Walk Off The Earth is the coolest

May 8, 2013 By 2 Comments

Ok, I can’t even handle this.

Walk Off The Earth (the coolest band ever) has partnered with ING Direct (the coolest bank ever) for a contest.

You could win $10,000 by telling ING your “creative” way to save. A friend originally texted me the contest and encouraged me to enter, but I don’t think I have a creative way of saving — I mean, scheduled transfers isn’t that creative is it? Mandatory employer retirement plans? Automatic dividend reinvestment plans? Maybe there’s something I do that is creative and I’m just not aware… might be time to reread some of my old blog posts.

If you have a creative way of saving your hard earned dollars, you can enter here.

Doesn’t matter, what does matter is this wicked video by WOTE (I’m allowed to acronym their name, right?):

This is a song about saving and dating. It’s practically my blog. I am adopting this as the official theme song of Money After Graduation.

“The boy with the cold hard cash is always Mr. Right”.  PREACH, SISTER! (remember that time I dumped a guy because he was $50,000 in debt?)

Walk Off The Earth is the best. I even bought their REVO album for my dad.

Saving is so cool, even cool bands are on board.

Reminder: get a $25 bonus for opening an account with ING if you use my Orange Key referral number. It’s right there in the sidebar! Now is especially a great time since they have a promotional 2.5% interest rate going on until the end of June. Happy Saving =) 

Filed Under: Save

How much should you have saved for retirement by age 30?

May 1, 2013 By 41 Comments

I saw a post of the same title in my twitter feed last week, but when I went back to read it, I couldn’t find it again so my apologies to the author, I’m sure you did a much better job than me. In any case, you got me wondering:

How much should you have saved for retirement by age 30?

At 27, my retirement nest egg is somewhere in the neighbourhood of $20,000. If you add in my TFSA (and I don’t, because I might spend that on other stuff) it’s even higher. I started saving at 25, which is early or late depending who you talk to in the personal finance community. I started slowly, but this year I’m on some kind of retirement-saving bender because the stats about how little people save for their retirement really freak me out. Essentially very few people save, and those that do aren’t very good at it. I don’t know how anyone in their 40′s sleeps at night with $10,000 or less in the bank, but they probably have a higher pain tolerance than I do, or considerably less FOMO. I know that if I want to maintain my groovy lifestyle into my 70s and 80s — and believe me, I will — I need to make sure I have the funds to do it.

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So it’s best to establish milestones and goals so you know you’re on track. I don’t put a lot of thought into my life at age 65 because it’s nearly 40 years away, but age 30 is something I can work with. Word on the street is:

You should have 1x your annual salary saved in your retirement account by age 30.

That seems doable, right? I’m more or less on track, unless my salary jumps significantly in the next year or two, in which case I would need to have more, but that’s not a bad problem to have ;)

If you have more than 1x your annual salary saved, awesome! If you have less, you’ve got some work to do. If you have nothing, you have a lot of work to do. If you think saving for retirement when you’re in your 20′s is unimportant, I get it. I’m probably the least concerned of all personal finance bloggers about how wealthy I’ll be when I’m old and grey. I don’t like saving for retirement at all, but I do it anyway because I like the idea of being poor even less. Don’t be a self-saboteur and save nothing for retirement in your 20′s, it’s a huge pain in the ass to play catch up every decade thereafter.

How I save for retirement:

Without choice: work deducts 11% of my gross pay and saves it for me. I never see that money, so I never get to spend it. There’s nothing quite like being volun-told to get stuff done.

Automatically: I have transfers set up every payday that direct a small part of my paycheque to my RRSPs. If I didn’t think the above was already enough, I’ve got my own thing going in the same theme: money in, and money out before you can spend a dime. I like locking money in my RRSPs because I can’t get it out to spend it on dresses.

With time: I may add funds to my accounts grudgingly, but I appreciate the interest and dividends that boost the small sum each month. Starting early and saving regularly means my retirement nest egg has decades to grow, and I’m happy to report that, slowly but surely, that’s what I’m already seeing.

How much have you saved for retirement? How much more did you need? How are you getting there?

