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[Darren870]

i do not know if being canadian applies here, because i don't understand what roth ira is. is it the same as rrsp?

i am actually thinking of doing the investing myself rather than going through an rrsp (or roth ira). is that advisable?

what i actually want is to not wait until retirement to enjoy my savings. i would want to take some money out every now and then.

i know, there isn't a quick way of being rich. still, i don't want to wait until i'm 65 (that's 40 years) to be able to spend some money. not to mention i am a really, really cheap person and i don't spend money at all unless it is for necessity.

to be honest, i don't like the idea of saving for retirement. it's like everyone is saving money so they can have money and not be poor once they're retired. it is honestly quite sad to me that that is the case for most people (including me).

Everyone is different to be honest and some people in this thread do both, save for retirement and have other investments outside of retirement accounts. Some do the extreme of one or the other. In the end the thread title is 'How to invest for retirement'

The general rule is that you should definitely take part of your employers retirement funds and get the most out of what they are willing to offer.

A lot of focus is on tax free income here. So that's why a lot of people suggest investing in retirement accounts. I don't know anything about Canada, but the tax laws for gains outside of retirement accounts might be heavy. However, there are places where its not. Example is the UK, the first ~£11,000 of gains isn't taxed. So why wouldn't you invest outside of a retirement accounts. That's free money every year you can have.

We like to focus on ways of making sure we get the most out of our $. There are some other Canadians here so they might be able to help a bit more.

In the end its up to you and your goals though!

 

[EmptySpace]

Everyone is different to be honest and some people in this thread do both, save for retirement and have other investments outside of retirement accounts. Some do the extreme of one or the other. In the end the thread title is 'How to invest for retirement'

The general rule is that you should definitely take part of your employers retirement funds and get the most out of what they are willing to offer.

A lot of focus is on tax free income here. So that's why a lot of people suggest investing in retirement accounts. I don't know anything about Canada, but the tax laws for gains outside of retirement accounts might be heavy. However, there are places where its not. Example is the UK, the first ~£11,000 of gains isn't taxed. So why wouldn't you invest outside of a retirement accounts. That's free money every year you can have.

We like to focus on ways of making sure we get the most out of our $. There are some other Canadians here so they might be able to help a bit more.

In the end its up to you and your goals though!

we have tfsa (tax free savings account) here, which doesn't charge tax on capital gains. it has a limit, though (last i checked, $40k). i don't even have that much in savings so...yeah..


also, would it be wise to just invest the 10k i have in my savings rather than put it in a tfsa emergency fund account? half and half?

 

[Darren870]

we have tfsa (tax free savings account) here, which doesn't charge tax on capital gains. it has a limit, though (last i checked, $40k). i don't even have that much in savings so...yeah..


also, would it be wise to just invest the 10k i have in my savings rather than put it in a tfsa emergency fund account? half and half?

Up to you. The rule of thumb is 3-6 months living expenses that is easily accessible. To me if I needed to go to the ATM now, the most I could get is $200. All my other cash is in my mortgage account or stocks. I believe that there are no real emergencies that exist where I couldn't use my CC. In the end I could sell my non retirement shares now and have the cash in my account by the end of the week.

I suppose if the interest rate for savings accounts is high in Canada then its worth putting some money there. Its somewhat high here in Australia, but its not in the US. You want your money to work for you. In the end a $1 under the mattress (or checking account) is just losing value as inflation rises.

 

[Makai]

we have tfsa (tax free savings account) here, which doesn't charge tax on capital gains. it has a limit, though (last i checked, $40k). i don't even have that much in savings so...yeah..


also, would it be wise to just invest the 10k i have in my savings rather than put it in a tfsa emergency fund account? half and half?

I don't know how the TFSA works, but my Roth IRA doubles as my emergency fund. Contributions can be withdrawn without penalty.

 

[Piecake]

we have tfsa (tax free savings account) here, which doesn't charge tax on capital gains. it has a limit, though (last i checked, $40k). i don't even have that much in savings so...yeah..


also, would it be wise to just invest the 10k i have in my savings rather than put it in a tfsa emergency fund account? half and half?

http://www.neogaf.com/forum/showpost.php?p=136790344&postcount=1519

I have that post linked in the OP for Canadians so you might find that helpful.

You mentioned before in one of your posts that you find it sad that so much investing is geared towards retirement, and I totally agree, it is rather depressing. Sadly, that is the way our system is set up. We gotta save a ton of money for retirement so we won't be eating dog food when we retire. The only way to really make that happen is to invest in the stock market for retirement. If you make enough money or are extremely frugal it is definitely possible to put some of that money towards the here and now, but that is a decision that you really have to make. I would recommend playing around some investment return calculators to see how much money you will need to save every year for a decent retirement for yourself.

As for taxable investing, I think the principle is really the same as retirement investing. Low cost, diversified index funds.

I would also definitely keep 3-6 months worth of expenses in a check/savings account as your emergency fund. You don't want an unexpected emergency to fuck you over. Though since you are Canadian and have less opportunities to get royally fucked over, maybe you'd need less? Don't take my advice on that obviously.

 

[Unknown Soldier]

VTSMX is a popular choice here and what I started with. The minimum is $3k. Roth IRA is probably the way to go for most people.

