Life Situation: 23, single, Ontario, Canada
Gross Salary/Wages: $65000
Pre-tax deductions: currently 4% RRSP matched 100% by employer.
Adjusted Gross Income: $62400
Estimated taxes:
federal and provincial: $12,349
CPP: $2480
EI: $931
Current expenses (per month):
Rent: $390 all inc (with cable and internet)
car insurance: $80
gas: $80
car maint/upgrades/travel: $200 (into savings account so after maintenance is taken care of I can either travel or do unnecessary fun stuff to my car.
groceries: $160
cell phone: $45
gifts: $25
haircut/hygiene: $20
clothing: $30 (probably high but I need some more professional clothes)
gym/sports registration: $60
entertainment(restaurant,bars,activities): $200
Total: $1290/mo
Assets: 14k cash
Liabilities: OSAP student loan: 30k @ 4.9%(interest is tax deductable) monthly payments of $378 starting November.
Specific Question(s): I'm unsure of where I should allocate my excess money. I just graduated and started my job, so I'll only be working 6 months in 2015. This will make my gross income ~34k for this year. I feel like I should only contribute enough to my RRSP to get the employer match (4%) and then next year max it out since it'll be deducted from a higher tax bracket when I'm making $65k.
For my emergency fund, I want to keep $6000 in cash. This gives me a safety net with free banking, a free credit card with 1.75% cashback on everything, roadside assistance, etc. I could stretch that out at least 6 months in the worst case scenario.
My plan was to start a TFSA with the last $8k of my cash and deposit everything leftover at the end of each month (about $2300/mo).
When I have to start paying my student loans in November I will make the minimum payments of $378. I think the effective interest rate is about 4.1% after the tax deduction, so I'd rather invest than pay it off.
2015 TFSA room: $36000
2015 RRSP room: $19000
Come January, my 2016 RRSP limit should be about $25k and I'll max that out next year, putting any leftover into the TFSA.
Both RRSP and TFSA will be invested in index funds with a mix of Canada/US/EAFE/Global.
Future plans: Buy an investment property (duplex, rent rooms, etc) to live in at least 5 years from now. I would eventually like to get into real estate more and have some passive income.
If possible, I would like to retire by 40 with an income of $25k + inflation. By then my primary job income should be in the low 6 figures.
Am I on the right track here? Is it best to wait until next year to contribute to my RRSP? Did I miss anything important from my budget? I do everything I can do be frugal and still have fun while I'm young. I only really go out to eat when invited by friends. Do all my own car work, buy gas gift cards in bulk to save 15%, only buy things when they're on sale.
Thanks all. I'm looking forward to growing out my stache.