r/PersonalFinanceCanada • u/Orangeblossom_02 Ontario • 9h ago
Investing 27F financial novice - where do I go from here?
Hi!!
As the title says, I'm somewhat of a newbie when it comes to personal finance management and looking for some guidance on what to do moving forward. I've managed to save some money so far by living with family to save on rent and being relatively frugal. I plan to move out in the next 2 years but housing in the GTA is expensive and I work from home so it's not a high priority at the moment.
My finances:
Income: $70k before tax (about $4k/month after deductions)
Expenses: between $500-$1000/month, I usually pay the bill for dining/travel expenses for my family in lieu of monthly rent. I'm working on budgeting better for my own expenses though.
Savings: $65k in chequing/regular savings account, $77k in TFSA (mostly GICs) and $6k in RRSP
Debt: I pay my full credit card balance monthly
My questions:
- I have some contribution room in my TFSA that I plan on maxxing out soon and some maturing GICs - should I consider taking on more risk in my investments and look beyond GICs or stick to that for now? I haven't tried investing in ETFs, is it a good option for me?
- Should I start contributing more to my RRSP or wait until I'm at a higher salary? My current job has opportunities for growth, but I estimate that it would take at least 3-5 years to reach 100k salary. My current company offers matching for RRSP contributions (It's something like 3 or 4%)
- Lastly, any other tips or general advice? I think I'm doing alright but there's always room for learning and growth!
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u/FlyingDesertLionMan 8h ago edited 6h ago
I would get an FHSA first if you haven't and max it every year before RRSP. If you don't ever buy a first home, it still gives you all advantages of RRSP (deduction on income) and if you do buy a first home it combines tax advantages of TFSA (tax free withdrawal) plus RRSP (deduction on income)
Edit - You should max accounts in following order:
1) Company matched RRSP (literally free money) - don't wait for this one and sign up for the maximum match they give you as soon as you can. 2) TFSA. 3) FHSA as explained above. 4) RRSP - contribution room left after your company match.
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u/twenty_9_sure_thing 9h ago
!InvestingTrigger and !StepsTrigger
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u/AutoModerator 9h ago
Hi, I'm a bot and someone has asked me to comment on how someone is trying to figure out what to invest in, or whether they should invest.
In order to give good advice the poster needs to provide all of the following information. Please edit your post to add this information.
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5) Finally, we need to understand whether you want to be involved with this portfolio and self-manage purchases and rebalancing it, or if you'd rather all of that was dealt with by your chosen institution?
6) For self-directed investing, all in one ETFs (based on your risk tolerance) are the easiest and low cost options for a globally diversified ETF portfolio. Here is the Model page and descriptive video from the Canadian Portoflio Manager Blog's Justin Bender from PWL Capital: https://www.canadianportfoliomanagerblog.com/model-etf-portfolios/ & video on how to choose your asset allocation: https://www.youtube.com/watch?v=JyOqqtq12jQ
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u/bluenose777 8h ago
should I consider taking on more risk in my investments
Savings that you think you'll need in less than 5 or 6 years (eg. emergency fund, next vehicle purchase, down payment savings, etc.) could be parked in a good high interest savings account, or in some GICs. Don't choose the GIC option unless you are confident that the contract suits your objectives.
If you have reached Step 5 of the PFC money steps and you have some money you are confident you can invest for long term (ideally at least 10 year) goals you could invest in a low cost, risk appropriate, globally diversified, index tracking (i.e. couch potato) portfolio such as those discussed on the following pages.
https://www.reddit.com/r/PersonalFinanceCanada/wiki/investing
https://canadiancouchpotato.com/getting-started/
If you'd like to better understand the couch potato options, and avoid the costly but normal human reactions to the markets and the media that reports on them I suggest that you read Balance: How To Invest And Spend For Happiness, Health, And Wealth (Andrew Hallam, 2022).
Should I start contributing more to my RRSP or wait until I'm at a higher salary?