Don't forget that if you have less than $3K or $10K or whatever the minimum is on these funds, there's also VTI, the ETF version of those. I pretty much only invest and trade in ETFs because there's no minimum or maximum purchase, it only costs me the price of a stock trade to buy in, and I can sell whenever I want. ETFs offer a lot of flexibility that mutual funds don't for some investors.

The Total International Market ETF version of it is VXUS.

 

[PflargBlarg]

we have tfsa (tax free savings account) here, which doesn't charge tax on capital gains. it has a limit, though (last i checked, $40k). i don't even have that much in savings so...yeah..


also, would it be wise to just invest the 10k i have in my savings rather than put it in a tfsa emergency fund account? half and half?

I wrote the Canadian version of the post for this thread although I would not refer to it right at this moment as I actually want to do some updates to it after gaining more experience.

My current best advice is to use the TD e-series funds portfolio which is described at http://canadiancouchpotato.com/model-portfolios-2/. The expenses on these funds is relatively high but you don't have enough cash flow at the moment for ETF trading to make sense (you'll be burning more money on brokerage transaction fees than the difference in fund expenses). You're fairly young so I would definitely go the aggressive route, and I honestly wouldn't even put anything in the bonds fund yet since you have so many years of investing to average out any hits to the stock market.

The cons mention RRSP maintenance fees if you're below 25000 but don't worry about that because you'll only be putting cash into a TFSA. The general advice varies but many people suggest that RRSPs aren't worth it until you're making 70,000+ a year (or you're hitting your TFSA contribution limit).

So, do that e-series Fund portfolio by signing up for an investment account at http://www.tdwaterhouse.ca/products-services/investing/td-direct-investing/index.jsp. Make sure you only open a TFSA for now and distribute your money as follows inside that TFSA
30% - TD Canadian Index Fund
30% - TD International Index Fund
40% - TD U.S. Index Fund

There's no transaction fees on mutual funds so you can contribute whatever extra you have at any time.

As your income increases and you're able to contribute in chunks of at least $5000 at a time once or twice a year, you should switch to the ETF portfolio on the same page I linked to. You trade off much lower expenses on the funds for the fact that you're paying for transactions. So once you're doing ETF trading you have to do as few transactions as possible, hence the big chunks at a time.

If you ever reach a relatively high income tax bracket, that's when you switch to RRSP as your main investment vehicle.

That should take care of you for your whole life. Have fun!

P.S.
I hear ya on the depressing reality of working to save for retirement. I really recommend Mr. Money Mustache's blog as a sort of guide on how to retire far earlier. They retired at 30 with around 720k saved and are able to live off that at a 4% withdrawal rate indefinitely while still doing odd jobs and other things to further increase their savings. Their situation is fairly unusual as they were living off 100k+ in salary for most of their 20s but you can still do what they did in a longer period of time. I'm hoping to retire myself in my 40s following what they've done, so we'll see how that goes.

 

[aerts1js]

I may get burned at the stake for this here but I decided to open and fund a Betterment account for my taxable/non-retirement investing over a vanguard or fidelity account. My reasoning for it are as follows:

1) Most important it's essentially a front end easy button way to buy the Vanguard and Fidelity funds I wanted anyway.

2) As has been mentioned in the last page or so, a lot of the best funds that we all want to be in have minimum amounts for buying in. I will be stashing away approximately $700 a month so it would take me approximately 11 months to be able to open up a total stock market fund, a total international fund, and a S&P index fund. Betterment allows me to start small and add to all of those funds and more at the same time.

3) Tax Loss Harvesting is interesting. I am in a high bracket to begin with, any bit of savings will help.

Our buy MMM does it as he mentioned in his article here: http://www.mrmoneymustache.com/2014/11/04/why-i-put-my-last-100000-into-betterment/

My concern is the fees. I plan on stashing as much as possible in the account, so eventually I will cross the threshold in which I could have straight admiral shares. Here is their fees page: https://www.betterment.com/pricing/

Either way, I'll check it out. I signed up through a friend's link so it gave me 30 free days on top of the 30 free days they give you to start. This is my referral link if anyone is interested. 30 free days and I get another 30.

Edit - Cyan/Ghaleon: Not sure if referral links are even allowed. If not just remove it don't ban me!

eh, you could do a lot worse than betterment. I've been using it and the fees are quite small; i forget exactly how much I have but it's just over 10K and the quarterly fee I had to pay was less than two dollars.

 

[Smiley90]

I don't know how the TFSA works, but my Roth IRA doubles as my emergency fund. Contributions can be withdrawn without penalty.

If you withdraw from a TFSA you pay taxes on it, that's about the penalty there is.

RRSP you can't withdraw without penalty AFAIK.

Basically for Canadians it should be

a) max out your TFSA with investments
b) spare money goes into a different account

I'd happily recommend Questrade for Canadians, it's been very easy to use and cheap (no fees on ETFs bought, large variety of Canadian and US ETFs, no account fees)

just don't lend on margin because their lending rate sucks. But they also offer RRSP's and TFSA's so that's sweet.

 

[iamblades]

eh, you could do a lot worse than betterment. I've been using it and the fees are quite small; i forget exactly how much I have but it's just over 10K and the quarterly fee I had to pay was less than two dollars.

'Could do worse' is obvious, but given that every discount brokerage today offers 0 transaction cost ETFs that cover basically every index fund investing niche, why would you pay any fee that you don't have to?

