Couple of young D.I.N.K.'s looking to start investing

[tylerkilburn]

My partner and I are weighing options and trying to figure out the best way to use our savings. I figured I'd post here to see what people suggest. Here are the facts:

- We are in our late 20's.

- We do not have kids, and we will never have kids.

- Our only debts are a 40 year mortgage on our condo (which has appreciated in value 5%-8% annually since purchasing), and an interest-free loan on our car which will be paid off in the next 4-5 years.

- Cost of living in our area is steep, and with the rising interest rates, we are only going to be saving 5%-10% of our monthly combined income for the foreseeable future.

- We currently have a total savings equal to about 40% of our combined annual income.

- We both have good job security.

We are trying to figure out if it's best to..........

- Keep that savings as a contingency? It is currently not generating anything.

- Dump a chunk of it into our mortgage? Is it best to wait until interest rates have come back down?

- Build a portfolio either on our own, or with a financial advisor?

- RRSP's?

- Other?

I know this is broad, and asking a lot. I guess I'm looking for a point in the right direction.

 

[jjp297]

@tylerkilburn Have a 6 month of expenses for your emergency fund in a HISA.

Money you don't need, either dump on your mortgage or invest.

!InvestingTrigger

!TFSARRSPTrigger

 

[jesusfreak2014]

@tylerkilburn How/why do you have a 40 year mortgage?

 

[pilgrimswalk]

@jesusfreak2014 Also only saving 5-10% being Dinks is weak. My wife and I do 25-35% of our monthly income with a 9 year old and a 4 month old, in a HCOL area (Markham). You need to sit down with your partner and set up your financial foundations. Start with a zero dollar budget.

 

[actsofjames17]

@tylerkilburn A 40 year mortgage when you save 40%.

Do the math and pay off your mortgage.

 

[timonator14]

@actsofjames17 If the mortgage is at some silly fixed rate (mine is 5 years , 2%)- why on earth would you use free cash flow to pay that off?

 

[actsofjames17]

@timonator14 Because you don’t have the time to safely invest that money before you renew and rates are much higher.

At 5%, a $500k mortgage will cost you $120k in interest over a 5 year term using after-tax dollars. If your average tax rate is 35% that’s $185k you need to earn over those 5 years just to pay interest. Money you will never get back. At 2% that interest was only 45k over those 5 years.. so maybe it didn’t seem like too much.

People need to run the actual numbers and come to their senses.

At 5% how much will you need to spend in after-tax dollars on interest over your next 5 year term? If you bought recently I’ll wager it’s more than $100k+ than what you think. Like most people, you probably have no idea!

 

[timonator14]

@actsofjames17 I don’t think you understand the math…. If a mortgage costs (2-2.5%/yr) after tax, and you can invest it at 3 or higher, you make money! When it’s time to renew your mortgage, liquidate the investments and put the lump sum down on the house. Heck, right now I just borrowed for 5 years at 1.99% FIxED and will soon be able to find a GIc that pays me 5% annually. I’d be nuts to pay down my mortgage. I’ve even pulled 500k out of my house to invest (so interest is tax deductible) and will be much further ahead rhat grinding away. Very simple

 

[resjudicata]

@tylerkilburn ETFs

 

[trby]

@tylerkilburn Stay out of r/wallstreetbets

 

[elmer1444twick]

@tylerkilburn > We do not have kids, and we will never have kids.

You two place too much faith in your own freewill

 

[timonator14]

@elmer1444twick In his free will- she can have other ideas …and…oops!