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I’m a 20 year old University student from Canada and up until a month ago was completely clueless to the world of finances and investing. However, a labour strike has hit my school, one which has now lasted nearly 3 months, and I’ve found myself with an abundance of time to educate myself on subjects I ought to know more about. Given that I made this thread, economics, finances, and investing are obviously some of these subjects. Keep in mind that I’m a fine arts student, one who was particularly poor at mathematics, so at first I felt completely out of my depth. But I’ve been lurking on these forums for about a month and I’ve picked up a couple books, Rich Dad Poor Dad and The Wealthy Barber, to help me with the basics. No, they’re not highly technical but I’ve found them to be useful entry points seeing as how I’m a complete beginner. I’m also considering reading Bernstein’s The Four Pillars of Investing and I’d welcome any other suggestions. The reason I’ve chosen to further my education on these subjects is largely in part to the current state of the economy. I know that the markets historically have an upward trend and the sagging global economy, coupled with my young age, have intrigued me to the point where I feel that “buying low” will give me a great head start to my future financial well being. I’d greatly appreciate any advice and feedback to help me succeed in a rather daunting undertaking.
I work part-time at a paltry wage, but I’ve been saving at least 65% of my pay cheques for over a year and have always been a very frugal and cost-savvy person. Fortunately, I currently have no real expenses. My tuition is covered by my parents, who also cover almost all of my monthly expenses including the phone bill. However, come September I’m planning on moving downtown to live with my girlfriend. I’ve carefully calculated my budget, which is enclosed below. The budget isn’t set in stone as it assumes I will receive no aide from my parents, who may help with my transportation (school-related) and other incidentals, but since I’m unsure it’s best to err on the side of caution and include all possible expenses. Also, I neither drive nor own a car, and I don’t see myself getting one for some time as the city has extensive public transit. Needless to say, I’m not keen on making car payments on a student’s wage.
Monthly Earned Income - $800-1100 (15-25h a week at near minimum wage, though increases during summer-time)
Monthly Expenses (Sept.) – Rent & utils. - $500, Groceries - $150, Transportation - $100, Cable/Internet/Phone - $100 --- [$850]
Credit Card - $0
Because I’ve been careful with my spending, I’ve amassed a fairly respectable savings account for someone my age, especially when I compare it to that of my spend-thrift peers who often have less 1/5 of my assets. My goal is to save as much as possible, and inversely spend as little as I can, until September rolls around when the real expenses kick in. I currently have $8000 in my savings account, pay off my credit card every month, and consequently have no debt. By September, I should have around $14,000 saved up. I’ll likely need at least $3,000 in initial expenditures – first and last, security deposit, and some furnishings – so I’ll estimate that by October I’ll have $11,000 in liquid assets. However, that money is only collecting 2.25% in interest and I feel that it’s a bit excessive in terms of liquidity and it’s not really preparing me for my future. I want to start setting money aside for my future and build a portfolio to achieve my short and long term goals.
My Goals:
Short Term - Make a 25% down payment on a house in 15 years, when I’m 35 years old.
Long Term – Retire at the age of 60.
Firstly, I think $5100 ($850 x 6months) would be an adequate emergency fund and I could keep that in my tax-free savings account earning the same 2.25% interest. That would leave me with $6000. This is the part with which I need the most advice. I can either start investing now or wait until I have amassed that $6000 by the summer before I start. On the one hand, I’m curious to see if the market reaches new bottoms, but on the other the market is so badly hit that I’d be getting bargains even if I wanted to start investing right now. Mutual funds and index funds seem like good options, but I’m not at all sure how much I should invest, nor what strategy to adopt. Because I want to build this portfolio primarily for a house payment, it would probably be wise to stay conservative, correct? (60% stocks to 40% bonds?) I also think it’s a good time to start contributing to my retirement plan, my RRSP (equivalent to your 401k). It’s difficult to tell how much I can contribute monthly over the period of 15 years, mainly because I have no idea what my income will be when I get my degree and start working full-time. But at my current wage, I feel that $60 a month would be adequate. According to the compound interest calculator I’ve been using, if I start with $3000 as my initial balance, assume an 8% return per annum, and contribute a mere $60 monthly, I’d be looking at $30,700 in 15 years.
Am I on the right track? Could some of the regulars provide me with some advice and feedback, particularly in regards to my investment inquiries? I greatly appreciate your time and effort.
I work part-time at a paltry wage, but I’ve been saving at least 65% of my pay cheques for over a year and have always been a very frugal and cost-savvy person. Fortunately, I currently have no real expenses. My tuition is covered by my parents, who also cover almost all of my monthly expenses including the phone bill. However, come September I’m planning on moving downtown to live with my girlfriend. I’ve carefully calculated my budget, which is enclosed below. The budget isn’t set in stone as it assumes I will receive no aide from my parents, who may help with my transportation (school-related) and other incidentals, but since I’m unsure it’s best to err on the side of caution and include all possible expenses. Also, I neither drive nor own a car, and I don’t see myself getting one for some time as the city has extensive public transit. Needless to say, I’m not keen on making car payments on a student’s wage.
Monthly Earned Income - $800-1100 (15-25h a week at near minimum wage, though increases during summer-time)
Monthly Expenses (Sept.) – Rent & utils. - $500, Groceries - $150, Transportation - $100, Cable/Internet/Phone - $100 --- [$850]
Credit Card - $0
Because I’ve been careful with my spending, I’ve amassed a fairly respectable savings account for someone my age, especially when I compare it to that of my spend-thrift peers who often have less 1/5 of my assets. My goal is to save as much as possible, and inversely spend as little as I can, until September rolls around when the real expenses kick in. I currently have $8000 in my savings account, pay off my credit card every month, and consequently have no debt. By September, I should have around $14,000 saved up. I’ll likely need at least $3,000 in initial expenditures – first and last, security deposit, and some furnishings – so I’ll estimate that by October I’ll have $11,000 in liquid assets. However, that money is only collecting 2.25% in interest and I feel that it’s a bit excessive in terms of liquidity and it’s not really preparing me for my future. I want to start setting money aside for my future and build a portfolio to achieve my short and long term goals.
My Goals:
Short Term - Make a 25% down payment on a house in 15 years, when I’m 35 years old.
Long Term – Retire at the age of 60.
Firstly, I think $5100 ($850 x 6months) would be an adequate emergency fund and I could keep that in my tax-free savings account earning the same 2.25% interest. That would leave me with $6000. This is the part with which I need the most advice. I can either start investing now or wait until I have amassed that $6000 by the summer before I start. On the one hand, I’m curious to see if the market reaches new bottoms, but on the other the market is so badly hit that I’d be getting bargains even if I wanted to start investing right now. Mutual funds and index funds seem like good options, but I’m not at all sure how much I should invest, nor what strategy to adopt. Because I want to build this portfolio primarily for a house payment, it would probably be wise to stay conservative, correct? (60% stocks to 40% bonds?) I also think it’s a good time to start contributing to my retirement plan, my RRSP (equivalent to your 401k). It’s difficult to tell how much I can contribute monthly over the period of 15 years, mainly because I have no idea what my income will be when I get my degree and start working full-time. But at my current wage, I feel that $60 a month would be adequate. According to the compound interest calculator I’ve been using, if I start with $3000 as my initial balance, assume an 8% return per annum, and contribute a mere $60 monthly, I’d be looking at $30,700 in 15 years.
Am I on the right track? Could some of the regulars provide me with some advice and feedback, particularly in regards to my investment inquiries? I greatly appreciate your time and effort.
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