Lately, a lot of bloggers have been talking about financial goals and where their money is placed. Unsurprisingly, the majority of PF bloggers are working on two main goals:
1- Paying off student loan/credit card debt
2- Building an emergency fund
From a psychological stand point, I truly do understand why emergency funds exist — people, scarred by the horrors of bad finances, are afraid to end up in a situation where their credit cards are maxed out. In the past, I’ve written about times when I’ve been happy to have extra cash lying around to meet my expenses (hello, car accident in December?) but the idea of having a dedicated bank account seems ridiculous. Furthermore, I’ve previously mentioned that paying student loans is actually not in my best interest.
Now that I’ve explained why I’m bucking conventional PF money-distribution, I can talk about where my money goes.
1- Every two weeks, I subtract $600 from my paycheques and deposit it into a bank account dedicated to bill paying/spending money. The excess is transferred to my RBC savings account
2- All Paypal money is immediately sent to my RBC savings account
3- If I overspend in pay period (flights, gifts etc.), I take this money from my RBC account
4- Once my savings account reaches ~$1000, I transfer the money to an investment shelter
Currently, my investments look like this:
62.7% in ING mutual funds (TFSA): This is a huge amount of my investments in a relatively safe investment. While one might look at my age and earning power and feel that I am being too conservative, I feel that these funds are a secure place to leave a large portion of my assets — especially considering that this money will be used to repay my student loans at one point in the mid-range future
1.6% in RBC mutual funds (TFSA): This teensy-tiny amount is in an emerging markets mutual fund. Basically, as long as I have this investment, I have free banking. Earn (modest) returns AND save $4 a month? Yes please!
8.9% in stocks (TFSA): I find buying individual stocks to be so nerve-wracking. I’ve only purchased a few so far but have contributed a ton of cash to my TFSA (see below) in order to take advantage of dips in the market or new stocks that look interesting.
10.6% ETFs (TFSA): When I bought ETFs, I spent every dollar. Unfortunately, having all my money tied up in ETFs didn’t allow me to buy a certain stock and by the time I transferred more cash, the price had raised by $1 :/ While putting all your spare money into ETFs sounds like a good idea, the market doesn’t always allow you to sell in order to purchase something that could be more lucrative.
16.2% cash (TFSA): Again, this money is uselessly sitting in my account, waiting to be spent. While it kills me to have money not earning any interest, I know that if spend this money, I don’t have the option to transfer more money into my TFSA to purchase new stocks
As I mentioned earlier, I keep almost no cash in my bank accounts (in fact, I have exactly $431.64) simply because I don’t need it. I’ve gone through periods of my life where I’ve needed a bit more cash on hand (unemployment in 2013, right before major purchases, job instability or changes) but right now — when my income is steady and far exceeds my expenses — it’s completely useless to have 1000s just sitting there, earning 1.4%. If an emergency does happen and I don’t have the cash to pay for it, I have a credit card with a pretty decent limit that can bridge the gap until the next pay period.
Essentially, my financial goals are as follows:
1- Continue saving ridiculous amounts of money
2- Continue spending ~$1500 a month
3- End the year about $20 000 richer
Thankfully, there are no big money-sucking events on the horizon — no weddings, no concerts, no major trips, no house-buying — basically, I can return to 2009-Vanessa who was focused solely on hoarding money. I’ve missed her.