2020 Financial Goals – December Update
When it comes to goals, I once read the following:
“Set goals that both excite you and scare you at the same time.”
The reasoning behind that is simple: goals should motivating and somewhat daunting.
Today’s post recaps our 2020 financial goals to see where we landed.
The investing future remains unknown and unpredictable
After a couple of decades of investing, in my 40s now, I’ve certainly learned a thing or two about investing.
One thing I’ve learned is this: the investing future is both unknown and unpredictable.
Nobody accurately predicted the pandemic coming.
So, it’s financial lessons from the pandemic that continue to reinforce what I/we need to do when it comes to our financial plan. Here are some major takeaways for me from the past year:
1. It sucks to see your portfolio value crumble – but you need to stay invested
When the pandemic hit hard in March and the stock markets crumbled, it was tough to see the portfolio value down considerably. Yet I reminded myself when it comes to the stock markets “this too shall pass”.
2. Dividends are never guaranteed – ever
With dividend cuts to my portfolio this year, such as Inter Pipeline (cutting their dividend by 72% (not a typo)) and Suncor (SU) in particular, this year was yet another reminder that while dividends are good and an important part of my journey – they are never guaranteed. Seemingly “good stocks” can and will cut dividends to survive.
Thankfully, I had many stocks (about 25 I recall?) increase their dividends across the portfolio this year.
3. Even if you have an emergency fund – have a little bit more
I’ve highlighted the reasons why I continue to have an emergency fund – we realized our goal many years ago and maintain this balance (and a bit more) today.
This fund helps us sleep at night knowing we have some monies available to us on demand if and when needed.
4. Diversification helps
Further to point #1, in a year when markets crashed only to rebound later this year (see evidence below), I’m reminded it’s often a collection of stocks (dividend payers or not) that are an enabler to investment returns.
Our multi-year financial priorities were embedded in 2020
With one of our long-term, aspirational financial goals largely realized in 2020 (hint – look at the carefully worded language at the top of this page), the only major barrier to realizing full-on financial independence now is our mortgage debt.
So, knowing one of our major life financial goals could occur this year, our 2020 financial goals were carefully constructed 12 months ago with another key priority in mind, along with future investing plans and some fun:
- Kill debt more aggressively.
- Maximize contributions to next year’s TFSAs (2021).
- Increase our travel fund.
Our mortgage is the only debt remaining on the financial books.
Since January 2020, we sustained the $100 increase made to our bi-weekly mortgage payments. This small change has accelerated our debt payment.
In October, we renewed what we believe is our final mortgage term at 1.69% for the next four (4) years. With less than four years to go on our mortgage, semi-retirement or any sort of full-time work that we wish to continue (work on own terms) seems very much in sight. #FIWOOT
I prefer Financial Independence Work On Own Terms (FIWOOT) versus FIRE
2. Maximize contributions to next year’s Tax Free Savings Accounts (TFSAs).
I hope you already know that the TFSA is far more than a “savings account” by name.
Since Day 1, we’ve used this account as a retirement account and will do so, for the foreseeable future.
With our TFSAs out of contribution room since January 2020, and money invested throughout the year including during the pandemic, our focus naturally turned to funding 2021 contribution room after January 2020.
We assumed 12 months ago that the annual contribution limit will remain the same for 2021 – so that’s $6,000 to fund per account, or $12,000 total for us.
We were correct.
Since inception, here are the annual and cumulative limits assuming no withdrawals over that period were made:
|Year||TFSA Annual Limit||TFSA Cumulative Limit|
In that TFSA link above, I mentioned a few years ago that some couples might be well over $200,000 in combined invested tax-free assets in the coming years if they invested wisely inside just their TFSAs (forget RRSPs, other accounts) since inception.
Well, I know some couples that have this accumulated value and more thanks to the benefits of this account…
Again, I can’t emphasize enough you strive to max out contributions to your TFSA before investing in your RRSP, if you can.
At the time of this post we have our TFSA money ready to go again. I will be investing that money in a few short weeks.
