The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Reynolds531 on July 29, 2015, 12:10:54 PM
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Long time lurker from Canada, thought I would introduce myself and throw out my situation for any suggestions. I have a couple areas where I could improve but overall I think I am doing alright. I’ve been doing a version of this for a long time. I’m 43, recently divorced with a seven year old son who I have half the time. I do not pay my ex-wife anything.
Income: $4300 net monthly after $820 pension contributions
Expenses:
Mortgage $2307 including 261 property tax, 5 years to go at this rate
Cell $59
Internet/ Cable $129
Heat $85
Hydro $90
Insurance $180
Gas $180
Food and Cash $300
Daycare $200
Totals around $3580
Assets:
House $245,000 book value, MV is higher – I bought a fixer upper
Retirement Accounts $230,000 mostly ETFs and a low cost DC pension - Average expenses 22 basis points
Cash $11,500
2010 Nissan Titan pickup $18,000
Education fund for my son $29,800, lndex fund, projected to fully fund him plus $50k
Liabilities:
Mortgage $136,000 at 3%. Minimum payment is about $1100.
I’m holding the cash reserve in case my job becomes unstable. I work at a university which sounds good but I’ve seen people dismissed all around me. I figure I can do two years without a paycheck between insurance and cash reserves.
The truck was a reaction to the divorce. It eats gas, but I drive a total of about 9000 miles a year. I paid $25,000 cash for it used. I also don’t pay for repairs – I can get those for free. Still I recognize this is one area I could improve if I bought a car and banked the difference.
My employer pays for internet access at the house, part of the $129. I do have cable which is about $80 of the charge.
My main question is what should I do with the approx. $1,700 free cash flow every month. Right now I am using it to 1) Attack the mortgage with over $1,000 extra a month. And 2) funding home improvements on a sixty year old ranch. I do all the work myself.
I think I have included everything, if you have any questions please let me know.
Thanks
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First, sorry for the emotional and financial loss of a divorce. But it looks like you are in pretty good shape!
I am about the same age and have seen many divorces around me where the financial point seams to get reset to almost zero after the house is split or bought out and another is purchased. Unmotivated parents are afraid their child support will be re-assessed if they get a raise. Or realising there is not much left once all the secret, marriage wrecking, debt is counted. Sigh!
So having no support payments, 100K+ in your house and getting to spend ½ the time with your son is great!
You’re in Canada, and I’ll assume your University pension eats up most of your RRSP room:
So I would do the following:
1700 * 12 so ~ 20K/year
Take 2,500 off the top for your son's RESP. 20% ROI once the gov't grant is put in. (unless your ex is also funding one but you listed a good chunk in your assets so I assume that is your responsibility.)
Put 10,000 in a TFSA (This will be a good emergency fund as you mentioned an unstable job.)
Use the extra 7,500 for bonus mortgage payments &/or home improvement. (Sorry it's not fun money.)
As for what to invest within your TFSA and RESP it looks like you already have an ETF and index fund plan so I would just follow with what you are comfortable with. Check that they are low fee. If not, maybe look into the Canadian Couch Potato model portfolios, or ask a direct investing question to the Canadian experts in that forum.
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I just gotta say I really like your screen name!
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I'll just leave this right here...
http://www.mrmoneymustache.com/2015/04/28/what-does-your-work-truck-say-about-you/ (http://www.mrmoneymustache.com/2015/04/28/what-does-your-work-truck-say-about-you/)
Oh and dump your $89. cable, too lazy to calc it but I think it is roughly $20k over 10 years assuming a reasonable return.
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I'll just leave this right here...
http://www.mrmoneymustache.com/2015/04/28/what-does-your-work-truck-say-about-you/ (http://www.mrmoneymustache.com/2015/04/28/what-does-your-work-truck-say-about-you/)
Oh and dump your $89. cable, too lazy to calc it but I think it is roughly $20k over 10 years assuming a reasonable return.
89*173=15,397 for 10 years at 7%
He lives on a ranch... the truck, while it may not be economical may be more functional than not.
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"The truck was a reaction to the divorce. It eats gas, but I drive a total of about 9000 miles a year."
It doesn't seem like the truck is required, 9k a year is a lot of miles to me, any mmm style car is going to save major coin.
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The truck and the cable, yes you're right. To clarify I live in a "ranch" style house. I'm not a cow poke. HaHa
I do appreciated the answers and encouragement.
Cheers