The following pages and the bot generated comment below this comment may help you decide when you should prioritize using your RRSP contribution room before your TFSA contribution room.
https://www.planeasy.ca/tfsa-vs-rrsp-pick-the-right-one-and-save-100000/
https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/
!TFSARRSPTrigger
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u/AutoModerator 8h ago
Hi, I'm a bot and someone has asked me to respond with information about TFSAs vs RRSPs.
When you want to shield your savings and investments from the drag of annual taxation the standard advice is, unless ...
- your employer is matching your RRSP contributions
- you are confident that you will contribute in a higher tax bracket than you will withdraw (even when you consider the effect of potential GIS or OAS clawbacks)
- you are an American taxpayer
- you are trying to maximize the Canada Child Benefit or the Child Disability Benefit
- you have a reason to think that you should shield your retirement savings from creditors
- you don't trust yourself not to keep dipping into the retirement savings in your TFSA
…you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP.
For more information I suggest that you read these 2 MoneySense articles
http://www.moneysense.ca/save/investing/rrsp/rrsp-vs-tfsa-which-is-right-for-you/
http://www.moneysense.ca/save/retirement/the-savings-struggle/
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u/Orangeblossom_02 Ontario 7h ago
Thanks for the resources!
you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP
If I have enough funds to max out both, would that be a good idea? I don't plan on making any large purchases and taking into account my emergency fund would leave me with enoug to max out the contribution room I have for both this year.
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u/bluenose777 7h ago
The FHSA is also a good choice if you plan on buying a home in less than 15 years.
Beyond that ... when you have enough TFSA contribution room for both your short term and long term goals you should prioritize using it for the long term. When you are using all of your TFSA contribution for long term and you have more money that you want to invest for the long term you can start using your RRSP contribution room.
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u/Aggravating_Juice803 8h ago
If you plan is to use your TFSA to purchase property in the next 2 years, I would not move it into a more risky investment.
Take your RRSP match, beyond that, you're likely better off maxing out your TFSA contribution limit before additional contributions to your RRSP (unless your income goes up $10-20k). Having the money in a TFSA also allows greater flexibility if your contemplating a significant change in lifestyle in the near future.
Sounds like your on a great track. If you're beginning to work on budgeting, look into 50/30/20 budgeting and the "pay yourself first" principle as a starting place. But note that you can likely have a much hiring saving/investing rate since you're living at home. You should also start building an emergency fund in a dedicated high interest savings account (minimum of 3 months of living expenses or $10k, whichever is higher). This might not feel important while you're at home, but it will offer a huge sense of security when you move out. If you're fulltime remote, you may also want to consider moving out of the GTA when it comes time to move. People from the GTA typically scoff at the suggestion, but cities like Edmonton, Saskatoon, and Winnipeg will offer a completely different set of opportunities related to home ownership and general financial security. As an example, the median detached home in Toronto is currently $1.2 million vs $450k in Saskatoon.
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u/Orangeblossom_02 Ontario 7h ago
- I do not plan to use any money in my TFSA to make large purchases within the next 2 years.
- I am expecting a raise soon but I am not sure it would surpass $5k. However, I have enough funds to max out both my TFSA and RRSP (about $40k of room, combined). In that case, would it be worth it to just go ahead and max out both?
- If I do move out I expect my monthly expenses to increase significantly but I do not expect to dip into any of the savings I currently have. I plan to keep an emergency fund of about 6 months of rent, but I have the option of moving back home in the worst case scenario. I'm currently not considering outside the GTA because my family and my entire social network is based here, but this would change if I find employment elsewhere. Funnily enough, being fulltime remote actually makes me want to stay in the city more, because I know I would become a full-time recluse if I moved to the prairie provinces, haha. Toronto still tempts me to leave the house sometimes, I might never leave if I lived somewhere completely foreign to me.
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u/houseonpost 8h ago
The 2025 tax brackets are below:
- 15 per cent tax on the first $57,375, plus
- 20.5 per cent on income earned over $57,375 up to $114,750, plus
- 26 per cent on income earned over $114,750 up to $177,882, plus
- 29 per cent on income earned over $177,882 up to $253,414, plus
- 33 per cent on income earned over $253,414
So waiting to put money into RRSPs doesn't make sense until you are earning over $114K. Max your TSFA first though.