Filed Under: Save Tagged With: ,

Wanna save money? Get married young!

April 29, 2013 By 33 Comments

Truth time: 80% of the reason I decided to write this article is because I knew Bridget would go into stat overload when she saw it. I know, I know. There is a 50% divorce rate, that percentage increases for younger couples, yadda yadda yadda.

(Bridget: ….. lol, Erin.)

In my introduction post, one reader pointed out that I am the youngest writer on the site but the only one that is married. While more of my peers are getting engaged and married now, it was not normal when I got married at the tender age of 20. From a purely statistical standpoint, getting married at such a young age is a terrible idea. (Right, Bridget?) However, it does come with some serious financial benefits.*

- Financial aid. If your parents make a decent income but aren’t helping you with tuition, you get screwed over in financial aid. I didn’t have an issue getting loans (evidenced by the $40,000 of student loan debt I managed to accumulate), but grants were much harder to come by. As soon as I got married, financial aid was based solely upon mine and my husband’s income. Two college kids aren’t really flush with cash so I started getting the maximum amount of grants. If only I didn’t take out additional student loans to pay for…whatever the hell I blew them on.

- Double the (meager) income. College students do not make anything much. But when you go from one meager income paying for your crap apartment to two meager incomes paying for your crap apartment, it really does make a difference. Same goes for utilities, cable, Internet, what have you. Aren’t roommates the same thing? No, because unless you are super close you will need extra space, i.e. a second bedroom. Which costs extra money. Also, they get mad when you eat their food. I prefer the “what’s yours is mine” relationship that can typically only be found in committed relationships.

- Taxation. When you are making the salary of one adult combined but claiming the exemptions of two, your tax liability is slim to none. It’s beautiful. While popping out children young can also be beneficial for tax purposes, I don’t recommend this as a way to save money (to the dismay of my mother and MIL). I’m not sure if you know this, but the cost of a child actually outweighs the $3,800 exemption. I’m pretty sure that only pays for like three weeks of diapers…

So that’s my financial advice for the day to you young college students. Just get married!**

Did you get married young? Do you have any additional financial benefits to share? Everyone else: share your favorite “raining on someone else’s parade” statistic!

*I am well aware that marrying young can come with a host of downsides as well, many of which are financial. But in a world of hyper-responsible PFers, I wanted to offer the rebel perspective. Because let’s be honest, we aren’t always going to make our decisions based on statistics and plenty of us “irresponsible youngins” turn out just fine.

**Please do not get married young just because you want to reap the financial benefits or because I’m your idol and you want to be just like me. Marriage is kinda a big deal and should not be taken lightly. Unless you are a celebrity, in which case it’s not really a big deal. Go nuts.

Bridget: remember this:

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Filed Under: After Grad Life, Save Tagged With: , ,

Saving just got sweeter: ING’s promotional 2.5% rate

April 10, 2013 By 5 Comments

After a few years of personal finance blogging, telling people to save is something I feel I might have already said one too many times — but if you’re a new reader, maybe you don’t yet know how awesome saving is, or maybe you do but you don’t know how to do it, or maybe you already know & do it and just want to relish in how much joy it brings you.

Well, now it can bring you more joy, because it will bring you more money. If you’re not saving, now is the time to start. If you are already a good saver, now is the time to boost contributions.

From now until June 30th, ING Direct is offering an interest rate of 2.5% on any new contributions to your investment savings accounts.

This means what’s already in there isn’t suddenly earning 2.5%, but anything you throw in as of April 1st will earn interest at this promotional rate. If you don’t yet have a savings account with ING, you can sign up using my referral key and we’ll both get a $25 bonus — that makes your rate of return even more than 2.5%! Am I sweet to you or what?

Now, usually when I pull financial-evangelicism offline and encourage anyone to save and invest, the audience isn’t always as receptive as the online finance community. The complaint about low rates of return has been an argument posed by unmotivated savers for the past few years.

I know, ok? You want to earn a double-digit return on your money with absolutely no risk. I understand these figures existed in the past, and you long for the golden age your parents told you about where savings accounts and GICs could set you up comfortably for years.

