2011 Personal Finance Goals

2011 Personal Finance Goals

Last year was the first year I set some personal finance and investing goals in “black and white”.  Now, I’m going to put them on my blog going-forward.

In years past, while I set financial goals, they were not written down and consequently not followed up on very well – they floated around in my head. In hindsight, I think this blog was a huge enabler for meeting many financial objectives in 2010. I hope this year will be just as successful.

To recap, our goals from last year were:
• Goal # 1 – Put down $20,000 on our mortgage.
• Goal # 2 – Maximize TFSAs.
• Goal # 3 – “Clean-up” RRSP Accounts (ETFs instead of high-MER funds).
• Goal # 4 – Frequent contributions to DRIPs.
• Goal # 5 – Optimize RRSPs.
• Goal # 6 – Save for and take a great trip.

We were fortunate enough to accomplish every one above, 100%, except for #1. That goal was indeed lofty but I think you need to have stretch assignments, at least we like them. In the end we hit 55% of our target for goal #1 and while in grade school 55% means you almost failed, I don’t think our efforts were too bad.
Writing about mortgage payments brings me to our first personal finance goal of 2011:

Goal # 1 – Increase mortgage payments by $200 per month

With a new place there are lots of expenses. Lots. I don’t need to list them because I’m sure you’ve moved enough yourself and you know what they are. The list never seems to end. For us, the initial big ticket items were appliances and window treatments last month. These things weren’t cheap and neither are the small things when you add them up. Recognizing we can never do it all at once, we’ve decided to strike a balance in 2011; live for today, make our house a home and take small steps at paying off the mortgage.  If we increase our mortgage payments this year by $200 per month and never stopped until the mortgage was done, we figure we’ll save almost $30,000 in interest costs over the life of our mortgage and payoff the house about 4 years earlier – sounds pretty good to us.

Goal # 2 – Contribute $5,000 each to TFSAs

Our government has been pretty good to us in recent years, OK, at least in one area with the introduction of the TFSA in January 2009. We figure we better take advantage of this financial tool because who friggin’ knows when, if or how the rules will change. Governments are famous for that. You already know the deal:

• Including this year, you could have contributed up to $15,000 into a TFSA.
• The money can be earned or withdrawn completely tax free.
• Contribution room can be carried forward indefinitely.
• You never lose contribution room when you withdraw money.
• More benefits, more benefits…

With $10,000 contribution room each, we’ve got lots of room to manoeuvre in 2011. We’d like to contribute $5,000 each to our TFSAs. We had to withdraw money from our TFSAs in 2010 to purchase those appliances I wrote about. We don’t regret this transaction (because we need to eat!) but this purchase left a big hole to fill in our financial plan. 

Goal # 3 – Optimize our RRSPs

Thanks to some savvy DIY investors and financial tutors I’ve been schooled on the importance of managing our RRSPs efficiently. For many years, my wife and I weren’t managing our RRSPs, they were managing us. For almost 10 years we held various equity and bond mutual funds in our RRSPs. These knowledgeable DIY investors re-emphasized the drag management fees had on our retirement savings. Armed with this knowledge we made changes last year and now we’re using a few ETFs in our RRSPs to match returns of the S&P/TSX 60 Index and the DEX Universe Bond Index respectively, instead of equity and bond mutual funds that charged us 2% per year. These changes lowered our management fees by over 80%!

For 2011, we intend to optimize our RRSPs – that is – contribute only enough needed to avoid paying any more taxes come tax time. This way, we pay ourselves first but we also retain necessary funds for the rest of our financial plan. We figure optimizing our RRSPs in 2011 will cost us a few hundred dollars every month.

Goal # 4 – Continue my full Dividend Reinvestment Plan (DRIP) with Bank of Nova Scotia

After making major investments (for us anyhow) into businesses like Bank of Montreal, Sun Life, CIBC and Enbridge some time ago, my focus early in 2010 turned to Bank of Nova Scotia (BNS).  I started investing in BNS for many reasons, one of the main reasons being they behaved (not just survived) very well out of the financial storm of 2008-2009.  They too, are a dividend stalwart:  paying dividends for over 150 years.

Last year I managed to contribute at least $50 per month into BNS stock, no commission fees, just the cost of a stamp and an envelope.  Hopefully sometime later this year I’ll be at a point whereby I’ll be earning at least one free Bank of Nova Scotia share via my full DRIP every quarter.   I look forward to seeing that compounding machine running.

Goal # 5 – Start my full Dividend Reinvestment Plan (DRIP) with Fortis

I’ve been meaning to do this for some time and I think 2011 should be the year, enough procrastinating already. An overview of Fortis:

“Fortis Inc. is the largest investor-owned distribution utility in Canada, serving approximately 2,100,000 gas and electricity customers. Its regulated holdings include a natural gas utility in British Columbia and electric utilities in 5 Canadian provinces and 3 Caribbean countries. Fortis owns non-regulated hydroelectric generation assets across Canada and in Belize and upper New York State. It also owns hotels and commercial real estate in Canada.”

Fortis (FTS) pays a healthy (and steady) dividend and is considered a Canadian dividend aristocrat, consistently raising its payout to shareholders year after year.  I want to be part of that payout.

Goal # 6 – Build up our emergency fund to $10,000

We have some funds set aside for emergencies but not enough to satisfy our comfort level. Everyone has their own “level” and ours is $10 K. We’ve got some work to do and 2011 is the year to do it.

Unlike last year, we won’t be taking any grand trips to South America or any distant lands for that matter.  My wife and I have decided that 2011 is a year to get some work done around the house and furnish it the way we want to. Lawn chairs in our living room are not an option! Those efforts will take time and money and so in 2011, any additional savings beyond our emergency fund will be going towards home improvements.  We’re still planning some weekends away, together, with friends and family but no big voyages. Although we’d like to travel and experience new worlds there are things to do “at home”, literally. On the flipside, getting some objectives accomplished around the house in 2011 should give us much more freedom in 2012 – something to look forward to for sure.  I guess that’s what goals are all about 🙂

What do you think of our financial goals for 2011?  What are yours?

I look forward to hearing from you, have a good weekend!
My Own Advisor

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