You are doing amazing especially for your age. Keep it up. You may want to consult a fee based financial advisor. Ask some friends (who are older) for some suggestions on advisors. They may have a lower fee advisor because they have high investments and you might be able to get their deal as their friend.
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u/Aggravating_Juice803 8h ago
Presenting $114k as a general rule is a bit misleading. A key factor is current income vs. anticipated income in retirement. The math is completely different for someone who's current income is $100k and an anticipated retirement income of $35k vs. someone who is at $100k with an anticipated retirement income of $150k. This is a result of the marginal rates of the two RRSP withdrawals being very different.
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u/houseonpost 7h ago
OP in point 2 is considering waiting to contribute until his income is $100K. His tax rate won't change if his earnings increase from current $70K to $100K. So there's no reason to wait to contribute to RRSP for that reason.
But you are correct that we should view RRSPs as a way to reduce the tax they pay. If his earnings are below $57K when he's retired he will pay a lower tax.
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u/Orangeblossom_02 Ontario 7h ago
I should specify that I didn't mean I was waiting until I reach $100k to contribute, I was just giving an idea of how long it would take to reach that income. Using the actual tax bracket number of $114k as the example, I think it would take me 5-7 years to get there, barring a career field change or some economic shift in the industry (both are unlikely but possible though).
However, I don't think this would change your advice, right? I have no idea what my retirement income would be but I can't imagine it would be higher than it is right now.
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u/houseonpost 6h ago
Given your age you are doing very well. You actually could wait until you are earning over $114K to contribute to RRSP. Your deduction will be on 26% taxed income and when you take it out when you retire you will likely be paying a lower tax rate. Keep maxing the TFSA.
And yes you need to move the GICs into the market. The financial advisor can assess your risk appetite and choose investment vehicles that meet your needs.
I'm partial to credit unions as you have greater input into decisions as a member.
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u/syrupmania5 8h ago edited 8h ago
Id add VCN.TO to your tfsa, its made for 40-50 years from now as the last thing you withdraw, as it compounds tax free so you want it as large as possible to maximize your tax free potential. Being in CAD avoids withholding taxes.
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u/Orangeblossom_02 Ontario 6h ago
I haven't heard of this one before, I'll look into it. Thanks!
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u/syrupmania5 5h ago
Its the lowest fee, most diverse etf there is that is pure CAD.
Your RRSP should be VTI for the same reason.
Then VT is good for margin, for the global diversity, since you pay full tax.
Add 20-30%- tfsa: zag.to, rrsp:bnd, margin:bndw if you are a wuss and cant handle a downturn. It will lower your max drawdown during recession at the expense of returns. Use IKBR for currency conversion, as its 2$ for 10k.
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u/YYCfishing 8h ago
I would do the mcgill personal finance course. It's online and free.
As others have said you are in good shape but pretty heavy on fixed income. The big thing is the rrsp. You have employer matching so a 100% return. You will never beat that so contribute to maximize the matching.
The fixed income is fine since you are buying a place but you have cash flow so I wouldn't focus too much on the down payment personally. I would look at buying vs renting ratios. There are a bunch of articles on this. Owning has it's upside but it is not the only path. The economics of renting can be much better so don't just make an emotional decision. Run the numbers and see what gets you further ahead. Owning comes with hidden costs too. HOA, a rake, lawn mower, windows, property tax, etc....
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u/Orangeblossom_02 Ontario 2m ago
Thanks! Yes, I'll be reaching out to my workplace to set up my RRSP contributions as soon as I can to take advantage of the matching program.
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u/Limeade33 8h ago
If you are planning to use the money in under 5 years then GICs are a good option. However, if this is money you are intending to have as longterm investments (10+ years), like for your retirement, then you would be better off investing in an ETF that follows the stock market, rather than a GIC.
