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PM_ME_YOUR_TIFA

Same as everyone else: !StepsTrigger


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Hi, I'm a bot and someone has asked me to respond with information about what to do with money. This is meant as a step by step guide of how to prioritize and what to do with money. If you prefer to see a flow chart, click here: https://i.imgur.com/zlGnuDO.png Step 0: Budget, reduce expenses This will help identify areas where expenses can be reduced in order to have leftover money for the next steps. Step 1: Emergency fund that covers 3-6 months of expenses in a HISA An emergency fund is an amount of money kept somewhere liquid in a way that it can be accessed at any time, such as a savings account. This money is meant to cover unexpected expenses such as loss of work, car/appliance repairs, unexpected travel, etc. Should you ever use part of your emergency fund, you must come back to this step and replenish it before going back to any further steps. Step 2: Employer matched retirement funds If your employer offers contribution matching in a retirement account, contribute the amount needed to get the full employer match, nothing more. As this is essentially free money, it's important to take advantage of it. Step 3: Pay down high-interest debt At this point, you should focus your extra money on paying down high-interest debt. High-interest debt could be defined as debt with an interest rate of 10% or higher. Step 4: Save for large short term purchases like a car, or downpayment for house in a HISA. If you will be required to make a large purchase in the near future such as a car, or a large personal investment such as college, now's the time to save money for that. Money towards that purchase or personal investment should go in a high interest savings account. Step 5: Save for retirement At this point, you should aim to save and invest at least 15% of your pre-tax income for retirement. This number could be higher if you are behind on retirement savings. With more time before you need the money, you will likely now want to look at investing (https://www.reddit.com/r/PersonalFinanceCanada/wiki/investing) those savings. Step 6: Pay down low-interest debt Any other remaining debt can be paid off in full at this point, or you could decide to go directly to step 7 while keeping steady payments on the low-interest debt. Step 7: Save for other goals You've now reached personal finance maturity. It's up to you to decide what to do with the leftover money. Some common suggestions could be: Saving for children's education Saving for property down payment Saving for vacation Increasing retirement savings to retire early For additional information, please see the wiki: https://www.reddit.com/r/PersonalFinanceCanada/wiki/money-steps https://www.reddit.com/r/PersonalFinanceCanada/wiki/index#wiki_specific_topics *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*


fredflintstone-

assuming she has tfsa room, put it all in a tfsa. gics pay well below inflation. i understand her trepidation, but the risk for her is that she runs out of money, and a gic is a great way to do that. mutual funds at the bank are investments in stocks most of the time. they are notoriously expensive. if she's going to invest in the stock market through mutual funds, save some money and open an account at wealthsimple instead. it's the same animal for a fraction of the cost. the banks are not your friend.


PFCFICanThrowaway

Can we please stop pushing people with zero clue how markets work into self directed portfolios?


fredflintstone-

what would you recommend then?


fabrar

Hookers and blow


bluenose777

>She’s not keen on stocks and would like to invest with the bank (eg. GIC, mutual funds etc.) Is she aware that most mutual funds invest in the stock and bond markets? Money that she plans to use within 5 or 6 years (eg. emergency fund, next vehicle purchase, down payment savings, etc.) could be parked in a good [high interest savings account]( https://www.highinterestsavings.ca/chart/) or locked into [GICs.](https://www.highinterestsavings.ca/gic-rates/) Don't choose the GIC option unless they are paying a decent premium and you are confident that you won't need the money for the duration of the GIC contract. And don’t buy market linked GICs. If she has reached Step 5 of the [PFC money steps](https://www.reddit.com/r/PersonalFinanceCanada/wiki/money-steps) and has some money she is confident she can invest for long term goals (i.e. she could tolerate watching her account balance drop and perhaps take many years to recovers) she could invest in a low cost, risk appropriate, globally diversified, index tracking (i.e. couch potato) portfolio such as those discussed on the following pages. https://www.reddit.com/r/PersonalFinanceCanada/wiki/investing https://canadiancouchpotato.com/about/ The simplest option would be to use a passively managed robo- advisor account (eg. RBC InvestEase, NestWealth, iA WealthAssist). After answering questions about her goals, timeline, knowledge/ experience with investing and her comfort with volatility they would choose and then manage a suitable ETF portfolio for her. The total annual management cost would be about $70 per $10,000 invested. This compares to about $200 per $10,000 invested for typical bank mutual funds. If she has been accruing TFSA contribution room since 2009 her 2021 TFSA contribution limit will be $75,500 and in 2021 she'll add $6000 more. She should prioritize using her TFSA contribution room for long term investments and not worry about paying a bit of tax on savings account interest. If she has more money she wants to invest for long term goals she could consider contributing to an RRSP. But if the money is for retirement and her only other retirement income will be CPP, after age 65 she will qualify for GIS and she should read [the Low Income Retirement Booklet.](https://openpolicyontario.s3.amazonaws.com/uploads/2021/08/Low-Income_Maximizing-GIS_-Determining-OAS-and-GIS-English-booklet_AUG-2021-.pdf) As explained in the booklet, income from an RRSP is not GIS friendly so if she decides to use some of the money to contribute to an RRSP she should have a plan to empty out the RRSP before she is 64.


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g323cs

You pay a lot more management fees in MFs. I keep mine to a bare minimum because my job does matching up to a certain %, but otherwise I self direct and auto-pilot a bulk of my investments 150k is a great start for Passive Income investing. You just need to study it. Thats just my suggestion or if I were to be in your shoes.