I may get burned at the stake for this here but I decided to open and fund a Betterment account for my taxable/non-retirement investing over a vanguard or fidelity account. My reasoning for it are as follows:

1) Most important it's essentially a front end easy button way to buy the Vanguard and Fidelity funds I wanted anyway.

2) As has been mentioned in the last page or so, a lot of the best funds that we all want to be in have minimum amounts for buying in. I will be stashing away approximately $700 a month so it would take me approximately 11 months to be able to open up a total stock market fund, a total international fund, and a S&P index fund. Betterment allows me to start small and add to all of those funds and more at the same time.

3) Tax Loss Harvesting is interesting. I am in a high bracket to begin with, any bit of savings will help.

Our buy MMM does it as he mentioned in his article here: http://www.mrmoneymustache.com/2014/11/04/why-i-put-my-last-100000-into-betterment/

My concern is the fees. I plan on stashing as much as possible in the account, so eventually I will cross the threshold in which I could have straight admiral shares. Here is their fees page: https://www.betterment.com/pricing/

Either way, I'll check it out. I signed up through a friend's link so it gave me 30 free days on top of the 30 free days they give you to start. This is my referral link if anyone is interested. 30 free days and I get another 30.

Edit - Cyan/Ghaleon: Not sure if referral links are even allowed. If not just remove it don't ban me!

Tax loss harvesting is nice to do when you are forced to take a loss, but remember, to do it you must first take a loss, which you don't really want to do.

It also means you have to sell off stock when it is cheap, which goes against every principle of value investing. If your investments are sound, you should be buying more when the price goes down, not selling to harvest a loss.

 

[RumblingRosco]

-

 

[Althane]

Is there anyone in here in the consulting/auditing where you have to be careful with what companies you invest in with regards to conflicts of interest, accusations of insider training, etc?

If so, how do you handle it? Offload to someone else? Spend tons of time making sure everything checks out properly?

 

[GhaleonEB]

Is there anyone in here in the consulting/auditing where you have to be careful with what companies you invest in with regards to conflicts of interest, accusations of insider training, etc?

If so, how do you handle it? Offload to someone else? Spend tons of time making sure everything checks out properly?

Most folks in here are invested in mutual funds, primarily index funds, and so do not own any of those companies directly. To the extent that it might be an issue to hold a fund with a particular stock, disclosure of that fact should be sufficient. I think there is a big distinction from holding a passively managed index fund in which a stock is a tiny part, to trading on that specific stock; there isn't a conflict of interest in the former.

 

[Mr.Mike]

If you withdraw from a TFSA you pay taxes on it, that's about the penalty there is.

No, TFSA capital gains are never taxed. You even get whatever you withdraw back as contribution room the next year.

So say you're 18 and have $10,000 in contribution room (TFSA limit increase is 10k a year now), and you put in 10k dollars and let it grow until it's worth 11k and then pull it out. You wouldn't owe any taxes on that $1000 gain. Also, you would get 11k dollars worth of contribution room back the next year. So on January 1st of the next year you would have a 21k contribution limit (10k annual increase + that 11k you withdrew last year).

 

[Althane]

Most folks in here are invested in mutual funds, primarily index funds, and so do not own any of those companies directly. To the extent that it might be an issue to hold a fund with a particular stock, disclosure of that fact should be sufficient. I think there is a big distinction from holding a passively managed index fund in which a stock is a tiny part, to trading on that specific stock; there isn't a conflict of interest in the former.

Gotcha. Getting started in the business world, and also trying to start investing. Realizing that this is a lot more complicated than I thought it was going to be. Probably should sit down with someone from Schwab or something like that to figure out how to do it.

 

[Cyan]

Most folks in here are invested in mutual funds, primarily index funds, and so do not own any of those companies directly. To the extent that it might be an issue to hold a fund with a particular stock, disclosure of that fact should be sufficient. I think there is a big distinction from holding a passively managed index fund in which a stock is a tiny part, to trading on that specific stock; there isn't a conflict of interest in the former.

Yes. Generally you don't even have to bother disclosing that you hold broad-based index or mutual funds, and are not considered to have any conflict of interest if you do hold them.

There are a few companies I'd probably want to be leery of trading in directly, but it's not something that comes up for me since I'm all index.

 

[iamblades]

Is there anyone in here in the consulting/auditing where you have to be careful with what companies you invest in with regards to conflicts of interest, accusations of insider training, etc?

If so, how do you handle it? Offload to someone else? Spend tons of time making sure everything checks out properly?

I wonder how a situation like that would work with index fund investing.

On the one hand, you do have a financial stake in the companies you are auditing, but on the other you can't use that to do any insider trading or pump and dumping. Not up to date on all the FINRA rules that may be applicable to that situation.

If I absolutely had to have no investments with the companies I was auditing, I would pick about 10 or so rock solid blue chip stocks of companies I wasn't working for and just buy those, and ask for more in salary because of the missing out on potential growth stocks.

EDIT: seems like it's not an issue. ^^

 

[Link]

Asking again since I think it got lost in the shuffle:

I also wanted to ask you guys for some advice. Right now, I have my Roth invested with Vanguard in their Target Retirement 2045 fund (VTIVX). However, I have enough invested to select an Admiral fund. Would you suggest I switch it to something like VTSAX, as mentioned above, or hold steady?

