I recently read about a new report from CIBC that stated 48% of Canadians aren’t making debt repayments, bill payments or growing their portfolio a priority in 2017. For this group, this could be true for a few reasons:
- These individuals have reached financial security, they don’t need any new financial priorities for 2017, or
- They don’t know any better.
I know we’re not in camp #1 yet.
I’d like to think because I’m writing this blogpost we’re not part of camp #2 either.
Why Goals? What Goals?
My wife and I decided long ago we need financial goals, some savings and investing targets to work towards. We do this because it gives us some focus, it makes us feel good about how we live, and just as importantly it sets us up for a healthy financial future. Who knows what might or might not happen to our jobs or our ability to earn an income? This is our greatest asset. The future is always very cloudy.
Our investing goals are rather simple but they might seem aggressive to some: we hope to cover basic living expenses from dividend income alone.
In today’s dollars, here’s a list of expenses we hope dividend income will cover within 10 years, by age 50 if possible:
- Property taxes ($4,200 per year)
- Home maintenance ($4,800 per year)
- Home utilities (heat, hydro, water, internet; $5,000 per year)
- Home insurance ($1,500 per year)
- Food and any household supplies (up to $11,000 per year)
- Healthcare needs ($3,000-$4,000 per year).
When we do the math that’s about $30,000 per year to cover basic living expenses: shelter, food, healthcare. Not cheap.
These basics do not include any contingency money, new clothing money, funds to cover car expenses, travel or entertainment money – so I believe we’ll need more than $30,000 per year to live from in our financial future.
To earn $30,000 in dividend income, we’ve decided to invest in a number of Canadian and U.S. dividend paying stocks across our portfolio. We started this journey back in 2009, after overhauling our portfolio out of pricey mutual funds and other bad investments. Since 2009 our dividend income has rose steadily thanks to new stock purchases every year and reinvested dividends. Basically, buy and hold and do very little else. We try and invest as to make a sloth jealous.
We’re optimistic if we continue our investing habits and lazy path of reinvesting dividends, we’ll reach our dividend income goal sometime around the end of 2023. We hope to be halfway to that goal by the end of 2017.
This dividend income coupled with our other indexed investments across our portfolio should provide for a comfortable semi-retirement.
Back to the CIBC report for a moment, the report also stated the vast majority of respondents stated their biggest financial concern was paying back credit card and line of credit debt. Well, we try not to have any of those bills. I don’t think our bank like us very much.
It goes without saying but our number one financial goal for 2017 is:
- Do not to incur any new debt.
Here are the rest of our 2017 financial goals:
- Maximize our Tax Free Savings Accounts (TFSAs)
This account is used to help us with our dividend income goal. It remains a big priority to accomplish every year.
- Make double-up mortgage payments
Even with our mortgage borrowing costs as low as they are today (less than 2%), we believe having no debt in our financial future will give us options.
- Save $5,000 for a vacation
After maxing out the TFSAs and after setting up extra payments on our mortgage, we have fun – travel is a big part of that for us.
- Save $5,000 towards a new car
I write about my old car often on this site and while I hope to keep it running for another year or so, as our secondary car, there are no guarantees. This money will go towards a down payment for a newer car when the Mazda dies.
- Top up our emergency fund
We used a small portion of our emergency fund this winter after our Heat Recovery Ventilator (HRV) broke after 17 years of operation. We were able to purchase a new HRV unit outright. Topping up this fund back to this amount should only take about a month.
You might notice we don’t have any RRSP-contribution goal. This is because those contributions have already been on autopilot for many years. Besides, only my wife’s RRSP has any relevant contribution room left. We’re working slowly on maxing out her RRSP contribution room within the next couple of years.
So folks there you have it. New financial goals for 2017 – lots of them covering a number of bases.
Let’s see how we do, including keeping our funds in check to support two new adopted cats in our home. Stay tuned for our progress and thanks for reading.
2017 sound like a great plan. Although I can’t buy Canadian ETF’s as I incur 22% foreign country tax, I look forward to follow your track
My plan is very similar athough I am single with 2 kids which makes a bit harder. Single income
I hope my chart will look the same as yours at the end ))
Good luck with your goals and all the best in 2017. We love to travel too. Never been in Canada for leisure travel
Thanks Dividend Cake – good to hear from you. Canada is a great country, happy to have you visit! Hope your goals will be realized in 2017 as well – I’ll keep you posted on mine!
I just love that chart Mark.
The slow and steady growth in dividend income sounds great, and I think your estimates sound reasonable as well. Perhaps even a little conservative.
If it’s conservative – great….I’ll be happy if/when it all works out. Thanks for being a fan DGI.
Looking good, Mark. Some good set of goals there. All the best for 2017
Thanks R2R, some are a bit aggressive but will do what we can!
2023 isn’t (relatively) too far now, keep up the good work!
