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?
Your goals sound very similar to our goals as well. We emptied our TFSAs somewhat recently (okay 2014) to pay off our mortgage and have yet to replenish them, so this is top of our priority list. We have also been putting travel on the back burner as we have a toddler and new baby on the way in the new year but I would like to start saving monthly again for a trip so when we’re ready (in probably 2 years haha), we can go somewhere fantastic! Love to the goals of others….always inspires me. Thank you!
Thanks Jess. With your mortgage paid off you’re definitely in the driver’s seat vs. the passenger’s seat. Good on you and good luck on your goals in 2016.
Good stuff Mark. I would suggest a trip anywhere but the US in 2016 as I think the dollar is going to continue to tank. I’m a bit disappointed the TFSA contribution limit went down to $5,500 but better than nothing I guess. With the markets down lately there are a lot of bargains out there. I’m looking at Royal Bank, Suncor, Telus and a few others. Which ones are you looking at?
Yeah, well, I have a small trip planned in the spring but such is life 🙂
I’m disappointed as well but then again $11,000 per couple is still a very good chunk of change to invest for any couple who is also trying to kill mortgage debt as well. I think most Canadians would do well to max out their TFSA every year.
For the TFSA, liking BNS, LB, and T. CDN REITs are also taking a beating and the TFSA is a good home for those assets.
Ha–my goal is to not buy a stock or index or ETF that goes down in price….a lot!
All have been solid purchases in the past two years, but none of us know for sure what will happen with prices, I do my best.
Now in our savings years leading up to retirment, one of my goals is to actually spend a bit more money on things like dinners out. After so many years of not being able to do this–3 kids, one income, high medical bills–I would appreciate that. I get a bit of sticker shock, though, even on the budget eating. Yesterday I was with my son (student) and said I’d buy him something to eat, I worry he doesn’t eat enough. Stopped at a burger joint and it was over $12 for the burger combo thing. I’ve never eaten those things so had no idea they could be so expensive.
I like to travel internationally and have a trip in February booked and paid for and am planning something for end of April, too. I am very careful about spending and I travel for pretty low cost, which also equals high enjoyment.
Really? Don’t you want to buy stocks and ETFs when prices are tanking? I do 🙂
Yeah, McDs for example is now $10 for a burger and fries. We all have to eat!
We love to travel internationally but the challenge is time and money, we don’t have unlimited of each. If we can do a big trip in another year or so, and realize these goals, we will be very happy! Best wishes for 2016 Barbara and thanks for being a fan of my site!
Yes, I am a fan of your site. Thanks to you I got back into doing a “net worth” calculation at year end–I had put it off for over 10 years when things were looking miserable–and paying attention to retirement planning.
You know the TSE is about the same level as it was in January 2007–that is 9 years……It is hard not to be discouraged when all the money I have put in in the past two years is now worth so much less. Only thing saving me is any USA investments have done well, especially in Canadian dollar terms. I am really not sure about purchasing anything else in Canada–yes prices are lower but no one can be sure when/if things will recover. I am kinda hmmmming on POT, with its 8.9 percent divident yield.
Best wishes for 2016 to you too, Mark.
Depressing for sure, with our Canadian economy in terms of total stock market return basically running flat for almost a decade, yes, agreed!
This is certainly a message for me I need to invest more abroad, in the U.S. market and internationally. Although most of my TFSA investments will be in Canadian content my RRSP selections will be in U.S. stocks or Canadian stocks that have a sizable international diversification such as BNS, TD, POT, BIP, etc. I will also buy more VTI and VXUS where I can. The days of relying on our energy and resource sector to drive the economy are very suspect now.
Many of the stocks I hold have recovered to the pre-2007 levels, but when I look at my market value returns I might be disappointed. However, I have been concentrating on the income my investments generate since before 2007 rather than the changes in the portfolio value. By selecting income generating stocks (avoided etf’s) and buying when prices are low I now have an income stream which more than meets my needs.
Didn’t me to a know it all! Did I follow my advice all the time, No. Did I chase Yield, Yes a few time to my peril, but overall I stuck to it and did achieve my goal.
Congrats Cannew. As long as you are meeting your objectives and not taking undue risk that’s the main thing.
You remind me of me when I was in my 30s Mark. Work hard, get out of debt, save, enjoy. Sometimes the save/enjoy was reversed but the work hard, as well as the get out of debt, was never compromised. In a nutshell that was it. Now I’m retired from “the job”, I am starting to remove funds from the RRSP but only as long as I can get it out in a low bracket. Don’t need the money, but if I can get some out at a low rate I am going to take advantage of it. Glad I am in that position. Sure I obviously could have not bothered with maxing the RSPs when we were younger but A) who knew back then and B) it sure is nice having them there now. We’ve also reduced life insurance which also helps out with the budgeting.
Certainly the way we see it, while there is the(financial) future to be concerned about, we feel we can’t obsess over it. There is no point in going through life always denying yourself some fun. I suppose some people are like that but that’s not for me. I wouldn’t have traded our trip to Scotland for anything and I look forward to our next travel adventure together. Life’s experiences are precious.
Thanks for your comment.
For us no longer accumulating, my goals are:
– Monitor our budgeted expenses to see they are as expected,
– Monitor our dividend income and growth,
– transfer maximum amounts into TFSA from RRIF,
– Seek ways to minimize taxes,
– update our financial position reports and wills,
– enjoy life and family,
– don’t let negative attitudes or unforeseen things get you down.
Thanks. We are trying to simplify our goals and keep them focused for 2016.
I like your “enjoy life and family” 🙂 Best wishes for 2016!
Maxing out RRSPs and RESP after tax return in april
Double mortgage payment through the year
TFSAs, just matching the 11k$ for 2016 (a lot of room remaining!)
Those are some very strong goals Le Barbu. I hope you nail them – best wishes for 2016.
I’m a fan of your 2016 goals Mark, seeing as how ours are pretty similar. You are definitely keeping it simple. While I probably wont be able to max my TFSA (room from previous years), I do intend to add $8,000 to it. And similar to you, I want to start up an RRSP and just have it on autopilot.
All the best, and I look forward to seeing your posts and updates this year.
It’s funny how effective you can be, in life in general, when you simplify things. Good luck on your goals as well for 2016.
Great post. We’ve been laser focused on paying off our mortgage, with that almost behind us we will be maxing out our tfsa. I think it will play a big part in aour early retirement. Good job on doubling up the mortgage payments, that was huge for us in paying it off quickly. You’ve definitely got some good goals for the year ahead.
I’ve often read and listened to others to had a modest mortgage and paid it off quickly, that was one of their success factors to early retirement. Once debt was out of the way, they saved close to 50% of their income and were able to really put the pedal down for savings.
Thanks for the feedback on the goals and good luck on yours in 2016. Check it when you can on our progress.
Nice and simple. I like to keep things simple. Best wishes in 2016 and beyond
Simple yet impactful goals. Thanks for sharing. Do you max out your RRSP contributions every year? Because of mortgage and childcare expenses my husband and I are not able to max out our RRSPs or TFSAs so our growing contribution room is daunting. Not sure we’ll ever catch up!
My RRSP is maxed out for 2015, at least it should be with a few months to go. My wife’s RRSP is not maxed out and won’t be for a few years but we’re working on it.
If we had kids (we don’t) I’d probably put a higher priority on RESPs. I can appreciate parents have a difficult balancing act, RESPs vs TFSAs vs RRSPs vs mortgage paydowns. I think the key is to have a plan of increasing investable assets and decreasing debt over time, any saving or investing that accomplishes those high-level goals is a great thing from my perspective.
Thanks for reading and good luck in 2016!