Recent grad, now working at Can Tire - Budgeting & pay off debt options

[lingenfelter7]

Hi All,

I need some help trying to figure out what is best for me to do. Here's some of the basic info:
-22 yr old male, BBA grad, living at home
-Working at Canadian Tire making $45,000 gross
-Currently have $50,000 in debt (Under parent's secured LOC @~4.75% int.)

Here's a list of what I believe to be my monthly expenses:
Cell phone $40.00
Gas $120.00
Repairs/maint $100.00
Insurance $100.00
TTC pass $100.00
Entertainment $300.00
Extreme Fitness $63.00
Clothing $75.00
Miscellaneous $100.00

Totaling $1,000 in monthly expenses.
This leaves just under $1,700 in remaining monthly net income.

Now the tricky part. How should I balance trying to pay off as much of my debt off as possible with trying to invest for the future (with a better rate of interest, future income) from options such as GRRSPs, and a stock purchase plan?

Stock Purchase Plan - The Tire allows you to put 1-10% of your before tax monthly pay towards investing in their Stocks. At year end, Dec.31, they will match (historically) 50% of amount you have in there and reimburse you for tax deductions on those bonus shares.
The kicker is that you can only be paid out 10% of bonus amounts after each year of service - meaning 20% after 2 years of service and so on. After year 10 you would have the full amount to take out. But you can always take out your base shares and sell them at any point.

GRRSPs - Just like any investments in RRSPs to save for the future, its a good idea to also put away a certain amount for these. So Canadian Tire has their own set of investment options that I could invest in. Also, I like this idea for the possibility of investing and then taking some of it out to put towards a down pmt under the first home buyer's plan.

So I'm at a loss as to how much I should invest in the stock purchase plan as well as how much money to put towards RRSPs, on a monthly basis.

I've just started there, so obviously its hard to tell how long my career will be with them, I know at least 2 years, but who knows maybe i'll be a lifer. How should I allocate my money since I know paying off my debt is the biggest priority (or the allocation of my money should be) but how do I also save for the future with these incentives which would make me more than the interest I'm paying on my debt now, etc...

Sorry for this long winded post! I need help! :confused:

[sklm]

my monthly expenses:
Cell phone $40.00
Gas $120.00
Repairs/maint $100.00
Insurance $100.00
TTC pass $100.00
Entertainment $300.00
Extreme Fitness $63.00
Clothing $75.00
Miscellaneous $100.00

Lucky you, not having Rent and Grocery on your list...

[HammerRFDer]

The employee stock purchase plan sounds like a no brainer. It is free money.
Invest the max you can put in, and take out the max that you can to diversify your holdings. (unless you get things like bonuses on dividend reinvestment or the like).

If you end up with a massive holding of CT stock that you can't sell off for whatever reason, consider some financial planning arrangement where you bet that the stock will go _down_, to free up cash to actually diversify.

Also, read carefully into what happens if you quit, get fired, etc, as well as any fees that they charge (or don't charge) upon purchase/sale/holding of those shares.

It is somewhat a good idea to invest in your employer, in case they find a way to do everything more efficiently that negatively impacts your job (so you benefit from it). However, it is somewhat a bad idea, since if CT stock goes sour, your job might too, and that's a double whammy you might want to avoid. Just something to think about.

Their Group RRSP stuff is good if they match or somehow contribute into it on your behalf, but their options of funds to invest in might not be so good. Just watch out for MERs.

I also note that you have both gas costs and TTC costs. Could it be cheaper to arrange a carpool with others instead of taking the TTC to work? (I'm assuming that selling the car and just taking TTC isn't an option)

[cgtlky]

You can pay your debt at $1,500 a month and be debt free in 4 years and start saving for your future.

Cut out your entertainment expenses ($300) and you could used that to purchased Cantire Stock option, because you can lived without entertainment expenses for the sake of saving. Miscellaneous expense ($100) used this as RRSP investment at least you can have some saving too.

[lingenfelter7]

The employee stock purchase plan sounds like a no brainer. It is free money.
Invest the max you can put in, and take out the max that you can to diversify your holdings. (unless you get things like bonuses on dividend reinvestment or the like).

