Am I on the Right Track?

[squeak]

Hello Mustachians! Brand new member here. I've been reading avidly all around the forum for the last week or so, and I'm sure I can keep myself busy for many more weeks reading more.

Anyway, I am really wondering what my best course of action is here. I realize no one here is a financial adviser, I'm just looking for opinions and maybe some suggestions from wiser mustachians.

My Scoop:

I am 40 years old, Canadian, working for the government. I have a pension coming to me in about 18 more years (if I last that long and the powers that be don't squander all of the pension dollars away)

I have about $14000 in an RRSP right now (mutual funds)

I don't have a traditional mortgage, per se, but I owe 51,000 on a LOC that is my house. (not secured against the home, though. Just a plain old LOC. The current rate on it is 5.25%

I have $4000 in a TSFA savings account at ING, which used to have a half-decent rate of 3.5%, but is now down to 1.4%

I rarely ever carry a balance on my credit card, but right now I do have 2000 on one that is 3% right now. That will be paid off in a month or two.

So, what I have been doing is piling every extra cent I can on the $51,000 LOC and not putting anything into savings, other than my pension contributions and $100 a month to the RRSP.

What I'm trying to determine is should I contnue on this same path until the $51,000 is paid off, or should I be trying to save more each month? And if I save more, shoud I be dumping it into my RRSP, TSFA or some other investment?

Any and all comments and suggestions are welcome!

[grantmeaname]

If you were American and I understood all the acronyms in the post, I would say to focus on the 5.25% debt but still contribute a little to the retirement accounts for the tax advantages. It looks like you've considered all the options pretty well, so you're probably on the right track, but I bet some Canadian mustachian will be by momentarily with their expertise.

[KMMK]

Do you have any other money at all? To me, your emergency fund (TFSA) is a little low. I'd start with getting that to 3-6 months living expenses. Even if your job is stable, as a homeowner it's good to have money set aside in case you need a major repair.

But there's a lot of information we don't have. Do you have a partner/kids? How are your expenses? Any major purchases in the near future? I don't know much about government jobs and it depends on what area - how secure is your job?

Why do you have a credit card balance? That's a great low rate, but it's useful to know why you had to use the credit card in the first place.

If you give more details, we can give more advice. I am Canadian so understand all the acronyms.

[squeak]

Thanks for the replies!! grantmeaname - sorry for the acronyms! TSFA= tax free savings account. RRSP=Registered Retirement Savings Plan.  LOC=Line of Credit

 

Do you have any other money at all?

No, but I will be getting a lump sum payment sometime next year. I was planning on putting it straight into my RRSP to defer the tax.

To me, your emergency fund (TFSA) is a little low. I'd start with getting that to 3-6 months living expenses. Even if your job is stable, as a homeowner it's good to have money set aside in case you need a major repair.

I agree. I'd like to get that up too. I've been neglecting putting any away into savings as I've been putting everything I have into the $51000 Line of Credit. Maybe I should switch to a 60/40 split of LOC/TSFA.

But there's a lot of information we don't have. Do you have a partner/kids?

 Yes, husband who is only making $28000 a year. Our son is 21 and does not live with us.

How are your expenses?

Pretty good, though could be much better. (will post monthly expenses shortly.)

Any major purchases in the near future?

No

I don't know much about government jobs and it depends on what area - how secure is your job?

Gov't jobs used to be pretty secure. With the current government's goal of cutting 19,500 jobs over the next 3 years - not so secure any more.

Why do you have a credit card balance? That's a great low rate, but it's useful to know why you had to use the credit card in the first place.

Poor planning. I had several expenses come up that I should have planned for, but didn't.

[twinge]

The thing that jumps out for me is that your retirement savings seem very low for your age, but this may be my ignorance of the Canadian system.  If I throw your numbers --14K at age 40, adding $100 month until you retire at 65 into www.firecalc.com, the most you have a fairly decent chance of withdrawing each month is $200 (inflation adjusted).   
This is the information I would need to give you a better answer about retirement:

1. What are your anticipated retirement expenses? What would a bare bones retirement budget be for you?
2. What percentage of those expenses do you need to cover out of your RRSP if your pension wasn't there? Are there other sources of benefits you will likely receive (e.g., like social security in the US).
3. What is the likelihood of various scenarios for your pension?