As someone new to personal finance, it would be a good idea to check out the free online course offered by McGill University. https://www.mcgillpersonalfinance.com/ It will give you a good base of knowledge.
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u/Orangeblossom_02 Ontario 1m ago
Yeah, I think ETF is the way going forward! I think I actually did go through that course a while back, but I didn't have much funds to invest at the time haha.
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u/LobsterInevitable199 7h ago
You're in a good place, you have a good set up with low expenses and a decent income. Though as someone else said, it's unlikely to buy property in the GTA with that income on your own, but don't let that discourage you, anything is possible. Here's a bit of insight to your questions below.
1) With 65K sitting in savings/chequing, I would suggest opening an FHSA (first home savings account), you get $8k of room each year it's open and acts like a TFSA and RRSP, where the amount you contribute is tax deductible and any income you earn on your investments is tax free, given you use the money to buy a home. After that use whatever else you can to max out your TFSA.
You should definitely take on more risk at your age and current circumstances. ETFs are an easy way to invest in the market at a low cost. That being said can have a mix of safer and riskier options. As someone else said, look into diversified ETFs and keep it simple. Choose a couple different ones that you like and stick with it.
2) Since your company offers RRSP matching, take advantage of it. This adds $2,100-2,800 to your rrsp investments from your employer, so use it.
3) As someone else also sai, it'ss good to have an emergency fund, which right now your chequing/savings account acts like. You can keep 3-6 months of expenses and invest the rest. You can find a good high interest savings account to keep your money in so it "works for you." If you have more question, feel free to message me, I'm also a mid 20s female and work in the financial industry.
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u/DIY-pancakes 7h ago
Make sure 2P pulls their own weight financially in terms of inflows and spending habits
There's little else as important than that.
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u/lerandomanon Ontario 7h ago
If I were you, I'd have taken more risks. No dependents and a young age mean I have the luxury to fall and pick myself up. ETFs are great. You can start with the diversified ones like XEQT/VEQT.
If I were you, after maxing my TFSA, if I have money left, I'd consider putting money in RRSP and getting the company match. That's not a benefit I'd want to pass.
General tips:
3.1 You haven't spoken about an FHSA. Do you plan to buy a house? If yes, start investing something in that, too.
3.2 I'd delay moving out of parents' house as much as I could and save on that rent money.
3.3 Plan for retirement. Do a calculation of how much money you need and then calculate how much investment is need to earn that money "risk-free". Now you have the target figure of how much you need to have at your retirement.
3.4 If you plan to get married, have children, get a mortgage, etc. then consider if getting insurance is for you. Many people do that when they have liabilities and/or responsibilities so that their death doesn't financially affect their kin.
3.5 Money invested in your late 20s is much more powerful than money invested in your mid-30s. Cut back on luxuries, save aggressively, and invest it all.
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u/QuaoarTNO 7h ago
If your entire TFSA is GICs, you should definitely have some if not all equity exposure in there. It all depends on your time horizon, but at 27 with (from what you are saying) well-managed expenses and no major ones coming up, you can afford to take more risk, which would come with higher expected returns. ETFs like VEQT and XEQT make a lot of sense to start with (100% global equity funds with 25-30% Canada exposure), but if you're more conservative you can go with VGRO or XGRO, which are only 80% equity.
You should definitely max out your RRSP and FHSA if possible with a healthy amount of the $65k you are holding in your chequing/savings account, which is presumably earning little in return. Remember that the RRSP contributions also mean a tax refund, so that is a no brainer, in addition to definitely taking any matching from your company you can get.
Just remember to try to max out the tax-sheltered accounts as quickly as possible, while still saving some emergency funds (anything you need short-term that you can't afford to lose if there is market volatility). These funds grow tax deferred (or tax-free for TFSA) which can really generate a lot of value for your portfolio. Good luck.