I GET IT.

But I’m sorry, you’re going to have to join us here in reality where 2.5% is a good rate.

Yes, you can earn a greater return in the stock market but chances are, if you don’t see the value in a basic savings account, you don’t possess the savvy to begin buying shares. I know I’m being harsh here, and I’m sorry, but you need a little tough love to bring you down to earth.

A savings account is always a good idea, and now it’s a better one because you can get 2.5%. You can use it to save up some cash to invest in stock market and earn those double digit returns your heart desires.

Filed Under: Save

Ways to use your RRSP for things other than retirement

February 18, 2013 By 7 Comments

If you frequent Canadian personal finance blogs, you’re already familiar with the Registered Retirement Savings Plan (RRSP). However, while members of the personal finance community might be privy to the perks of the RRSP, the average Canadian is not.

Only about 38% of Canadians contribute to an RRSP. The ones that don’t complain about lack of funds, market volatility and feeling that it simply wasn’t “important” to make a contribution. Source.

I didn’t start my RRSP until I was 25. I put $2,500 in that year, and this year (two years later) is the first time I’ve claimed the deduction. Last year and the year before, I contributed to my employer’s mandatory pension plan, and claimed those deductions, which also counts towards my RRSP contribution room. Despite having a retirement plan through work, I’m contributing to my RRSP for a few reasons:

primarily for the income tax break

secondly because putting money in now means it will earn interest and compound for decades

and lastly, because there’s the opportunity to use that money to achieve other financial goals other than retirement.

That last one is something I think most 20-somethings don’t know about. Maybe if they did, they’d start building their retirement funds a lot sooner.

RRSP Fast Facts:

  • your annual contribution limit to your RRSP is 18% of your gross income to a maximum of $23,820 (for 2012, this limit generally increases every year).
  • unused contribution room can be carried forward to future years
  • you can contribute to your RRSP but claim the contribution in a future year (this gives time for your contribution to compound and you can still use the deduction for taxes when you’re earning more in a later years)
  • you can keep your RRSP savings in any savings or investment vehicle, including: savings account, GICs, mutual funds, stocks, etc.

The First Time Homebuyer’s Plan

The first time Homebuyer’s Plan (HBP) will allow you to withdraw up to $25,000 from your RRSP for a down-payment on your first home. If you’re purchasing with a partner, they can also withdraw up to $25,000 from their RRSP. This can give a couple up to $50,000 to put down on their first home. The catch is this is just a loan: you will need to put back the money you borrowed from your RRSP. You have 15 years to pay back the amount you withdrew. If you borrowed the full $25,000 this is about $139/mo. But hopefully if you had $25,000 in the RRSP in the first place, you’re a good enough saver to work $139/mo of saving into your budget ;)

Remember: in your 20′s, time is nearly as valuable as capital. The sooner you put your borrowed money back, the longer it has to compound which means a greater nest-egg when you actually do need it for retirement.

The Lifelong Learning Plan

Like the First Time Homebuyer’s Plan, the Lifelong Learning Plan (LLP) will allow you to withdraw an amount tax-free from your RRSP that you will later need to pay back. The limit for the Lifelong Learning Plan is $10,000. You have 10 years to pay this amount back, which works out to $1000/yr or about $83/mo. Again, no big deal if you’re a good saver! This is a great option if you’re seeking to increase your education to boost your income. High paying degrees like an MBA or an MD can justify the investment, but I’d discourage you from borrowing from your retirement nest-egg just to study something for interest sake.

Remember: if you borrow under the LLP, you have to actually go to school. If you withdraw the money but fail to enrol in an accredited program, you’ll have to pay the money back in less than 10 years.

Can you withdraw from your RRSP for other non-retirement reasons? 

Technically, yes — but you shouldn’t. When you withdraw from your RRSP outside the Homebuyer’s or Lifelong Learning plan, not only is your withdrawal taxed, you never get back the contribution room. If you’re in absolute dire straights, ie. jobless with no other source of income, withdrawing from your RRSP might be worth the the drawbacks, but in any other circumstances it’s likely to do more harm than good.

Filed Under: Save
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