 

[Randolph Freelander]

Asking again since I think it got lost in the shuffle:

That's really your call, though the target fund is giving you some additional international stock exposure (27.6%) that wouldn't be present in VTSAX, so you'd need to invest in an international fund as well (if you wanted to keep that exposure). You're also getting ~10% in bonds, which I don't particularly care for, but then, I don't mind the risk of 100% stock, particularly 30 years out. For me, the target funds ride the brakes too much. For you, perhaps that's a warm blanket.

 

[PflargBlarg]

If you withdraw from a TFSA you pay taxes on it, that's about the penalty there is.

RRSP you can't withdraw without penalty AFAIK.

Basically for Canadians it should be

a) max out your TFSA with investments
b) spare money goes into a different account

I'd happily recommend Questrade for Canadians, it's been very easy to use and cheap (no fees on ETFs bought, large variety of Canadian and US ETFs, no account fees)

just don't lend on margin because their lending rate sucks. But they also offer RRSP's and TFSA's so that's sweet.

The money you put into a TFSA is already taxed and capital gains in it are also not taxed, so you can withdraw whenever you want no problem. This is because the TFSA was not really introduced as a tax-shelter for retirement. It was targeted more at general investment to make larger purchases.

Questrade can be alright but I would caution against thinking that it's definitely the cheapest. Questrade charges SEC fees for any trading in US securities as well as SEC fees, exchange fees, and ECN fees any time you sell securities. It very well could end up being cheaper than other discount brokerages but if you're rebalancing a large portfolio it could go the other way.

Questrade is definitely a good option though. Everybody should do their research!

 

[Smiley90]

The money you put into a TFSA is already taxed and capital gains in it are also not taxed, so you can withdraw whenever you want no problem. This is because the TFSA was not really introduced as a tax-shelter for retirement. It was targeted more at general investment to make larger purchases.

Questrade can be alright but I would caution against thinking that it's definitely the cheapest. Questrade charges SEC fees for any trading in US securities as well as SEC fees, exchange fees, and ECN fees any time you sell securities. It very well could end up being cheaper than other discount brokerages but if you're rebalancing a large portfolio it could go the other way.

Questrade is definitely a good option though. Everybody should do their research!

Well I only rebalance my portfolio very rarely and I mostly do it through more investment-contributions, so I try not to withdraw lol. And true, the exchange fees to thee US can be a bit harsh, that's something to keep in mind. If you keep it Canadian (and there's basically the equivalent ETF's than US Vanguard now anyway) it's pretty great. Costs me nothing at all to keep buy ETFs and keep the account and contribute, which is really all I want out of my retirement account. For everyday banking it might not be the cheapest, unless you pay for one of the special plans, but I haven't done the math on that.

 

[PflargBlarg]

I got around to updating my Canadian investing post as I had started to disagree with some parts of it and there have also been some changes.

http://www.neogaf.com/forum/showthread.php?p=136790344#post136790344

Main Points

TFSA contribution limit is now $10,000/year - Holy damn this is insane. If you're making 55000 a year or below, your TFSA contribution limit will now be higher than the RRSP limit. You can now have a very significant amount of cash in your TFSA which means a lot more tax free income when you're retired. This is ridiculously good, but I cannot even imagine how expensive this is going to be for the government.

RRSP Minimum Withdrawal is now 5.28% at age 71 - Also pretty nice, as it used to be pretty high. If you play your cards right you can now expect to get the majority of your retirement from TFSA, supplementing it from RRSP withdrawals, but not enough to negatively affect your Old Age Pension payments.

I also changed my investment advice to be in line with Canadian Couch Potato as it's much simpler and overall just better.

 

[Makai]

TFSA contribution limit is now $10,000/year - Holy damn this is insane.

Woah

 

[Giard]

I got around to updating my Canadian investing post as I had started to disagree with some parts of it and there have also been some changes.

http://www.neogaf.com/forum/showthread.php?p=136790344#post136790344

Main Points

TFSA contribution limit is now $10,000/year - Holy damn this is insane. If you're making 55000 a year or below, your TFSA contribution limit will now be higher than the RRSP limit. You can now have a very significant amount of cash in your TFSA which means a lot more tax free income when you're retired. This is ridiculously good, but I cannot even imagine how expensive this is going to be for the government.

RRSP Minimum Withdrawal is now 5.28% at age 71 - Also pretty nice, as it used to be pretty high. If you play your cards right you can now expect to get the majority of your retirement from TFSA, supplementing it from RRSP withdrawals, but not enough to negatively affect your Old Age Pension payments.

I also changed my investment advice to be in line with Canadian Couch Potato as it's much simpler and overall just better.

So you no longer recommend the Schwab funds and the like? It seemed to make sense to me, seeing as the MER was considerably lower. Is there an advantage of going all Vanguard?

Even though the TFSA limit went up, no idea how I'll ever get 10k to save every year...

 

[simplayer]

Re TFSA. Be warned, if you ever move to the U.S. to work, it will not be considered a tax free account in the U.S. Rrsps will at the federal level, but tfsas are considered foreign trusts

 

[PflargBlarg]

So you no longer recommend the Schwab funds and the like? It seemed to make sense to me, seeing as the MER was considerably lower. Is there an advantage of going all Vanguard?

Even though the TFSA limit went up, no idea how I'll ever get 10k to save every year...

The advantage is simplicity in purchasing and tax management. The previous post had funds that were all based in the US. This means you have to worry far more about tax implications as well as currency exchange on purchase and selling.