3. Increase our travel fund. HA!
All work and no fun makes for a boring life! But we still can’t go anywhere?!
Thanks a bunch COVID-19….
The view from our villa in Belize, from February.
The pandemic absolutely threw a wrench into any travel plans this year (maybe some for you too) but we have so much to be thankful for – I don’t take anything for granted.
So, when we can travel again including going back to Belize or other international lands we’ll have money to do so thanks to this year’s goal.
We realized our short-term savings goal to have >$5,000 ready to pay for travel, when restrictions lift. We realized that goal by automating our savings throughout the year – something I suggest you consider as well if not already done for 2021.
What might 2021 bring?
It’s hard to fathom what 2021 might bring after such a year. Life can be and will always be I believe, unpredictable.
Regardless of what you save, how you invest, or what your personal financial goals might be for the upcoming New Year it is my hope such updates provide some inspiration for your own financial path. Personal finance is personal. Once you wrap your head around your plan, good things can happen.
Thanks for following along with these updates this year.
My wife’s and my TFSAs are at $250k combined and our 2021 contributions are locked and loaded. Nothing but simple Couch Potato index investing got us there. Retiring next year but will continue to contribute the max by shifting RRSP assets for the next 15 years. By the time we hit 70 years old, we should have a tidy sum of tax free money ready to go.
TFSAs came along at just the right time in our life to take full advantage of them, but I can only imagine the possibilities if I was 20 years old again.
Incredible work Carl…very well done and ready to invest inside the TFSA myself in 2021. Leaning on a few options but potentially XUU and XAW are leading the pack 🙂
That money in your TFSA could likely double in the coming decade or so, so I would say half-million in tax-free money is very good!!
Just posted how that account can do wonders for millennials if they pay attention.
Congrats Mark on being close to mortgage freedom! I remember it felt like a great weight was lifted 🙂
Looking forward to that debt-free day Laura! Hopefully <4 years away now!
I had a good laugh at myself after reading my own comment from 2016 in the emergency fund link. Things have changed so much in almost five years.
Incredible really eh Lloyd how fast things can change?
Happy Holidays to you,
Real fine Mark. Hammer down and steady on the savings/investing, stay boring, and for the final act attack the debt.
Yup – thanks! I have a few decisions to make with TFSA in 2021 but I think I’m on the right track overall.
Our FI plan has us maxing out the TFSAs and RRSPs from now until the mortgage debt is paid off. Beyond that, slowly increasing our cash wedge to 1-years’ worth of a larger emergency fund. That’s it. <4 years to go I think markets willing to “live off dividends” and distributions.
Time will tell if my plan works!
Totally get it and think your plan is dynamite (in a good way….won’t blow up!!) LOL
Picking away at a response to you.
Thanks and Happy Holidays to you.
Ha, great stuff. Look forward to your reply!
Steady and focused is the game of Financial Independence, you have locked yourself in to that mindset well. I don’t personally plan on paying off our mortgage early, I just keep renewing and let the amortization shrink each year. It will be paid off just after we are 60 so I am cool with that. As for emergency fund, I prefer to keep that money in TFSA and RRSP and have zero balance credit lines to draw on if there was indeed an emergency. Good Luck in 2021
Agree with your plan Chris. Why pay off a mortgage when you can renew at under 2% and make 5% in safe dividends instead. We also have the LOC as the emergency fund, and travel is paid out of US dividends in our RRSP/RRIF’s.
I fully see why with today’s low rates that paying off your mortgage is not a priority to some.
I know we will feel better having another few $K per month that can be saved or saved and invested once our mortgage debt is gone. We figure we’re <4 years out now.
We’ve always considered our TFSAs as an investment account so we’re likely to buy more CDN stocks or potentially a fund like XUU or XAW for that account in 2021. That way, tax-free dividends and distributions can compound for us.
To your last point, yes, for sure, having zero balance credit lines to draw on “just in case” is a nice emergency cushion to have. You have good credit then and in today’s climate that’s important!
