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Now that they've decided to merge their finances – and their lives – Josie and Ken are looking for some guidance. Short term, they want to save enough money for a down payment on a house and build an emergency fund.

"We're hoping to have this together within one year," Ken writes in an e-mail. Ken works as a professional, bringing in $190,000 a year plus bonus. Josie gets $90,000 a year plus bonus and has a work pension to which she contributes. Last year, she bought a condo, valued at $327,500, which she rents out at a slight profit ($250 a month).

Within two years, they plan to get married and go on a honeymoon: cost $25,000. In two or three years, they hope to have their first child, followed by a second one later. "We would like for one of us to be able to raise the kids, with one of us possibly taking time off," Ken writes. "Do you have any financial suggestions on how to manage this?"

We asked Marc Henein, an investment adviser and financial planner at Scotia Wealth Management, to look at Ken and Josie's situation. Mr. Henein holds the certified financial planner (CFP) designation.

What the expert says

Mr. Henein starts by looking at the couple's income and expenses. They are spending $11,410 a month. Their joint net income after tax is $15,900 a month, so they have a surplus of $4,490 a month that can go toward a down payment and emergency fund, the planner says.

Of the monthly outlays, $2,170 is going to RRSP savings and $400 to their TFSAs. Add their surplus and they are saving roughly 44 per cent of their combined after-tax income, Mr. Henein says. "This is excellent."

Ken and Josie have many areas where they can trim their expenses if they wish to save more, the planner says. "They currently spend $1,000 a month on clothing, $600 a month on dining out and $10,000 a year on vacations. These are simple line items that can be reduced should the need arise."

The couple's main objective is saving up for a down payment on a house, with a secondary objective being to ensure they have three months' expenses in an emergency savings account.

Assuming a house purchase price of $800,000, it would be advisable to have a down payment of $200,000, Mr. Henein says. A mortgage of $600,000 at 2.70 per cent with a 25-year amortization would result in a payment of $2,700 a month. "This puts their mortgage cost at about the same amount as their current rent of $2,600," the planner says.

How long will it take them to save $200,000 for the down payment? "Combined, they have $55,140 in savings accounts and $63,240 in their TFSAs," Mr. Henein says. Their three-month emergency account will require $34,000.

If they tuck away their monthly surplus, they will have another $53,000 a year in savings, he says. "Subtract $34,000 for their emergency fund, and they'll have $116,000 toward a down payment by the end of 2017," the planner says.

Both stand to earn bonuses, although they're not guaranteed, Mr. Henein says. So in a good year, they could get another $56,000, or about $28,000 after tax. If they qualify for full bonuses this year and manage to save another $53,000 next year, "they should have more than enough to purchase [a house] in 2019," he says. Given their combined income, they should be able to pay off their mortgage well before the 25-year amortization.

They also wonder whether Josie could stay home for a few years when the children are young. Can they get by on Ken's income? "The answer is yes, but they will need to make some decisions on their expenses," the planner says. After tax, Ken is making about $8,000 a month. They are spending $11,410 a month. "The $3,400 gap can be bridged by cutting their major discretionary budget items such as $850 per month on vacations, $1,000 per month on clothing, and $600 on dining out," he says. "They could also look at limiting their RRSP contributions [temporarily] to make up the gap," he adds. "If they are willing to make some sacrifices, they can create a budget where Josie can stay home for a few years."

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The people: Josie, 32, and Ken, 36

The problem: Are they on track to buy a house in a year or so? Can they get by on one salary for a while when the children are born?

The plan: Use their annual surplus, existing cash and TFSAs to put a $200,000 down payment on a house. They should be able to buy early in 2019. If Josie chooses to stay home with the children, they can slash their spending and perhaps even suspend RRSP contributions for a spell.

The payoff: Financial security

Monthly net income: $15,900

Assets: Bank accounts $55,140; her TFSA $10,745; his TFSA $52,495; her RRSP $58,305; his RRSP $145,500; her rental condo $327,500. Total: $649,685

Monthly outlays: Rent $2,600; condo fee $365; property tax $300; property insurance $105; electricity $140; car lease $375; car insurance, fuel, maintenance $225; transit, parking $175; grocery store $600; clothing $1,030; gifts, charity $190; vacation, travel $850; dining, $600; drinks, entertainment $500; grooming $220; clubs $140; sports, hobbies $150; subscriptions $50; dentists, drugstore $35; telecom, TV, Internet $190; RRSPs $2,170; TFSAs $400. Total: $11,410 Surplus available for saving: $4,490

Liabilities: Her rental mortgage $255,750

Want a free financial facelift? E-mail finfacelift@gmail.com. Some details may be changed to protect the privacy of the persons profiled.

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