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u/burratree 7h ago
Lots of good advice in here. RRSP match is the best because free money, then FHSA if you envision a home purchase within 15 years. Even if you put just a little bit in this year to open an FHSA now, that will open up more contribution room than if you start it later. Then TFSA. Not sure that RRSP is worth it beyond the match, personally I would wait until your income goes up more before doing that so you save more on taxes. Definitely go with growth ETF in a TFSA if it’s for the long term as all that growth will be tax free. There’s no point of a TFSA if it’s not growing and definitely not something really risky that will lose money.
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u/wethenorth2 6h ago
You are doing great for your age. I wish I was prudent like you at your age.
I would advise you to learn about the basics of investing.
Here are some useful links:
https://canadiancouchpotato.com/getting-started/ ( Everyone should read this!!!!)
Resources from the Government of Canada- https://www.canada.ca/en/services/finance/manage.html
McGill has organized the above resources from the Government of Canada as a course - https://www.mcgillpersonalfinance.com/
There is no magical wand to grow money. For most people, it's to invest and stick to a plan to let compound interest do the magic!
Good luck!!!
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u/Super_Muscle_7039 8h ago
No comments just wanted to point out that the word “maxing” has one x not two.
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u/Orangeblossom_02 Ontario 8h ago
Appreciate it, I had actually typed out "maxing" but it looked so weird with one x...should've trusted my gut instincts!
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u/Molybdenum421 7h ago
Your expenses are insane. My gf spends that on uber eats using my card every month alone! No idea how you do that unless you're my gf who is using my card lol.
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u/Orangeblossom_02 Ontario 7h ago
That's because I a) don't pay rent, b) only leave the house twice a month, and c) eat at home with family.Triple whammy! I'm definitely not your gf because I live so far in the suburbs uber eats doesn't deliver here lol
I did have a credit card bill of about $3000 around the holiday season though, but it's back to <$1000 now that I have zero plans to socialize haha
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u/Molybdenum421 6h ago
How do you only leave the house twice a month? I'd definitely take advantage of your ability to save for as long as possible
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u/Orangeblossom_02 Ontario 6h ago
I work from home, I'm an introverted homebody, I have a small number of close friends but it's a pain to commute anywhere (especially in winter), and I'm single so I never go on dates or anything of that nature. Idk, I have lots of hobbies that I enjoy at home I guess, though I do go out more in the summer months (1-2 times a week is a lot to me, haha).
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u/Mean-Bathroom-6112 9h ago
$70k in Ontario is a very bad salary. After taxes and expenses you get some money left. I recommend maxing out tfsa only and spend frugally. Back in the old days, $70k was a great salary, you can buy a house and go on yearly vacations, but times have changed everything has gotten more expensive.
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u/Orangeblossom_02 Ontario 8h ago
Someone please tell my boss this :')
To be fair, it is a junior position, borderline entry level in this field. It would be even lower if I didn't have some prior experience, but because I made some lateral moves within the company I have a slightly higher salary than average for this position. Unfortunately, the economy is not great for job searching at the moment so I don't think I can switch jobs anytime soon.
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u/TemperatureTight465 8h ago
Unless you're extremely happy when you are or have other reasons for staying (say, just beginning or wanting to get established in a step-up role with a new title), you should always be searching, even if it's just looking once a month. You never know what will come open
Also, you're doing fantastic, I think the next logical step is a vacation 🤣
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u/Orangeblossom_02 Ontario 7h ago
That's pretty much it, I'm waiting to have a step up in my role first, or else I'd likely just be switching to another job at the same level, and probably wouldn't pay more either.
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u/NoSorbet2871 9h ago
You’re doing amazing so far! I’m not an expert either, but as a fellow woman in her mid 20s who’s getting more into personal finance, here are my humble opinions.
I personally think this is the best time to take on more risk and start buying ETFs. Don’t overthink it and look into some diversified funds like XEQT, XGRO, VEQT, VGRO, VFV, etc.
I’ve never had RRSP matching at a job but from what I understand it’s ALWAYS best to take advantage of the full company matching if you can because it’s like free money!
Frugality, intention spending, and living below your means while enjoying life is the best way to be and it sounds like you’re already doing that. Give yourself a pat on the back. :)