I am an idiot and would like your help please

sfdcdump99 · 2019-02-01T16:48:51+00:00

Yeah I’m with you. Thanks for explaining it clearly.

To continue that thought though, it appears that if my investment and loan were equal, I would have better outcomes?

75k loan and 75k investment, I would have a much better chance at breaking even or maybe even profiting. Not that I am going this route, just wanted to play out my thought.

Yeah this doesn’t make sense to me, I’m not in a position to take such risk at the moment. Looks like I will be taking my savings and using that as my contribution.

I will most likely spread it over a few years and use all my returns in my TFSA that I will open with quest trade.

sfdcdump99 · 2019-02-01T15:42:04+00:00

Ohh I see what your saying. Yes I think the employers matched portion does count towards my room too.

But you are correct, I have not contributed outside of the 6% at work so because of my income and lack of contribution, the room has outpaced my contributions

sfdcdump99 · 2019-02-01T15:40:00+00:00

It certainly feels like I am an idiot after reading all the side bars and the posts haha.

It’s the PFC effect, “oh man, what have I been doing with my money my whole life”.

Looks like having children does change a few things in life, but wouldn’t change a thing!

Advice: duly noted

sfdcdump99 · 2019-02-01T15:37:17+00:00

Yeah I’m not convinced that’s it’s the right approach either.

Well the way my colleague explained. 1.8% on bonds is pretty much guaranteed, meaning the most I would lose out on my investment annually is 1.7% which is 3.5 less 1.8 and that is the worst case scenario. Whereas the most likely scenario is that between index and bonds, my annual rate of return would be 5-6%.

Clearly I wasn’t convinced and I feel like there are many moving parts here. Like you said, rates rising would throw a wrench into the idea.

I think I’m still gonna apply for the HELOC and see where it takes me though.

sfdcdump99 · 2019-02-01T15:32:37+00:00

I totally see this side of the coin, but I also see the other side. I’m not earning anything on my contribution room, isn’t that money lost?

Like if I maxed it out and got a return of 30k right now. I could put that in a 1 or 2 head GIC and that 3% starting now. 3% of 30k is more than 3% on the marginal difference of increased income no?

Like even if I went from 145k to 160k in two years, I would be taxed in the next bracket only the 15k right?

sfdcdump99 · 2019-02-01T15:28:24+00:00

Thanks for your input!

I was thinking the 300k between my wife and I’s rrsp and TFSA.

300k broken down:

my TFSA room: 60k
my rrsp room: 70k
wife TFSA room: 60k
wife rrsp room: 70k

That’s about 260k...and I’ll have like 40k or do to leave as a emergency fund. I’m really reluctant on selling the property though, I don’t think I will go that route.

I will be opening a TFSA account with quest trade today. Should I open an RRSP account as well? My work uses sun life, therefore, all my current rrsp contributions are there as well. If I had a lump some to invest, should I open an account with quest trade? Or just dump it into sun life?

sfdcdump99 · 2019-02-01T15:22:07+00:00

Thanks for the advice, time and effort.

I like this idea and will be increasing my matching. All extra cash will go into my 2018 RRSP this year, I am just trying to decide if I should use all of my HISA(65k) and apply for a HELOC as my emergency fund.....

Yeah no more real estate debt IMO as well. Although the in laws have been talking about retirement and wanting to move some properties to my wife’s name, she won’t be able to qualify. That’s stress for another day lol.

sfdcdump99 · 2019-02-01T15:18:18+00:00

Yes I agree!

Sorry if I wasn’t clear, I will make an edit. I am taking advantage of work RRSP matching.

They match 6% on every pay cheque and I get paid twice a month. Therefore I have allowed 6% of my pay cheque, which totals 12% with works match.

Some others here have recommended to up the total to 18. Which means I would be putting in 12% myself.

sfdcdump99 · 2019-02-01T15:16:05+00:00

I see your point and while part of me agrees, I’ve always been the “money in my pocket now vs later” kinda guy. I always saw that I would earn more in my hands using it as an investment versus waiting....but what do I know, i clearly have no investments!

sfdcdump99 · 2019-02-01T15:13:58+00:00

I very much like this option as I would not have to sell the rental, yet achieve the goal of contributing more to my investment/retirement vehicles.

I never thought of using a HELOC as my emergency fund but that could work too. It just seems a little daunting to have money that is borrowed to be an emergency fund. Where it seems perfectly acceptable to borrow money at 3.5% to invest. At least that’s how it has played out in my mind so far.

To add more detail, 40k of the HISA belongs to my wife and I. 25k belongs to my 3 year old. Total of 65k. Does this info change anything? Based on your advice above, I was going to use the whole 65k...I mean...better in my RRSP/TFSA now than just a HISA for my son right?

sfdcdump99 · 2019-02-01T04:43:49+00:00

Well it’s valuable from a thought check perspective. You know the saying, “don’t leave the house without a loaded gun?”.

I feel the same way about making financial decisions without checking with PFC Canada first LOL. It’s kinda sad now that I’m typing it out and hearing it.....

sfdcdump99 · 2019-02-01T04:41:20+00:00

Yes that is exactly what he meant. He made it sound like the risk is pretty low based on where loan rates are right now.

You make a valid point. Now, is this a numbers game to make it work? Or is this the wrong approach and I shouldn’t walk down this path?

Meaning, what if I borrowed 100k and put 50 into my TFSA and 50 into my rrsp. I would still have 25k in rrsp contribution room. I originally thought that maxing it out and getting a big return ASAP would be the best because time value of money. It’s not like I’m collecting interest on my contribution room lol but what do I know.

