Horrible financial advice:
http://www.moneysense.ca/save/financial-planning/how-to-juggle-rrsps-tfsas-resps-and-a-mortgage/The family's concerns? Paying down debt (especially a $90k LOC they got to renovate their home), kids education fund, and building an emergency fund.
CurrentIncome is $180k, Retirement savings is $30k per year, LOC repayment is $10k per year, and mortgage prepayment is $12k per year, and kids education savings amount is $5k per year. =$57k saved (plus mortgage principal payments) on gross income of $180k. 30% savings rate. Likely 40% if you count the value of her pension contributed by her work as savings.
This leaves them with $6800 per month of spending currently. (both have jobs with excellent benefits)
The recommendations?
1) Roll your LOC into your mortgage when you refinance, because you MIGHT save money. (okay, but that is not likely to happen for a couple of years, not a plan for now, and LOC may be 25% smaller by then anyway...)
2) Forget the emergency fund
The family is a family of savers so set up a LOC to tap as emergency fund...but the article never previously mentioned anything about an existing or desire for an EF..? ( And this is in conflict with recommendation #1, isn't it? you can't get 2 LOC at good rates on a single property these days... oh, and $450k for a 3 bedroom home may just be at the 80% financing limit once they roll $90k renovation costs onto it...)
3) Stop "oversaving" $30k to your retirement. "go out and enjoy date night". WTF? $30k is is only 16% of their income, and the pharmacist may be getting an employer match on the ESOP....!! After all, he is moving the money out of the company stock to his own account every 2 years, as soon as he is able to...which implies he does not really want the stock, just the benefit??!!
ARGCH!!
My advice --
1) Ramp up the LOC savings. e.g., Stop pre paying mortgage principle and put that $12k plus as much as possible onto your LOC until you renew your mortgage.
2) Get $2k emergency fund.
3) Cut educational savings entirely or by at least half because there will be a lot of time later to save for kids before they hit college and after your renovations are paid for.. (e.g., re-start RESP saving at age 11.) At this rate, they will be maxed out on RESP contributions (CESG grant money) by the time the kids are 15 years old...,
4) Put another $11k per year into TFSA accounts by cutting other expenses.. add to RRSP's as your income grows over $90k per person.
What would your recommendations to this family be?
