2018 Financial Goals – February Update
We’ve come a long ways in recent years, by documenting and following up on our financial goals, but we have more work to do – to reach our two major financial long-term goals:
- Become debt-free before we retire, and
- Own a $1 million investment portfolio for retirement.
Unlike what some bloggers or financial experts suggest, we save and invest, and we pay down debt at the same time. I’ve followed this approach for many years and will continue to do so for these key reasons:
- If you want to take advantage of the magic of compounding interest, it’s important to start saving and investing early and remain invested for many years on end. This way, it’s possible to grow money to a large sum with an initial small investment.
- While time is my best friend when it comes to investing, investing alone is of little consequence if I’m carrying debt for decades on end. That amount of interest will add up over time and hold me back. We recognize the sooner we pay off our debts, the more money we’ll keep for ourselves.
Some folks will suggest you should not invest AT ALL until you pay down all debt. Others have suggested keeping debt long-term is fine as long as you’re paying it down; building assets along the way. We take the middle road. We feel a balancing act of killing debt and saving for our financial future works for us. Your mileage may vary.
In years past I feel like we’ve accomplished a lot using this approach. Our balanced approach of saving and investing for retirement, reducing debt obligations, and then spending some money leftover has taken us to many cool international destinations and provided us with a good lifestyle – but this year is different.
This year, our financial goals are rather simple, focusing on just two:
- maximizing contributions to our TFSAs (for long-term dividend income and growth), and
- killing debt.
How have we done? Pretty good so far (but I’m biased).
In January 2018 we decided to maximize contributions to our Tax Free Savings Accounts (TFSAs). If you don’t already know, there are many great things you can do with your TFSA here! We decided to buy more Canadian dividend paying stocks inside our TFSA last month – including some of the ones I said I would in this post here (utility stocks) and here (bank stocks).
Our TFSAs are now fully maxed out – and that feels great Based on recent calculations, investments inside those accounts now churn out a combined $7,300 in dividend income per year. While nice we don’t dare touch that money. We have long since considered our TFSAs as retirement accounts. Investments within these TFSAs will help cover future retirement spending needs when we’re no longer working and/or when we no longer have a decent job. This is another benefit of saving money now while paying down debt – at least you have some money in the bank if you need it.
So, the good news is – goal #1 accomplished! Goal #2 – far more work to do. Later this year I intend to report back on how we’re doing with the debt load but at least for now we can enjoy a small victory dance for realizing another major money accomplishment.
How are you doing with your financial goals this year? What did you set for yourself or your family?
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
David Bach says in his books that you can pay off debt and save/invest/buy a house at the same time. That might depend where you live because although I’ve owned houses in the past, after divorce, house sold, I’ll never be able to buy again in the Vancouver area on only one income.
I have no debt so at this time in my life saving for retirement is the main financial goal. My TFSA is maxed and I’ve made my 2018 contribution. I’m low income so RRSPs aren’t so important, though my employer has a group retirement plan that I’m in. Right now my main savings goal is to put aside $500/month towards next year’s TFSA. That comes through about 10% of each paycheque plus about half my monthly dividends. Anything over $500 in that savings account at month end gets transferred to my vacations savings.
I need to get my will updated. I have a good lawyer, but an equestrian lawyer also caught my eye. I have no dependents so my dogs and horses being cared for is most important to me. That’s my 2018 priority.
Thanks Cheryl. So I’m not crazy? Some bloggers or financial experts would believe I am. I’m just trying to do the best I can.
Putting $500/month towards next year’s TFSA is great, very well done. Good luck with your goals.
I have already maxed out all my registered accounts this year: RRSP, TFSA, RESP. 🙂
Wow, that’s outstanding.
No RESP here, but maxed out my TFSA and RRSP. Time to kill debt now 🙂
Do you have a percentage of your savings that you dedicate to debt repayment? Has the increase in mortgage rates affected how much you will contribute?
Yes, we have an idea. About 15-20% of our net income beyond existing mortgage payments. I think that would be a good pay down rate.
Back in the days we worked on paying off the mortgage and investing in RRSPs together just like you are. One reason was that RRSPs were either used or lost back then and mortgages had limited opportunities for extra payments. We also had the RESP to fund but you don’t have that one. We had numerous opportunities for overtime and I made it our goal to use any overtime payments for the RRSPs in the first few months of the year. Things are different now and with the many options and intricacies one has to be cognizant of what works best for them. There is no one size fits all.
Our goals this year begins with the wills. We need to figure out what to do and update them. It’s complicated. My other goal was to set up two more memorial trusts this year. One is just getting the paperwork done now and should be completed over the next week or so. The other one needs coordination with other family members to decide the benefactor. Probably get around to it in the fall I’m thinking. No rush.
Wills are very important for sure. We haven’t done ours in about 5 or 6 years but little has changed for us. Once we move and have other assets it will be time to update the wills. I could see that happening in another year or so.