I received this email from Greg regarding optimizing his finances. I thought it would be a great email to post to the public as it could be helpful to others.
My name is Greg, I’m 23 living in Vancouver with my wife (who is currently unemployed, still working on immigration stuff), I make $45k/year and I just had a few questions for you.
Being in Canada, how can I go about finding out my credit score? I’ve found a ton of info on this for the US, but nothing for Canada and I don’t trust the sites I have found since they don’t look legit.
Another question I have is more on the financial side. I have $10k in student loans left, along with $5k on a credit line. I put $100 into RRSP’s every month and other then that I do no saving. I pay $150 to my student loans every month and $100 to my credit line and I was just wondering if you have any suggestions as to what else to do? I just got a raise from 40 – 45k, so I’ll be bringing in an extra $150 – $175 per check. Is it better to take that $100/month from RRSP’s to pay down my debt more? Should I use my extra funds to focus on paying down debt, building an emergency fund, building a savings or increasing my RRSP contributions?
Lastly, and I apologized for all the questions. :) What do you recommend as a good way of getting into investing (over and above RRSP’s)? I’d like to try tinkering in some cheap stocks, but like many others I’m clueless on where to start.
- Student loans are Canadian and provincial rate @ prime after tax break.
- Credit line rate is @ 9.6%
There are two major credit bureaus in Canada, Equifax and Transunion. My favorite free way to get my credit report is through Equifax. Their automated service number is: 1-800-465-7166. Calling this number will bring you through a series of questions like SIN, address etc to verify your identity. After your identity is confirmed, they will mail you a free copy of your credit report. This report however, will not give you your credit/beacon score. If you want your beacon score, you will need to purchase the score from the Equifax website. I believe that it costs $24 for this service.
In terms of your debt, your credit line is public enemy #1. This is what I would do:
1. Pay the bare minimum on your Canada student loans as the tax rules will give you a tax break on the interest that you pay.
2. Increase your credit line payment as this debt is non tax-deductible and the rate is ridiculously high (IMO).
3. If your employment does not match your RRSP contributions, I would consider stopping them and applying them to your credit line until it is paid off. OR, you could continue doing what you’re doing, and using your tax refund to pay down your credit line.
4. After your credit line is paid off, increase your student loan payment and continue making your RRSP contributions. Any extra income (tax refunds, blog income etc) should be applied against your debt. Even though you have paid off your credit line, I would consider keeping it as part of your emergency funding. I, for example, keep a $10k personal line of credit for emergencies.
As you live in BC, if you are considering investing outside of your RRSP, you should look into dividend paying stocks as you can make up to $70k in income and dividends without paying any tax on the dividends. I personally would not even consider dabbling in small cap stocks until you pay off all your debt and have some discretionary income to spend. Playing with small caps can be risky business and the capital used should be that which you can afford to lose.
Hope this helps put some insight into your finances Greg. Feel free to add any additional questions you may have in the comments.
Anyone have anything to add? Disagree with my commentary? I look forward to a discussion in the comments.
If you have a personal finance question, feel free to contact me and I’ll try to help out where I can!
Disclaimer: Please note that this is my opinion only and should only be followed at your own risk.