Author Topic: Almost there! Poke some holes into my financial plan please!  (Read 2047 times)

Heckler

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Almost there! Poke some holes into my financial plan please!
« on: January 16, 2015, 04:46:38 PM »
My background:  40 y.o. Canadian enginerd, married, no kids, employed full time, high risk employer (layoffs pending for the past 2 years). 

Recently converted to MMM, and learned about investing since July 2014 - thanks for all the help and reading!  Prior to this, was investing in high cost mutual funds only.

Mortgage: $46K, Will be paid off in March 2016, currently about 55% of take home pay goes to mortgage.  Think of the MMM opportunity coming in a year!  15 year amortization to pay it off (we bought in 2003).

Debt: only mortgage and monthly credit cards that have been paid off 100% every month for the past 15 years.

Cars:  too many.  2006 Vibe (Matrix), 2007 Jeep Patriot and 1981 Westfalia (our vacation property on wheels).  All paid off, but cost an arm in insurance.  Only really put milage on the Vibe to get to work.  The other two are for play.

Currently saving 20% to  his RSP and 10% to her new Spousal RSP via his paycheck.  Employer matches 4% of his RSP.  Once a year, this gets moved from high cost Sunlife ETFs (0.3-0.45 MER) to Vanguard ETFs.  Contributions are going to 50% S&P500 and 50% EAFE index funds.  Once mortgage is paid, this will jump to ~75% saving rate.

Now, what I really want to get into - Asset Allocation and location.  Because come a year from now, I want a solid plan in place to start investing what was our mortgage spending.

Due to mistakes of not knowing any better and employer dumbassity, we have her LIRA (locked in RSP - no contributions or withdrawal allowed till she's 65), his RSP, her RSP, her Spousal RSP and his TFSA.  She doesn't have a TFSA yet, but once mortgage is paid, will get one.  No taxable accounts yet, as we still have $120K or so RSP limit room due to minimal contributions (5%) until this past year.

Current holdings are all in tax free or tax deferred registered accounts.  low six figures.

Notes:
I've minimized the number of holdings spread out across the accounts, but made total asset allocation almost per plan.
I've put bonds into RSPs only for now - once we get closer to the limit, only equities will go to taxable accounts.
I've kept international out of the TFSA (less dividend withholding taxes).
I am able to rebalance using his RSP and her Spousal, as they both have Bond and Equity.

Keep in mind these are Vanguard Canada - VUN is equivalent to VTI. 

Please make any recommendations to the asset allocation shown in attachments.  I've implemented only the His RSP portion thus far - Her accounts and his TFSA are being transferred soon so that I can implement the complete plan.   The issue is, that the percentages are a combined result of the current value of each account, so you can modify the proportions per account, but not between accounts.
« Last Edit: January 16, 2015, 05:29:28 PM by Heckler »

Heckler

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Re: Almost there! Poke some holes into my financial plan please!
« Reply #1 on: January 17, 2015, 09:07:28 AM »
No one here knows about financial planning?  Please don't make me get a Bogleheads account....

Indexer

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Re: Almost there! Poke some holes into my financial plan please!
« Reply #2 on: January 17, 2015, 10:34:01 AM »
All looks good.  You could always look at selling the extra car.

As for asset allocation.  The easiest was to figure this is to figure what you are comfortable losing given your time frame.  Then consult my favorite chart in the world.

source:  https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk

Look at the very bottom right number first, that big scary -43%.  Now move left until you aren't pooping your pants.  Find a number you are comfortable with and then look up at the average returns and what the asset allocation is. 

It looks like you are doing a 70/30 so in a crisis that would probably look like a 30% drop.  I'm in the US so I can't really comment on the account types or asset location, thats all going to come back to how taxes work in Canada and I have no clue.  I do understand having the US equities/Canadian equities/international equities indexes for your stock allocation.  The only other way I would consider doing it would be to have a small amount in a Canadian index fund and then just have a 'world' stock index fund which is already going to be pretty heavy in US stocks.  The determining factor for me would be cost.  Is the world more expensive than the US+international? 

Heckler

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Re: Almost there! Poke some holes into my financial plan please!
« Reply #3 on: January 19, 2015, 01:18:05 PM »
Thanks indexer.

In fact, Canadian Couch Potato is recommending the same as you - a Bond, a Canadian and a World fund.  Unfortunately, with so many accounts and no real way to consolidate them due to government policy, I need to hold many separate funds anyway.

DaKini

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Re: Almost there! Poke some holes into my financial plan please!
« Reply #4 on: January 19, 2015, 02:42:09 PM »
Thank you for that graph describing returns!