No it’s not…hopefully the semi-retirement days are 7 years away…
Hi Mark, enjoy your blog and also regularly read your Weekend Reading List! Thanks and keep it coming in 2017! I have a couple basic questions re: passive income from Dividends. I currently invest primarily in Vanguard ETF’s, with only a couple individual stock holdings incl. CP Rail and J&J. I would like to move to more dividend paying, higher yield stocks in my portfolio to accumulate passive income. Is there a calculator or online resource I could use to help track my own journey. Also, how can I easily track how much I’m receiving in dividends every year? I will occasionally go to check how my overall portfolio is doing, but how do I more specifically track the dividend income to put a timeline in place for the next decade or so? Thanks!
Thanks for being a fan Stephen. Spread the word!
OK, blog plug aside…here are my responses to your questions….my comments:
1. “I currently invest primarily in Vanguard ETF’s” – that’s smart. Vanguard is a low-cost leader in ETF investing and I think, if you’re invested in broad-market ETFs (I don’t know if you are…) then that’s great for diversification.
2. “I would like to move to more dividend paying, higher yield stocks in my portfolio to accumulate passive income.” I’ve done the same thing over the years. I own a few US stocks for dividends but I also index invest for market returns.
3. “Is there a calculator or online resource I could use to help track my own journey?”
I will put up a simple template in the coming week or so, for tracking dividends paid. I will share that in my January 2017 dividend income update and link to it on my “Helpful Sites” page.
You can play with some calculators here.
Try BuyUpSide and Longrundata for historical stuff.
Here is another dividend calculator:
Thanks for checking out my site. I will do the same for yours…
“…to generate between $35,000 and $40,000 in annual dividend income within five years” – that’s impressive.
I think we can both agree the strategy will work long term if you don’t tinker too much with the portfolio and stay diversified. I like a few of my indexed ETFs and will likely always hold them. Heck, they provided me on the CDN side with over 22% return last year. That’s good right? 🙂
Best of success to you in 2017. Will check out your site.
Hi Mark, is it possible to provide a quick breakdown of where you hold your investments (TFSA, RRSP, unregistered etc..) and what is held in each? Love the blog thanks
I can consider that yes, although I disclose a heckuva lot here on this site 🙂
Have you read these pages? It will give you some insight:
Thanks for being a fan – spread the word! Cheers.
“…48% of Canadians aren’t making debt repayments, bill payments or growing their portfolio a priority in 2017. For this group, this could be true for a few reasons:
1. These individuals have reached financial security, they don’t need any new financial priorities for 2017, or
2. They don’t know any better.”
3. They don’t have the means:
“Among those who incurred new debt over the past 12 months, almost one-third of those surveyed said the primary reason for overspending was day-to-day expenses beyond their monthly income.”
Thus, possibly 30% of Canadians* are going into debt to buy groceries and heat.
Yup…the economy is strong.
Oh…wait…not according to same-month CIBC analysis which claims “Canada is ‘deteriorating’ into a country of low-wage, part-time jobs”:
Might go a long way in explaining why people aren’t at all concerned with “growing their portfolio” — they can’t.
*(the online poll has not been published and the data is unavailable; a small sample poll is obviously not indicative of the whole situation, but what’s good for the goose, e.g. ‘48% of Canadians’…)
I agree with you, lots of Canadians don’t have the means but the conclusion was (rightly or wrongly)…(and I don’t know how the questions and conclusions were spun)…they “aren’t making debt repayments, bill payments or growing their portfolio a priority in 2017.”
If any Canadian is not focused on bill payments, that’s bad. Everyone has a bill to pay. Whether they can afford to pay it based on their income is a different story.
I know folks can’t afford their bills in Ottawa, because the food shelter is running dry and I get constant emails to donate to the Ottawa Mission. Which I do regularly.
Mark, Great stuff. I just stumbled upon your blog recently and haven’t had a chance to go back and read many previous posts. Do you include Dividends earned in your RRSPs in your $30k per year goal?
Thanks Brent. Do sign up and read more! I don’t because I focus these updates on CDN dividend paying stocks and/or ETFs for passive income. I also focus on the CDN side since I don’t have to worry about currency conversions, etc. when I do these updates. It’s very simple that way.
I am optimistic the $30k per year + RRSP assets to wind down + a paid off home will provide a decent semi-retirement less than 10 years away. Ideally by the end of 2023.
Having no debt in your future does open up options and it’s a great feeling which is why we opted to go down that route. Good luck on another successful financial year.
You would know! Thanks for the support Mr. CBB. I will be checking out your budget posts soon. Best wishes for 2017.
Nice line up. 6 for 6 would be very very good.
You have 3 things to make all of this happen.
1. The necessary good cash flow
2. The foresight to develop goals and a plan
3. The commitment and discipline to see it through
Good on you.
My goals are simple.
Do the same as we’ve been doing the past several years. Manage the portfolio to generate retirement cash flow, smooth/minimize taxes, stay diversified and balanced, maximize tax free accounts.
6 for 6 would be amazing! We’ll see. That’s a great deal of saving and investing and fun to do.
I like your goals, simple, but very effective I bet.