You can still go for those ones if you like. Hold all your money in a US Friendly RRSP and trade away. The hassle of having to worry about that kind of thing isn't worth it to me. For instance you can compare the 2 Total US Stock Market funds. US-based VTI at 0.05% and Canada-based VUN at 0.15%. With exchange rates and taxes and such, you're looking at a difference of 20,000-30,000 ish over a lifetime? If you're projecting to your retirement savings which will hopefully be at least a million or so, who cares?
It saves me time and worry and I can just purchase the canadian-based ones without thinking about it.

The Vanguard ETFs in Canada are by far the lowest management fees you can get, so it pays to go for them. The difference between the 2 countries' ETF fees is miniscule compared to the difference between ETF and regular Canadian mutual fund fees. I mean, some of those are far above 2% in management fees. You'd be paying several hundred thousand dollars into that. Crazy town.

 

[GhaleonEB]

My wife and I listened to the episode of Listen Money Matters with MMM that was posted earlier, after we had a long discussion about our medium term goals and priorities. We decided to make a few changes in strategy for a short run.

I ran some numbers to see if we could get to MMM's idea of living on less than 50% of your income, which was a goal we both agreed was worth striving for. The primary thing holding us back from that goal is our mortgage payment, which is on the order of 20% of our take home pay. If we knock that out, we'd be able to live on ~40% of my take home, and save the rest.

After running some scenarios we found we could knock out our mortgage entirely in 4.5 years by making some small adjustments in strategy. Namely, by taking the company stock we're currently selling (we have capped the number of shares we hold, selling the rest as they come in) to fund our IRA, and shifting it to the mortgage for that time horizon. As a partial offset, we decided to take the quarterly bonus we get and shift that to the IRA. We tend to get a bonus and then decide how to spend it. Going forward, we're designating about half the bonuses for the IRA from the get-go, and we'll adjust our projects and vacations to fit into the rest; a bit more restraint. On balance we will reduce our retirement savings by ~15% or so for 4 years, then be able to increase it much more - maxing both IRA and 401k, with more to save outside retirement accounts - from that point forward.

The math slightly favors keeping the mortgage for the 11 years we're tracking to pay it off currently, given tax advantages, mortgage rate and assumed market returns, though not by much, just a couple percentage points. But we both liked the idea of being out from under the mortgage that quickly tremendously. We'd be in our early 40's, before our oldest is our of high school, and would be debt free from that point on. If we wanted to move - and we might - we could do a cash only transaction. It feels greatly liberating just thinking about it.

The reduction in IRA contributions runs counter to a lot of the discussion and advice we've shared, but it's a short enough horizon that I feel pretty good about, after running the numbers (under fund for ~4 years, then max thereafter). Thanks for all the good discussions the past few pages.

 

[TangoAlphaLima]

I'm guessing the reduction in IRA contributions will cause a gasket or two to blow in here, but it's a short enough horizon that I feel pretty good about, after running the numbers (under fund for ~4 years, then max thereafter). Thanks for all the good discussions the past few pages.

Do whatever you feel is right. There's no right or wrong answer here. The important thing is that you are actively managing your finances and retirement savings, which already puts you ahead of 90% of the population. Whether it is slightly more advantageous or not to keep a mortgage versus paying it off early won't matter much in the long run.

 

[Piecake]

http://www.bloomberg.com/graphics/2015-401k/

Hmmm, Well, I would like to compare my 401k to other companies, but I can't get the damn thing to work. Help me out here people, how do you get this thing workin

 

[Makai]

http://www.bloomberg.com/graphics/2015-401k/

Hmmm, Well, I would like to compare my 401k to other companies, but I can't get the damn thing to work. Help me out here people, how do you get this thing workin

Works for me. Try switching browsers. Enable javascript if you have that disabled.

 

[Astral/H3X]

So hey guys.

I make about $1200/month, assuming I don't lose any hours.
I have about $500/month in bills, that I can't get rid of, and are outside of my living expenses (so car insurance, phone bill, and student loans).

I'm currently living at my parents so that I don't have living expenses. I personally don't feel like I'm in a situation that I can live on my own, but am I at least able to start saving money for retirement? Is it worth it right now?

 

[Mr.Mike]

So hey guys.

I make about $1200/month, assuming I don't lose any hours.
I have about $500/month in bills, that I can't get rid of, and are outside of my living expenses (so car insurance, phone bill, and student loans).

I'm currently living at my parents so that I don't have living expenses. I personally don't feel like I'm in a situation that I can live on my own, but am I at least able to start saving money for retirement? Is it worth it right now?

The earlier you start the better. Of course retirement isn't the only thing that you can save for. You could be saving for your own place, or whatever else you'd like.

Anyway, this might be useful. http://www.reddit.com/r/personalfinance/wiki/commontopics

The basic idea is to build up an emergency fund that would cover 3-6 months expenses, pay down any high-interest debt you might have, and then start saving towards your goals. The main goal here would be retirement, but it's not the only one, certainly.

 

[Astral/H3X]

The earlier you start the better. Of course retirement isn't the only thing that you can save for. You could be saving for your own place, or maybe for school. We don't really know your situation or desires.

Anyway, this might be useful. http://www.reddit.com/r/personalfinance/wiki/commontopics

The basic idea is to build up an emergency fund that would cover 3-6 months expenses, pay down any high-interest debt you might have, and then start saving towards your goals.

Alright, here's what I've got, I'll go ahead and run down everything I can think of.

