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.