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Last spring, after four years in Toronto, Heather and Darcy decided to abandon their big-city dreams and move back to Ottawa. Heather had been drawn to Toronto for a “dream job;” Darcy followed to be with Heather.Dave Chan/The Globe and Mail

Last spring, after four years in Toronto, Heather and Darcy decided to abandon their big-city dreams and move back to Ottawa. Heather had been drawn to Toronto for a "dream job," Darcy followed to be with Heather.

"Now, it's my turn to move for his career," Heather said . Ottawa also would bring them closer to Heather's family and friends.

Now settled and with good professional jobs, they are ready to "start a new page in our lives together," Heather writes in an e-mail. Their goals are to buy their first home in the next year or two, set aside funds to adopt a couple of children, begin saving for retirement and ensure their investment portfolio is properly structured. If they can, they would like to buy a cottage where they could eventually retire.

Heather earns $65,000 a year, Darcy $40,000. They are both 31.

Darcy and Heather have been careful with their money, and will be free of debt by the end of this year. Both have just started contributing to defined benefit pension plans. They anticipate their income will rise over time. All they need now is a road map.

We asked Ross McShane, director of financial planning at McLarty & Co. in Ottawa, to look at Heather and Darcy's situation.

What the expert says

In drawing up his plan, Mr. McShane assumes Heather and Darcy will buy a home in 2014. They will pay $300,000 with a $60,000 down payment and a mortgage of $240,000 (amortized over 25 years) at 3.5 per cent for five years. They will make biweekly payments of $625.

He recommends they take advantage of the federal Home Buyer's Plan, withdrawing $25,000 each from their registered retirement savings plans to put toward the down payment. Darcy already has $27,000 in his RRSP, but Heather only has $15,000. Mr. McShane suggests she contribute $5,000 to her RRSP before year end using money from their joint bank account, and another $5,000 next year from surplus cash flow. Together, the $10,000 contributed to Heather's RRSP will result in a $3,100 tax refund.

"Be aware that RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the Home Buyer's Plan or they may not be deductible for any year," the planner says. The money must be repaid over 15 years.

Darcy need not make additional RRSP contributions for now because he is only in a 24 per cent tax bracket, Mr. McShane adds. Both Darcy and Heather should channel surplus funds into their tax-free savings accounts. For the time being, both RRSP and TFSA funds should be kept in a short-term savings account or cashable guaranteed investment certificate so the money is readily available when it is needed.

Heather and Darcy figure the cost of adopting each child will be about $30,000. Once they have moved into their new home, they can begin directing surplus funds to this goal. Three years from now they should have $35,000, more than enough for one child. They could draw on their line of credit to cover any shortfall when they adopt a second child. "Heather and Darcy need to keep in mind that their lifestyle expenses will increase as their family grows," Mr. McShane says. Once the kids have arrived, Darcy and Heather can set up a registered education savings plan to take advantage of the federal grant. The estimated cost of university education is $20,000 a year per child multiplied by four years, or $80,000 each.

Looking further ahead, the couple has a good start in building for retirement with $45,000 currently in savings and no personal debt, the planner says. Their work pension plans will provide them with a healthy income stream in retirement if they stay in their current jobs. For now, though, "their focus should be on short-term goals – the house purchase and building their family."

Once they get past the next few years, they can look at taking advantage of their unused RRSP contribution room as well as paying down their mortgage more quickly. As their savings grow, they will need an investment strategy. Mr. McShane suggests they invest in exchange-traded funds or mutual funds with low management expense ratios. Such investments will provide diversification until their portfolio is large enough to invest in individual stocks and bonds.

As for the cottage, "this is something that should sit on the back burner for now until the other priorities are attended to."


The people

Darcy and Heather, both 31.

The problem

How to buy a first home, plan for children, pay down debt and save for retirement.

The plan

Draw on Home Buyer's Plan for 20 per cent down payment, take advantage of TFSAs, keeping savings in short-term deposits for now. Once the home has been bought and the children have arrived, shift focus to RRSPs and paying off mortgage.

The payoff

Financial security both now and in future.

Monthly net income



Savings $520; RRSPs $47,185. Total: $47,705

Monthly expenditures

Rent $1,380; utilities $50; food $560; clothing $135; personal care $80; medical, dental $185; dry cleaning $50; entertainment, restaurants $85; clubs, memberships $100; gym $70; gifts $25; telecom, Internet, cable $275; travel, vacation $220; miscellaneous personal $280; transportation $465; RRSPs $420. Total: $4,380 Surplus: $2,225



Special to The Globe and Mail. Want a free financial facelift? E-mail Some details may be changed to protect the privacy of the persons profiled.