Things I want to save up for:
A new Miata (Relatively cheap, nice car)
Building an "alternative home". By this I mean either a shipping container house, or a tiny house. I don't need much room, really, and I don't want to pay some ludicrous mortgage or anything for something I can ultimately build myself.

Expenses I have:
$500/month right now. This is, as mentioned, built up primarily of STUDENT GODDAMN LOANS, as well as car insurance and phone bill.
No other expenses, aside from gas, and buying things I like.

Sources of Income:
$~250/month of National Guard pay. This I expect to be fairly stable. I'm getting 4k in bonus next year.
$1100/month work pay. $10/hour, up to 40 hours per week, assuming I don't miss any work.

I'm hoping to, here in a year, get SLRP, which will over the course of 6 years pay off my student loans up to $60,000, but that is contingent on SLRP being offered next time I am up for re enlistment.

EDIT: I forgot to mention that outside of student loans, I have 0 debt. No credit cards, no loans, no car payments.

 

[Piecake]

Alright, here's what I've got, I'll go ahead and run down everything I can think of.

Things I want to save up for:
A new Miata (Relatively cheap, nice car)
Building an "alternative home". By this I mean either a shipping container house, or a tiny house. I don't need much room, really, and I don't want to pay some ludicrous mortgage or anything for something I can ultimately build myself.

Expenses I have:
$500/month right now. This is, as mentioned, built up primarily of STUDENT GODDAMN LOANS, as well as car insurance and phone bill.
No other expenses, aside from gas, and buying things I like.

Sources of Income:
$~250/month of National Guard pay. This I expect to be fairly stable. I'm getting 4k in bonus next year.
$1100/month work pay. $10/hour, up to 40 hours per week, assuming I don't miss any work.

I'm hoping to, here in a year, get SLRP, which will over the course of 6 years pay off my student loans up to $60,000, but that is contingent on SLRP being offered next time I am up for re enlistment.

EDIT: I forgot to mention that outside of student loans, I have 0 debt. No credit cards, no loans, no car payments.

Why don't you go on the income based repayment plan? With what you earn you could easily get your student loan bill down to 0. If you become a public employee you could also wipe that student loan debt out in 10 years. If not, I think it takes about 20-25. Still, might be a good way to go if you don't think you will ever make much money.

 

[Astral/H3X]

Why don't you go on the income based repayment plan? With what you earn you could easily get your student loan bill down to 0. If you become a public employee you could also wipe that student loan debt out in 10 years. If not, I think it takes about 20-25. Still, might be a good way to go if you don't think you will ever make much money.

Excellent idea! That's why my expenses are $500, and not $700. Not all loans are eligible, I'm afraid. Although I guess I could check some of the other ones and see... Maybe I missed one.

 

[Piecake]

Excellent idea! That's why my expenses are $500, and not $700. Not all loans are eligible, I'm afraid. Although I guess I could check some of the other ones and see... Maybe I missed one.

Ah, private loans, huh? Those suckers are the devil.

 

[Darren870]

My wife and I listened to the episode of Listen Money Matters with MMM that was posted earlier, after we had a long discussion about our medium term goals and priorities. We decided to make a few changes in strategy for a short run.

I ran some numbers to see if we could get to MMM's idea of living on less than 50% of your income, which was a goal we both agreed was worth striving for. The primary thing holding us back from that goal is our mortgage payment, which is on the order of 20% of our take home pay. If we knock that out, we'd be able to live on ~40% of my take home, and save the rest.

After running some scenarios we found we could knock out our mortgage entirely in 4.5 years by making some small adjustments in strategy. Namely, by taking the company stock we're currently selling (we have capped the number of shares we hold, selling the rest as they come in) to fund our IRA, and shifting it to the mortgage for that time horizon. As a partial offset, we decided to take the quarterly bonus we get and shift that to the IRA. We tend to get a bonus and then decide how to spend it. Going forward, we're designating about half the bonuses for the IRA from the get-go, and we'll adjust our projects and vacations to fit into the rest; a bit more restraint. On balance we will reduce our retirement savings by ~15% or so for 4 years, then be able to increase it much more - maxing both IRA and 401k, with more to save outside retirement accounts - from that point forward.

The math slightly favors keeping the mortgage for the 11 years we're tracking to pay it off currently, given tax advantages, mortgage rate and assumed market returns, though not by much, just a couple percentage points. But we both liked the idea of being out from under the mortgage that quickly tremendously. We'd be in our early 40's, before our oldest is our of high school, and would be debt free from that point on. If we wanted to move - and we might - we could do a cash only transaction. It feels greatly liberating just thinking about it.

The reduction in IRA contributions runs counter to a lot of the discussion and advice we've shared, but it's a short enough horizon that I feel pretty good about, after running the numbers (under fund for ~4 years, then max thereafter). Thanks for all the good discussions the past few pages.

Good on you! In the end, its down to what you want to do with your life and what your goals are. Your still saving also, its not like you are budgeting to buy a boat or a Ferrari, but to save to support yourself (and family) for an easier life in the future.

The missus and I are in a position where on a good month we can save about 70% of our income. I've just downloaded an app to track our spending for the month. We don't budget, and I have no real desire to budget, but we need to at least see where our money is going. This way we can have goals on what bills we can try and lower and what investments we can raise.

The missus also is looking to quit her job and work for herself. She isn't happy and I am actively encouraging her to look for something else. We have enough side income now that it wouldn't be that big of a deal. Just wouldn't be able to take home as much money which isn't the end of the world right now.

