2020 Financial Goals – May Update
Welcome to another goals update.
“You have to set goals that are almost out of reach. If you set a goal that is attainable without much work or thought, you are stuck with something below your true talent and potential.” —Steve Garvey
In that spirit, here is where we want to be in a few short years to start semi-retirement with:
- Own a $1 million investment portfolio. That portfolio value excludes any future workplace pensions and excludes any house equity, which brings me to major goal #2;
- Own our condo; no mortgage debt ever again!
How are we working towards these goals?
One month at a time really.
Despite getting oh so damn close to realizing goal #1 above before COVID-19 changed everything, goal #2 is actually coming along quite well.
As demonstrated in this post when I shared our latest financial independence update we’ve managed to kill off almost $10,000 on our mortgage over the last six months.
In ensuring our long-term goals align to what we value, this is what we are striving for in 2020:
- Kill debt more aggressively.
- Maximize contributions to next year’s TFSAs.
- Increase our travel fund.
May 2020 Updates
1. Kill debt more aggressively.
Since January 2020, we’ve increased our standard mortgage payments by $100 bi-weekly. We hope to continue this trend for the rest of this year.
Our mortgage is up for renewal in early 2021 which should be our final mortgage term – ever!
I’m tempted to lock into a 5-year fixed term or get a 5-year variable. (We’re currently in a 5-year variable rate mortgage paying under 2%.)
Thoughts readers? Would you stay variable or go fixed for this, my final mortgage term?
2. Maximize contributions to next year’s TFSAs.
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.
Although dividend cuts have recently occurred for a few stocks we hold inside these accounts (example: Inter Pipeline cut their dividend by a whopping 72%), we remain invested during COVID-19 and we continue to DRIP more shares of what we own commission-free every month and quarter.
With 2020 TFSA contribution room now done, our focus has actually turned to funding 2021 contribution room. Estimates say that contribution room should be in the neighbourhood of $6,000 per account, or $12,000 total for us.
At the time of this post we’ve saved up about $2,000 for our 2021 TFSA contribution room. I’m confident if we maintain our automated savings for the rest of the year, we’ll realize this goal by December 1, 2020. That will put us in a ready-to-roll investing position as of January 1, 2021.
You can read how we invest inside our TFSAs and how that contributes to our dividend income journey here:
3. Increase our travel fund.
All work and no fun makes for a boring life! But now we can’t go anywhere?! Thanks a bunch COVID-19….
The view from our villa in Belize, just a few months ago.
Nonetheless, we’ll keep saving for our next long distance getaway even if there are no short-term plans to go anywhere at all. We have our eyes on Belize again in 2021 once some new sense of normalcy returns. I would also like to take a few side trips per se to New York City or overseas to visit friends.
Our 2020 goal is to establish a travel fund of about $5,000-$10,000 that we can draw down if the mood strikes to buy plane tickets at any time.
So far in 2020, only $1,500 has been set aside since we made a few condo purchases and other purchases earlier this year. With things largely back on track (automatic savings moved to a dedicated savings account for our travel fund) I’m confident we can have a few more thousand saved up by the end of this calendar year.
What about RRSPs?
Ya, great question!
Regarding the RRSP contributions, because we pay ourselves first (this is the better way to budget by the way) we’ve removed all the behavioural gaps that might prevent us from maxing out contributions to these accounts.
At the time of this post, my RRSP is out of contribution room.
As of next month, my wife will also be out of RRSP contribution room.
So, needless to say, RRSP savings are not really financial goals for us anymore. We’ve conditioned ourselves to maxing out these accounts rather quickly.
Goals in perspective
Health and happiness are far more important than money.
With COVID-19 still a challenge to navigate, for many of us, I’ve tried to put a higher emphasis on my physical and mental well-being. I figure there are consequences if I don’t!
When you distill it, our bodies and minds play essential roles in the accomplishment of our goals and our overall happiness. We should all strive to find and learn new ways to support our health and well-being.This way, we can not only accomplish what we set out to do but we can also enjoy the journey much more while doing it.
I look forward to sharing our progress on these goals and much more wealth-building content in between.
Got comments on our goals? Fire away! I read every comment on this site and I try to respond to as many as I can.
I have proven time and time again that I cannot predict mortgage rates. With our first mortgage we locked into a fixed rate of 3.79 because we thought that they “could never go lower” ?♀️ But that didn’t stop us from paying off that mortgage in less than 5 years.