Happy Holidays and I will think of some questions to email to you over the coming weeks!
I’ve been reading for quite awhile now and have learned so much. We always were dividend investors because our parents were and I didn’t fully understand why. Not sure that my husband understood either. Thanks to you Mark and all contributors we know where we’re heading. And the future is looking good. Happy holidays to all.
Great to hear Christine and very kind words.
Happy Holidays to you and see you on the site in 2021!
“It sucks to see your portfolio value crumble – but you need to stay invested”. If it were not for your blog and your wise readers’ comments, I would have caved and sold. Patience to stay the course comes with maturity as well.
Mark’s site is also a great inspiration to me and I also really enjoyed communications with Mark’s wise readers. Too bad I found Mark’s site a long time ago, but only followed the practice three years ago. Still much better than never.
Thanks for the kind words Bonnie. I’m glad this site was helpful to stay the course. Not always easy for me either but I did it and am being rewarded now with new portfolio all-time highs and realizing one of our major, lifelong financial goals. Just one more to knock off and semi-retirement can begin in a few years or at least work on own terms 🙂
Good comment Bonnie, we’ve stayed invested in dividend paying stocks for 20 years now. The portfolio is at break even this year but dividends still up 5%. This strategy works, our TFSA dividends alone are $24,000 annually. “Patience to stay the course”
Great work DivInvestor!
I also just read your latest post – seems very smart to me!
re: you wrote:
“I have chosen to wait with CPP and OAS till age 70 and use up more from the RRIF to keep our income lower for tax purposes. We are also drawing out extra amounts out of the RRIF accounts over the next 10 years to make the tax burden a bit less for our heirs later. That means we must pay more in taxes now every year but there will be less of a lump sum at the end.”
That aligns with my financial independence plan as well to defer CPP and OAS, up to age 70 as well.
Happy Holidays to you!
I don’t remember too many years where I didn’t have a dividend cut. A few, but not too many. I usually end up selling which I did with IPL. CAE got the heave-ho as well since they suspended their dividends. At least I made a profit on that one that I can use against IPL’s loss in the taxable portfolio.
My wife and I are lucky in that we can fully fund the annual TFSA maximum contributions through our all-Canadian dividends. Even though we sometimes get dividend cuts, our income still grows year by year since we invest and re-invest even in retirement.
Excellent work. IPL makes up about <0.4% of our portfolio so I’m OK to own it and see if it comes back when oil rebounds eventually.
Looks still a very good year for you, Mark. And great summary for the year 2020.
Yeah, it really hurts to see the portfolio value going down. A good test for anybody’s investment strategy. I am changing my investment strategy a little. I still aim to have investment income to cover our basic needs in retirement but will invest in growth more in the future.
Talking about travel, now we almost get there to be ready for retirement, then while we are still working, we probably will increase our travel budget quite a bit so that we could take kids around the world while they still want to travel with us.
Yes, overall, all things considered, a very good year really. We are blessed and fortunate.
I’m likely going to be buying a few stocks inside my TFSA and potentially low-cost ETF XUU for some growth. I’m still toying with the idea of buying XQQ for a tech-growth kicker also. We’ll see!
Travel will be nice again. We’ll have to wait another 6-12 months I believe.
$6,000 a year might seem like a lot of money to contribute to a TFSA and I don’t expect the allowable amount to increase anytime soon, but at some point inflation will switch course. Like the market, inflation is unpredictable and at some point it will begin to rise. For us older folks we can remember when $6,000 was the price of a new car or a big part of a house purchase.
So, if you are young, expect that some time in the future $6,000 won’t seem like a large amount, especially if you are saving for your retirement.
Great point cannew. I think my parents started their first full-time jobs making about $5,000-$7,000 per year in the early 70s.
I recall they bought their first house for about $40,000 or something like that. Rates hit them hard in the early 80s.
The punchline is: small savings inside the TFSA can add up over time thanks to the power of compounding.
Happy Holidays cannew,