Looking forward to the rest of 2015 though! We have some really good financial goals right now. We need to put them all down on paper and really think about what we are going to do and how.

 

[Wellington]

My wife and I listened to the episode of Listen Money Matters with MMM that was posted earlier, after we had a long discussion about our medium term goals and priorities. We decided to make a few changes in strategy for a short run.

I ran some numbers to see if we could get to MMM's idea of living on less than 50% of your income, which was a goal we both agreed was worth striving for. The primary thing holding us back from that goal is our mortgage payment, which is on the order of 20% of our take home pay. If we knock that out, we'd be able to live on ~40% of my take home, and save the rest.

After running some scenarios we found we could knock out our mortgage entirely in 4.5 years by making some small adjustments in strategy. Namely, by taking the company stock we're currently selling (we have capped the number of shares we hold, selling the rest as they come in) to fund our IRA, and shifting it to the mortgage for that time horizon. As a partial offset, we decided to take the quarterly bonus we get and shift that to the IRA. We tend to get a bonus and then decide how to spend it. Going forward, we're designating about half the bonuses for the IRA from the get-go, and we'll adjust our projects and vacations to fit into the rest; a bit more restraint. On balance we will reduce our retirement savings by ~15% or so for 4 years, then be able to increase it much more - maxing both IRA and 401k, with more to save outside retirement accounts - from that point forward.

The math slightly favors keeping the mortgage for the 11 years we're tracking to pay it off currently, given tax advantages, mortgage rate and assumed market returns, though not by much, just a couple percentage points. But we both liked the idea of being out from under the mortgage that quickly tremendously. We'd be in our early 40's, before our oldest is our of high school, and would be debt free from that point on. If we wanted to move - and we might - we could do a cash only transaction. It feels greatly liberating just thinking about it.

The reduction in IRA contributions runs counter to a lot of the discussion and advice we've shared, but it's a short enough horizon that I feel pretty good about, after running the numbers (under fund for ~4 years, then max thereafter). Thanks for all the good discussions the past few pages.

Wow that sounds like a winner to me. If you could get it done it will really super charge your savings rate afterwards. IMO that is really the key for MMM, he even says it on the podcast. His yearly spending is $25k but if he had the housing expense it would easily be up at $40k, boosting his personal safe withdrawal savings number from $625k to $1M. Obviously a significant difference. With the 4.5 years how long will you have had your mortgage?

I wish I could do the same but I am so far off it doesn't make sense.

http://www.bloomberg.com/graphics/2015-401k/

Hmmm, Well, I would like to compare my 401k to other companies, but I can't get the damn thing to work. Help me out here people, how do you get this thing workin

I'm very lucky with my company regarding company contributions, along with the match we also get an earnings based contribution into our retirement funds. It's an additional number on top of the match.

 

[GhaleonEB]

With the 4.5 years how long will you have had your mortgage?

I wish I could do the same but I am so far off it doesn't make sense.

We just had our 9 year anniversary in the house, so it would be a bit over 13 years to pay off, in total.

 

[Wellington]

We just had our 9 year anniversary in the house, so it would be a bit over 13 years to pay off, in total.

Amazing. Congratulations.

 

[PflargBlarg]

Alright, here's what I've got, I'll go ahead and run down everything I can think of.

Things I want to save up for:
A new Miata (Relatively cheap, nice car)
Building an "alternative home". By this I mean either a shipping container house, or a tiny house. I don't need much room, really, and I don't want to pay some ludicrous mortgage or anything for something I can ultimately build myself.

Expenses I have:
$500/month right now. This is, as mentioned, built up primarily of STUDENT GODDAMN LOANS, as well as car insurance and phone bill.
No other expenses, aside from gas, and buying things I like.

Sources of Income:
$~250/month of National Guard pay. This I expect to be fairly stable. I'm getting 4k in bonus next year.
$1100/month work pay. $10/hour, up to 40 hours per week, assuming I don't miss any work.

I'm hoping to, here in a year, get SLRP, which will over the course of 6 years pay off my student loans up to $60,000, but that is contingent on SLRP being offered next time I am up for re enlistment.

EDIT: I forgot to mention that outside of student loans, I have 0 debt. No credit cards, no loans, no car payments.

I think I've been heavily influenced by MMM when I can honestly say I started feeling a bit nauseous when I saw that you're planning to buy a NEW GODDAMN CAR when you make under 2000/month. My wife and I make over 3 times as much as you per month and I would never even consider such a thing. Buying a new car is one of the most financially irresponsible things you can do. That is the sort of the purchase you make when you're financially independent and have more money than you know what to do with.
If you actually seriously need a car and you don't have one right now, you should be looking at sub-$5000 used cars that are high quality and known for lasting for a very long time.

Building the small alternative home is a brilliant idea and would be a supercharger for your savings rate if you can get it done cheap. Everything else looks pretty good. Is there any possible increase in income in the near-ish future? That's going to be your limiting factor here.

 

[RumblingRosco]

-

 

[Apt101]

All this MMM stuff makes me wonder, have any of you ever been surprised at how low or high your expenses are in a certain area relative to your peers? For example, my wife and I spend $70/mo on TV and internet (we're gonna push this down to $50/mo soon we think), but most of our friends and family spend closer to $200 (or more) per month - mostly because they have much more comprehensive TV packages than we do. It's hard to imagine that there are people right next door to us spending 3 times what we spend just on TV/internet.