So you're saying I should put a full $375 (45k/12) each month towards this plan, then take out the full 10% after first year, 20% after second year towards RRSPs or other diverse holdings?

Their Group RRSP stuff is good if they match or somehow contribute into it on your behalf, but their options of funds to invest in might not be so good. Just watch out for MERs.

They do not match or contribute otherwise, but I suppose there are savings to purchase, change options rather than if I invested on my own. I do know their investment funds so should I research them to see how they've done in the past?

Lastly, what are MERs?

[lingenfelter7]

You can pay your debt at $1,500 a month and be debt free in 4 years and start saving for your future.
If i paid $1500 per month wouldn't that only take 3 years to pay off?

Cut out your entertainment expenses ($300) and you could used that to purchased Cantire Stock option, because you can lived without entertainment expenses for the sake of saving. Miscellaneous expense ($100) used this as RRSP investment at least you can have some saving too.
I feel this is unrealistic, I'm not going to have no life or entertainment for three years while I pay everything off, it's a balancing act imo. I'm 22 years old so I do need to enjoy my weekends and being young.

And miscellaneous expenses are just that, they mean I do not plan on spending them but they are either unexpected or unaccounted for.

[randomdef]

If i paid $1500 per month wouldn't that only take 3 years to pay off?


I feel this is unrealistic, I'm not going to have no life or entertainment for three years while I pay everything off, it's a balancing act imo. I'm 22 years old so I do need to enjoy my weekends and being young.

And miscellaneous expenses are just that, they mean I do not plan on spending them but they are either unexpected or unaccounted for.

I think you should cut down your party budget, a lot. 300 is like 4 heavy nights at the bar, or more than 10 movies a month, 8-10 meals out. Cut that in half or into a third and you've got a reasonable entertainment budget. Also, what costs you 100 bucks in maintenance and repairs? 120 in gas a month is also high, that's 3 tanks for me, how many is that for you? cut your driving down a bit.

[angel_wing0]

I feel this is unrealistic, I'm not going to have no life or entertainment for three years while I pay everything off, it's a balancing act imo. I'm 22 years old so I do need to enjoy my weekends and being young.

Fun and entertainment comes old when u are retired...then u can travel the world, buy your ferrari and do whatever u want. Not when u are 22, paying back debt and trying to save for your future. (house, new car, marriage, baby, retirement...)

So yeah i support cutting down the entertainment by AT LEAST 50%.

[AllWheelDrift]

They do not match or contribute otherwise, but I suppose there are savings to purchase, change options rather than if I invested on my own. I do know their investment funds so should I research them to see how they've done in the past?

Lastly, what are MERs?
MER is Management Expense Ratio.

In general I don't like company sponsored RRSPs. They usually work with companies that have a limited selection of funds which tend to underperform and have high MERs. If there's matching going on that usually overcomes those limitations but otherwise you can probably do much better on your own. Start with a TD eFunds portfolio and move to a TD Waterhouse account once you've got 25k saved in RRSPs (the point at which they don't charge an admin fee for a self directed RRSP account) for even more investment options.

For now you should focus on paying down your debt rather than contributing to RRSPs. You'll get a guaranteed after tax return of 4.75% by doing that. Also, your salary will probably increase over time pushing you into a higher tax bracket, giving you better return on your RRSP deductions later. (This doesn't mean you shouldn't contribute to RRSPs in a situation where you've paid down your debt and expect an increase in salary though, because in that case you could contribute but delay claiming the contribution.)

As for the share purchase plan, the previous posts have some good advice. One suggestion I have is if you're forced to keep a lot invested in the company stock to get the "free money", look into using PUT LEAP options to hedge against the stock price dropping or to capitalize on a run up in the stock price while still being unable to sell.

[Rishi]

Why are you paying $120 for gas if you have a Metropass? Do you use the TTC enough to justify the Metropass?

Also, why are you paying $40/month for cell phone? Get a retention plan under $30.

