences, unlike the RSP. Keep in mind though that any money you withdraw cannot be recontributed in the same calendar year unless you have extra contribution room, you'll have to wait until the next calendar year to put the money back in. Depending on which province you're in, you can open a TFSA when you turn the legal age (18 or 19 depending on the province). To keep things fair across the country, if you're in a province where the legal age is 19 (like BC), you have to wait until you're 19 to open it but will get credit for your 18 year and can make a larger initial deposit.

    Personally I invest in stocks. I used to sell mutual funds but if you're interested in investing why pay for someone else to do it? Look at a successful mutual fund's top 10 holdings and invest in those stocks yourself, saving yourself the 2% annual fee. It's fine to invest in mutual funds for a few years to get used to market fluctuations, but long-term I'd recommend either index funds or stocks to save on fees, after you get the hang of it. If you're not interested in doing it yourself, I'd recommend index funds. If you'd like to try, start small at first until you get used to it (you'll make and lose money, don't beat yourself up) and go with stocks.

    For your situation it's a balance. I'd recommend maximizing the RSP contribution limit of your employer like others have suggested, pay off your high interest debt (and stick to your budget), and invest in a TFSA with the remainder to keep as an emergency fund.
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    Default Re: Investing/saving

    Quote Originally Posted by Feenom View Post
    Looked it up:

    The annual TFSA dollar limit for the years 2009 to 2012 was $5,000.
    The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
    The annual TFSA dollar limit for the year 2015 was $10,000.
    The annual TFSA dollar limit for the years 2016 to 2018 was $5,500.
    The annual TFSA dollar limit for the year 2019 and 2020 is $6,000.

    If my math is correct it's $64K and this year could be another $6K so $70K. Now returns on that depends on what you do. GIC gives you nothing so depending on your risk ratio with mutual funds it could be 4-10%. Market is getting better so talk to a financial advisor or your bank to get biggest bang for your buck.

    Just as a FYI, back when my sons were born we put $10K(2002) into an RESP. In 2019 cashed it out and was worth $25K. I think I put another $6K in the account over the years (really slacked off, if I put more Gov't would have given more grants). So 16K investment yielded a $25K total. Not bad I guess, could of had more but was paying myself first to pay them.

    OH and congrats on the job Clutch.
    It depends on what year you turned 18. The max for Canadians to be able to contribute (assuming they were 18 for the maximum number of years that a Canadian citizen could contribute to a TFSA) is currently 75.5k.

    For example, if you turned 18 in time for the 2018 contribution deadline, you'd be able to contribute $19 500 total to your TFSA. Returns depend on what you're invested in, and only securities eligible under the CRA guidelines are allowed to be purchased within it (essentially US and Canadian listed stocks). There are a bunch of other more detailed rules, but that is the gist most people need to know.
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    Default Re: Investing/saving

    This got me curious so I just checked on my TFSA to see if I had any available contribution room ( I do automatic withdrawals towards it so might have that total $5500 for the year).
    Lousy website doesn't show it - just my book value.
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    Default Re: Investing/saving

    Congratulations on getting the job Clutch. You are getting some excellent advice here. For sure, pay down the debt with the highest interest rate first before worrying too much about investing.

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    Default Re: Investing/saving

    Quote Originally Posted by butch View Post
    perfect ; and what type of returns can you expect from 70 k ?
    Returns have basically nothing to do with how much money you have. All that does is limit your investment options.

    For a incredible simple rule of thumb on returns and investment growth, use the Rule of 72. The Rule of 72 will let you roughly figure how long it will take for your money to double.
    https://www.investopedia.com/terms/r/ruleof72.asp

    Additionally, Investopedia is a good place to go to look up terms you aren't familiar with.
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    Default Re: Investing/saving

    Lots of great ideas in this. Let's see what I can addas someone who just wrote their CFP exam and who's been giving financial advice as my only source of income for the past 10+ years!!!

    First the advice to the OP part.

    1*) Sit down with your wife and figure out what you are trying to achieve with your money. Talk about goals, wishes, dreams, necessities. Make lists!

    2) Calculate your net worth. Write out a detailed financial statement including your assets and your debt. List your debt individually and include your minimum payments and your interest rates.

    3) Track your spending. The easiest way I find to do this is (assuming you don't spend much actual cash) is to go through 1, 2 or even better 3 months of statements from your credit cards and your bank accounts and write down where you spend your money in various categories. Use whatever categories you feel are best but things like utilities, vehicles, food, entertainment are a good place to start. Also be sure to think of any larger annual bills that will have been missed. (insurance, property tax, annual licenses, etc). Even if you don't catch every penny, it will give you a good idea on where you are spending your money. You can then use it to make a budget if that is something that interests you.

    4) Once you know how much you spend and how much you will earn, you will have an idea on how much "excess cash" you should have. Figure out what you want to do with this money which will either be pay down debt quicker or start investing. As a financial advisor, I used to tell people to pay off their high interest debt before they started invested, but I don't do that anymore. I tell people to start investing a small amount while also increasing their debt payments. The reason I do this now, is that I find that most people who have excessive debt will always have debt so by investing now they will at least have some retirement savings when the time comes.

    5a) Pay down debt. Put some of your "excess cash" towards paying down your debt. Use either the snowball or the avalanche method of debt repayment.

    5b) Set up regular deposits into a TFSA or RRSP account depending on the following factors:
    Any employee matching programs: max these out if you can regardless of anything else because a 20% match is a guaranteed return of 20% which is not a return you can expect from any investment; a 100% match is 5 times better!!!
    Expected annual income: anything less than about $90,000 per individual and TFSAs are probably better than RRSPs at least to begin with
    Length of time until money may be needed: the shorter the possible time line, the better TFSAs are
    I recommend starting regular investment contributions with less than you think you can afford. I find that it's easier for people to increase a regular investment amount than it is for them to decrease it. If they start investing than "run out of money", people tend to stop the investments instead of reducing it.

    6) Review your financial situation on a regular basis

    *1b) If you are not one who likes the do it yourself method, this is a great time to look for a financial advisor who can be helpful along any or all of these steps. I recommend talking to your friends/family about who they use or visit this website to find someone who is accredited https://www.fpcanada.ca/findaplanner


    Just a heads up but the TFSA contribution room on your notice of assessment as well as the information on CRA's website can be wrong. Institutions are only required to update CRA once a year so if you have made any withdrawals or contributions since the last time it was updated, the number will be incorrect.

  9. #24
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    Default Re: Investing/saving

    I want to add too, it's not just how much you make. It's how much you can save.
    Review your lifestyle to see if there's any aspects where you're bleeding money.

    For example, my coworkers are always buying their food. $15-20 a day just for a meal.
    I meal prep for my work week. Usually pasta. Doesn't take much time either. Takes about an hour to make enough sauce to last a month.
    The actual cooking the pasta takes hardly any time that I usually just do while doing dishes anyway.
    Rough estimate I say it comes to less than $5 for the days meal (Hard to gauge as I use stuff grown in the garden), and I eat a large quantity.

    $17*5*52 weeks = $4420/ year buying their meal.
    $5*5*52 weeks =$1300 / year with meal preps.
    So that's ~3k savings right there. That also isn't taking into account gas and everything else used up by them driving each time to pick up the food.
    Not to mention better food/ healthier.
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  10. #25
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    Default Re: Investing/saving

    Thanks to all, some very good advice.

    It's a lot to take in so I'm going to read through again and figure out exactly what I need, thanks to everyone who chimed in again!
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