Anyone else here have such experiences? We've been really tightening up the past year or two since we spent a decent sum on our wedding last fall, and I'd say cutting back expenses has meant more towards our retirement goals than anything.

I live very minimalist in regards to monthly bills. I paid off my student loans years ago, do not drive an expensive car, and cut the cord around 2008. I earn twice what many of my friends do (some have children) and yet spend probably half on monthly bills and transportation. I don't understand why they do it. They then complain about money.

Well, stop driving a BMW/Acura/et al and paying $200/month on a glorified subscription to HBO and ESPN.

 

[GhaleonEB]

All this MMM stuff makes me wonder, have any of you ever been surprised at how low or high your expenses are in a certain area relative to your peers? For example, my wife and I spend $70/mo on TV and internet (we're gonna push this down to $50/mo soon we think), but most of our friends and family spend closer to $200 (or more) per month - mostly because they have much more comprehensive TV packages than we do. It's hard to imagine that there are people right next door to us spending 3 times what we spend just on TV/internet.

Anyone else here have such experiences? We've been really tightening up the past year or two since we spent a decent sum on our wedding last fall, and I'd say cutting back expenses has meant more towards our retirement goals than anything.

The big one for us is our phones. We have a land line via Comcast (something like $30/month), and we use pre-paid flip phones from T-Mobile, and buy around $100 in minutes ever year or so. Our friends are paying well over a hundred a month, and make less than us. I don't understand the priorities. Likewise, cable - we just have basic, but see a lot of people with much larger packages. Take those two things out and you can save a good hunk every month for retirement.

 

[Smiley90]

All this MMM stuff makes me wonder, have any of you ever been surprised at how low or high your expenses are in a certain area relative to your peers? For example, my wife and I spend $70/mo on TV and internet (we're gonna push this down to $50/mo soon we think), but most of our friends and family spend closer to $200 (or more) per month - mostly because they have much more comprehensive TV packages than we do. It's hard to imagine that there are people right next door to us spending 3 times what we spend just on TV/internet.

Anyone else here have such experiences? We've been really tightening up the past year or two since we spent a decent sum on our wedding last fall, and I'd say cutting back expenses has meant more towards our retirement goals than anything.

we got rid of TV alltogether, just use chromecast for everything for free

 

[Wellington]

TV/Internet is just absurdly expensive and the cable companies are gouging us.

You have to sign up for a package rather than just a la carte choose the channels you want to have. I pretty much only use basic cable, YES Network (Yankees), MSG (Knicks/Rangers), ESPN, and AMC but I have to pay for the full boat. With internet and DVR I am at $147 a month. It is the second largest monthly bill behind my mortgage. Insanity IMO.

 

[RuGalz]

All this MMM stuff makes me wonder, have any of you ever been surprised at how low or high your expenses are in a certain area relative to your peers? For example, my wife and I spend $70/mo on TV and internet (we're gonna push this down to $50/mo soon we think), but most of our friends and family spend closer to $200 (or more) per month - mostly because they have much more comprehensive TV packages than we do. It's hard to imagine that there are people right next door to us spending 3 times what we spend just on TV/internet.

Anyone else here have such experiences? We've been really tightening up the past year or two since we spent a decent sum on our wedding last fall, and I'd say cutting back expenses has meant more towards our retirement goals than anything.

Yep many of my friends spend at least 2x in TV/internet, 3-4x in electric/gas, 2x in phone, drive nicer cars etc. Half of our additional savings go to retirement and half goes to travel. We want to be able to retire comfortably but we also want to be able to enjoy life now while we are young-ish. It probably means no early retirement but oh wells - we can't do backpacking style of travel.

 

[Original Famous Ray]

Anyone here put any money in a S&P 500 ETF? I have a Roth IRA and an employer backed 401k at Vanguard (Target Retirement 2040 Fund for my Roth and LifeStrategy Growth Fund for my 401k).

I have about 40k in my checking account (Schwab) doing absolutely nothing for me so I thought about putting 10k in a S&P 500 ETF at Schwab or Vanguard and possibly 10k in "i Bonds". The remaining money would be my "emergency and help mom" fund. Any thoughts on this?

 

[PflargBlarg]

Anyone here put any money in a S&P 500 ETF? I have a Roth IRA and an employer backed 401k at Vanguard (Target Retirement 2040 Fund for my Roth and LifeStrategy Growth Fund for my 401k).

I have about 40k in my checking account (Schwab) doing absolutely nothing for me so I thought about putting 10k in a S&P 500 ETF at Schwab or Vanguard and possibly 10k in "i Bonds". The remaining money would be my "emergency and help mom" fund. Any thoughts on this?

Yes, do it as quick as you can. 40k is an absurd amount to have just sitting in a bank account. Curious why you're specifically going for an S&P 500 ETF? There's nothing particularly wrong with it but you'll get broader diversification by going for Total Market funds.

 

[Darren870]

Yea, I just use free to air stuff and go as cheap as possible.

Cable Bill - $0
Phone Bill - $20 - PAYG
Internet (Unlimited) - $60 (Internet is expensive in AUS)
Cars - $2000 for a 1999 Station Wagon, $6500 for a 2013 Suzuki Alto with warranty still left. Paid both in cash.

I bike to work everyday, so the gas/transport bills are non existent really. Which is always a plus!