[lingenfelter7]

I think you should cut down your party budget, a lot. 300 is like 4 heavy nights at the bar, or more than 10 movies a month, 8-10 meals out. Cut that in half or into a third and you've got a reasonable entertainment budget. Also, what costs you 100 bucks in maintenance and repairs? 120 in gas a month is also high, that's 3 tanks for me, how many is that for you? cut your driving down a bit.

Yes to tell you the truth it probably could be trimmed down, but to be honest i'm probably overestimating my expenses for that, I should start to keep track of how much i'm spending on these amounts.

Well $100 is my estimate of monthly costs to keep my old sunfire running. Over the summer I spent $800 in one shot to replace the front struts, shocks. Another expense occurred where I spent $300 to replace one of my front bearings. These are unusual, but right there you have close to $100 per month in repairs over a year, throw in a few oil changes and you're there. It's probably not an unreasonable amount if you keep up a beater to take around. And yes, gas is getting pricey, $60 to fill a tank on mine, but again it might be closer to $100 rather than 120. Also should cut down since I'm taking the bus consistently to work now.

Thanks for the tips on cutting these expenses, but I really would like to know more about where to place my money (% of paying off my debt versus investing in my company/future).

[angel_wing0]

Why are you paying $120 for gas if you have a Metropass? Do you use the TTC enough to justify the Metropass?

great great point. Either drive, or take the bus. Not some of both. =\

[lingenfelter7]

Why are you paying $120 for gas if you have a Metropass? Do you use the TTC enough to justify the Metropass?

Also, why are you paying $40/month for cell phone? Get a retention plan under $30.

The gas amount was probably more over the summer, that amount will likely fall around $75 or under. I can't do one or the other, I'm almost in Pickering and not living in the city where everything is close. So I do need both but yes gas will likely cut down my expenses, keep in mind I'm also an occasional driver barely spending over $100 in insurance a month, that could be a lot worse.

Yes I use the TTC everyday for work. Not crazy savings but i use $5.50 worth of pass a day for $5 paid.

It is a $30 plan, I pay $37 including tax, this also I feel is not unreasonable.

[angel_wing0]

It is a $30 plan, I pay $37 including tax, this also I feel is not unreasonable.

cellphone plans ranging from $25-35 are reasonable depending on what u need (minutes, sms, data, etc...)

[cgtlky]

The gas amount was probably more over the summer, that amount will likely fall around $75 or under. I can't do one or the other, I'm almost in Pickering and not living in the city where everything is close. So I do need both but yes gas will likely cut down my expenses, keep in mind I'm also an occasional driver barely spending over $100 in insurance a month, that could be a lot worse.

Yes I use the TTC everyday for work. Not crazy savings but i use $5.50 worth of pass a day for $5 paid.

It is a $30 plan, I pay $37 including tax, this also I feel is not unreasonable.


If you lived in Pickering GO bus take you to Toronto (STC/Union station) I don't know which Can Tire you work but you mention you take TTC so I think somewhere in Toronto.

Are you using TTC Metropass? or ticket? since Metropass is cheaper if you ride TTC 5 days a week.

[weedb0y]

cellphone plans ranging from $25-35 are reasonable depending on what u need (minutes, sms, data, etc...)

Typical plan comes out to $40 incl taxes..I am sure he is rounding up few dollars..but not much difference between $35 incl tax and $39 something..

Mine is around $40 as well and I am on retention plan...

just got added txt msgs

[lingenfelter7]

If you lived in Pickering GO bus take you to Toronto (STC/Union station) I don't know which Can Tire you work but you mention you take TTC so I think somewhere in Toronto.

Are you using TTC Metropass? or ticket? since Metropass is cheaper if you ride TTC 5 days a week.

I use the metropass, signing up for a year i get it for $100 per month minus tax breaks at end of year. And Can tire is around Yonge/Eg so I take one bus the whole way there, train and bus would be a lot more expensive and not save much time.

[randomdef]

, but I really would like to know more about where to place my money (% of paying off my debt versus investing in my company/future).

Stop placing it in other peoples pockets. I think that's #1. I understand about your car and other things though.

[angel_wing0]

Stop placing it in other peoples pockets. I think that's #1. I understand about your car and other things though.

lmoa good one :lol: