At age 28, Erika has four main goals:
- She wants to pay off her remaining student loans by the time she was age 30. She owes $24,000.
- She wants very much to buy a home, but doesn't know how she can save for that goal while she still has debt. She also doesn't know how much house she can really afford to buy.
- She wants to reduce her income taxes.
- Start saving for retirement.
Erika's plan: When Erika met with her financial planner, he developed a plan to help her achieve these goals and more. The plan included these main steps:
- Continue to pay the minimum amount each month to pay back her student loans.
- Open a Registered Retirement Savings Plan (RRSP). Save the maximum she can each year.
- Use her tax refund from her RRSP contribution to pay off her student loans faster.
Her financial planner reviewed her budget and showed her areas where she could cut her spending. For instance, she could take her lunch to work, instead of eating out each day. This would allow Erika to save about $100 a month for her RRSP just from this one change.
Following this plan, Erika was debt free by the time she turned 30. She had some retirement savings as well. Then, instead of paying back loans, she started to save toward her next goal: buying a house. It took her three more years - to age 33 - but she was able to buy a nice condo in an area she really loved.