James Turik, 38, owns a sparsely furnished, two-bedroom condo unit in a trendy downtown neighbourhood. He plundered his RRSP as well as his other savings for the down payment. “Now that things are freeing up,” James says, referring to his healthier financial situation, “obviously, I have to start putting money away again.”

After working in advertising for several years, James decided that a post-secondary degree would give him more career opportunities.

For his tuition, James took out about half of his RRSP funds. Under the Life-Long Learning Plan he was able to withdraw $10,000 a year over two years. The remaining fees he paid from his Visa.

“I didn’t qualify for student loans because I was working while I was studying.”

The degree helped him land a job that pays considerably more than his previous position. The tuition was a long-term investment, but he is feeling some pressure to rebuild his finances now.

“I don’t have the savings that other people have at my age.”

He also has to start repaying the tuition money as well as the $25,000 he took from his RRSP under the Home Buyers’ Plan.

James doesn’t spend a lot on entertainment, except for his passion for golf. There are a few things he’d like to buy, starting with another car. His 16-year-old Honda has needed several repairs of late. He’d also like to do some renovations to his house, join a gym and buy a new stereo.

“Can I afford to put money aside for those things? Or should I really buckle down over the next three years and put everything I have toward retirement savings to get back in shape? I’m willing to do that. I’ll wait for the car. I guess the priority should be retirement savings, as much as I hate to say that.”

Assets: Liabilities:
Residence – $300,000 Mortgage – $268,000
RRSP – $4,800
Savings – $1,600
Auto – $2,300

Here’s what he can do. 

  1. Now that James has completed his major career/education goal and has bought a condo, he has sensibly outlined some specific goals. His long-term goal – to save money for his retirement – is one that he feels he should focus on. After calculating his budget, he has about $3,000 a month to work with. James’ salary allows him to contribute the maximum amount per year to his RRSP. James’ RRSP should be invested in a balanced index portfolio. He also needs to pay back his Home Buyers’ RRSP withdrawal of $140 per month and LLP of $167 per month. These payments don’t affect his contribution room.
  1. A car that’s on its last legs is only going to become more costly and lead to safety concerns. James wants to keep his vehicle for a long time so buying would be less costly than leasing. He could use his RRSP tax savings to help with the down payment. Since he lives and works downtown, instead of purchasing a new vehicle, he could also consider a car sharing service such as Autoshare or Car2Go for occasional vehicle use.
  1. If he doesn’t buy a car, he can use the remainder of his calculated surplus to pay for a gym membership plus savings (in a TFSA) for his stereo, home improvements and vacations. He could also use some of this money to apply to his mortgage in the form of accelerated payments.
  1. Everyone should have access to 3 – 6 months of living expenses in case of emergency, such as job loss, major house repairs, etc. Since he’s not to keen on having $12,000 – $24,000 sitting in a savings account, he can alternatively apply for a line of credit to use for this purpose.

Final thoughts

Getting an expensive post-graduate degree has solidified James’ career and gives him the option to freelance in the future should he so desire. He currently doesn’t have the savings other people have at his age, but with his increased income he can get back on track and make up for lost time.


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