Happy New Year!
With a new year brings some new opportunities but when it comes to financial planning, looking into the future, I’ll be the first person to acknowledge it’s the process of planning that is important – not the plan itself.
Let me explain…
In 2015, did I predict the oil crash and some of my stocks falling in price with it? Heck no. Did I accurately predict how far our Canadian dollar would have fallen? No again. Sure, I made some educated guesses when it came to these dividend raises in 2015 but there is absolutely nothing to suggest I can predict the future with any accuracy – and neither can you or anyone else.
This makes financial planning both an exercise in managing assumptions and making those assumptions personal. Planning for our financial future is personal to us – a good plan for us could be a disaster for you. This is where we feel yearly goals are at least some help. With a cloudy crystal ball at least some sense of where we’re going is comforting. We put yearly goals in place to avoid making financial decisions on feelings, instead, making them based on longer-term objectives (like early retirement).
Our financial goals for 2016 are not sophisticated. They’re not overly impressive. In fact, our goals are downright boring. However, when it comes to personal finance and investing I’ve learned that simple is exactly the approach many successful people take.
Without further ado here are our 2016 financial goals and how hope to achieve them.
- Maximize our Tax Free Savings Accounts (TFSAs)
From my perspective individual and collective financial prosperity will come from flexible saving and investing options that limit bureaucracy. This is where the TFSA is a gift to all adult Canadians regardless of their income status. If you don’t know the rules of the TFSA yet please read this post here.
Maximizing our TFSAs for 2016 mean my wife and I will strive to stash away $11,000 combined into these accounts. We intend to make these cash contributions by the end of June 2016 (we have been saving for these accounts since late-2015). We will invest in Canadian dividend paying stocks inside these accounts for the purposes of long-term dividend income. The stocks we will invest in, I don’t know yet, but I’m leaning towards more of the same: Canadian banks, pipelines, telecommunications companies and REITs.
- Make double-up mortgage payments
Personally, I don’t think there’s an absolute right or wrong way of tackling debt. We’re fans of getting rid of all high-interest debt first. That means we strive to never carry a balance on our credit cards.
Other than a small car loan on the books for another 11 months, our only debt is the mortgage. That mortgage debt is well into the six-figures which means we have a huge liability hanging over our heads in case something were to happen to our jobs or our health. With our mortgage rate now under 2%, after our TFSAs are maxed out, we feel it will be smart to pay down our mortgage more. If we can double-up our mortgage payments this year and continue those payments in the years to come, we have a chance to slay the mortgage dragon by the end of 2020.
- Save $5,000 for a future trip
Investing for our financial future is important but we’re not willing to delay consumption or gratification entirely. Last year, my wife and I vacationed in Scotland for about two weeks. I watched The Open Championship live at the home of golf (St. Andrews) with family and friends – a memorable bucket-list item – and we drove around the countryside to partake in highland hiking, visiting castles and distilleries and much more. Life is for the living after all. There’s talk of Portugal, Panama, touring wineries in British Columbia, or another destination for our next big trip. We’ll want the money saved in advance before we travel. This is where this goal comes in.
With these three goals in mind we are not anticipating taking on any new debt in 2016.
Note: Keen readers of this site might wonder why we have not included RRSP contributions as a goal this year. That’s because those contributions have been on autopilot since 2014; which makes paying ourselves first just like a bill payment to Us Inc.
So, that’s about it, two practical goals and one fun one for 2016. I look forward to sharing our progress with you later this year.
Got any comments for our saving and investing goals for 2016?