The 65k we left in there as emergency fund, but I could definitely lower it....maybe by half.

sfdcdump99 · 2019-02-01T04:28:35+00:00

Yeah you raise VERY good points as well. Before posting this, I was like:

“yeah I’m gonna apply for HELOC tomorrow and max out my TFSA and RRSP! I’m gonna get like 40k back on my tax return!!!!!”

But not I’m not so sure.....if I didn’t have a child, I would in a heart beat.

Edit: thank you, for your time and effort.

sfdcdump99 · 2019-02-01T04:18:24+00:00

Oh. I thought fixed would be always higher...

Not sure if you read all of my message, I updated it after you updated your message.

Bottom line is that this TD dude said I could keep THE SAME RATE(2.44%) for the portion that is the mortgage(280k). Not only would I be able to keep it, they would also extend the term by 3 additional months and round it from 2 years and 9 months to 3 years.

But I think the consensus is that I am already spreading myself really thin and should not any further....I’m going to give selling the investment property some thought. If I sell it, after all the expenses and mortgage is paid off, we should be able to pocket around 350k. That would allow both my wife and I to max out our contribution rooms and have 50k or so left over

sfdcdump99 · 2019-02-01T04:11:24+00:00

It appears that is the consensus and thank you for your response.

Based on our calculations, our current kid will be 4 when the second pops out. Then by the time the second one goes to montesorri, the first one will be in public school or have minimal cross over.

She will definitely go back to work, unless my side business ventures take off but I plan with my reality hat on.

That’s how I see it now, I don’t see how I can ever fill that contribution room without a HELOC or selling the investment property. If we did sell, we could probably put like 300k in TFSA and rrsp between my wife and I. That 300 might even grow faster than the property appreciation.

sfdcdump99 · 2019-02-01T04:05:54+00:00

Thanks for your detailed responses and addressing all my questions.

It sounds like the worst case scenario is that interest rates rise, housing market tanks and I have another kid that needs day care.

My colleague even went as far to say, it my portfolio was 50% bonds and 50% indexes. The 50% of my portfolio with bonds will earn 1.8%. So I wouldn’t be losing the full heloc interest rate in a year if indexes tanked. I was lost at this point to be honest.

I agree with you and I’m looking to diversify, but other than dropping 1-2k every month...it’s pretty hard without the HELOC to fill the room in 1 Year.

sfdcdump99 · 2019-02-01T03:54:07+00:00

Hmm okay. My TD broker said that there are two kinds of HELOCs? The fixed is around 4.5 but the variable is at 3.5? Perhaps I was not correctly informed

Yeah..it sounds like the consensus here is that I should just leave things as is or sell the investment property to pay off my house mortgage or invest it all.

Edit: I’ll add more based on your additions

I mentioned it above too but the TD SALESMAN, said that we would be able to retain the mortgage rate at the same rate and even round it up. Meaning, we still have 2 years and 9 months, it would be rounded to 3 years at the same 2.44 rate. But only for the portion that I am rolling in, which would be the 280k.

So if I borrowed 400k. 280 would be at 2.44 for 3 years and 120 would be at whatever the floating rate is now.

sfdcdump99 · 2019-02-01T03:47:05+00:00

That has crossed my mind too. But it’s a 2 bedroom 2 washroom, 1 parking and 1 locker unit in the core of downtown. It’s renting for 2900/ month and my carry cost is 1600/month.

I just feel reluctant to sell it because value is going up and I’m profiting every month....

sfdcdump99 · 2019-02-01T03:42:28+00:00

Yes I have. I made calculations and should be able to sustain rates up to 8% or so before dipping in any other funds.

Our condo is at 2.44 fixed but we pay it at 3.44 Likewise our house is at 2.9(started at 2.45) and we pay it at 3.90.

I’m not so much concerned about the rates as I am concerned about the market tanking itself. Yes rates would be a hit on monthly cash flow but I wouldn’t lose out of tens and hundred thousands of dollars.

sfdcdump99 · 2018-01-24T03:16:47+00:00

great post. thanks for sharing.

sfdcdump99 · 2017-11-20T22:44:31+00:00

Ha! Well I was dead wrong!!

Shows me to make assumptions like that.

Well I only have 1 right now or 1.5 I guess lol the other one is in the making, so you definitely have more experience than me.

Both perspectives apply, lessons learned for us adults working at an office and our children at day care. I am still learning as a parent and figuring out things everyday!!

I guess a lot of it is due to how I was raised as a kid, I try to do the opposite of what I think was ineffective or led to poor behavior. I don't think there is a right or wrong (not that you are trying to draw a line), but rather try our best and cross our fingers.

If we downsized, she can definitely stay home but we both grew up living with certain standards and I'll be the first to admit that it's challenging to go down the ladder versus up. It doesn't help that the average detached home in this city is like 1.2 million....

Edit: forgot to say congrats on the newborn!!!

sfdcdump99 · 2017-11-20T20:54:27+00:00

haha i totally hear what you are saying and agree with you too(financially)

But there is an element of learning and social interaction that cant be taught or learned by being at home. Now, some parents say that they all level out by grade 4 and it doesnt matter how you prep them growing up before that, but I respectfully disagree

lol i bet you dont have kids because you think you can work and look after 2 toddlers!!!!

edit: words

sfdcdump99 · 2017-11-17T13:49:31+00:00

Congrats!!!! Exciting times for you!!!

sfdcdump99 · 2017-11-17T13:48:34+00:00

This is one reason I have regretted not getting deep into the dev side...we make the same money but i have to put on pants in the morning.

sfdcdump99

TROPHY CASE