Fast forward to last year, we moved and now have a mortgage again. This time we locked in at 2.99 because again “how could rates ever go lower”? Once again we were wrong.
But at the end of the day it doesn’t matter too much, yes I would like to be saving more money on interest but I can’t 100% optimize everything financial choice (and don’t want to spend all my energy trying to). That being said, both times we had payments we are very comfortable with and have increased them with time too also accelerate our debt pay off.
Like you we have decided that this is the last mortgage we will ever have.
Crazy eh Maria? I mean, just when you think things can’t get any lower…well…debt becomes cheap.
At the end of the day, as you say, 2% or 3% or whatever doesn’t matter that much as long as you intend to pay off your mortgage in 10-15 years. There are lots of other ways to waste or spend money without fretting over 1%!!
Ya, that’s the plan, last mortgage we hope to ever have 🙂 The countdown in on!
Not sure when travelling will be possible but it’s always good to set some cash aside and look for deals right?
Ya. Things will open up but it will take time. I suspect FinCon is off for this year…
Hope all is well!
Hey Mark. I’m glad to see you’re managing to maintain a pretty positive outlook despite the crazy time that we’re living in. Love the Garvey quote – I definitely knew my 2020 goal of $100k was “almost” out of reach, but perhaps not as far out of reach as it is now. Ah, well, not too bummed about it. If COVID limitations mean we can’t spend on the usual indulgences, might as well save more. Like you, we’re building up that travel fund so that when we CAN travel again, it’ll be an even greater adventure. Keep staying safe out there.
Trying to Elise!
That’s a big milestone for a couple ~ $100K portfolio. Very well done.
Did you guys have plans to travel this year?
I hope we can go back to Belize in early 2021. Really enjoyed the snorkeling there and long walks/hikes around the beach and running in the morning too.
Owning a condo with strata fees is never debt free.
Fair point Jim but it’s not like home ownership is free either. There are always improvements and things to maintain in a home as well.
(Oops, I posted this to the April 2020 Update first)
As always a thoughtful and inspiring report, thank you.
Speaking of goals, TD has a neat feature on its Direct Investing platform, Projected Income. Touch the button and you get a 12-month forward-looking estimate of dividends of all the holdings in that account, and also for each holding month by month. Two lines appear across the main chart, one for the average expected income over the next twelve months, the other one you reset as a target. I reset mine at the end of each month, to the end-of month figure, which then gives me incentive to tweak things a bit to boost the income. It really works for me. Perhaps other brokerages have this feature.
The other suggestion I have for you is, do not forget your health and fitness. I am 80, retired 24 years, and having trouble with my knees to the point that I have had to give up hiking. Just days before Covid-19 broke, my wife suggested we look into pole-walking. We did a one-day introduction, liked it, and bought some special poles, paid for with dividends. The results have been incredible for us, and especially for me as poling takes pressure off my knees at a critical point in my gait. We are now prancing along local paths at a rock-steady 6 km/hr. Highly recommended for your older readers.
All good Doug.
Congrats on the 80 milestone and maintaining your activity!
I try and walk 3-5 km every night. If not that, I’m biking. I’m noticing more and more in my 40s I need to get out and enjoy the fresh air, even in the winter. It is helping me stay a bit calm (or more so?) in some very uncertain times. It quiets my mind a bit and it allows me to decompress.
Yes, I have seen that TD Direct Investing feature and very cool.
Our plan is to earn about $30K per year from taxable accounts + x2 TFSAs. If we can draw down our RRSPs by ~$20,000 or more per year starting in our 50s, supplemented with some part-time work, we figure the part-time work + RRSP draw downs alone should be enough money to provide all basic needs but also some wants in life like international travel.
We intend to work part-time in our 50s and potentially in our 60s to keep the body and mind active.
Continued health and wellness to you for your walking enjoyment. That’s an inspiration for me and my future years 🙂
Thoroughly enjoy reading your emails. They certainly make me think and stretch us to think about addressing investing.
Do you have any children? I wonder if you had kids how would have you approach it.
Hard to say Guy, no kids here. It was very much a personal decision for us.
Certainly for couples that have kids or any single-parent that has kids, the financial decisions they make are likely far different than mine. For example, instead of owning a taxable account likely that money is going into RESPs for their financial future. Personal finance is indeed personal!
All the best to you,
Mark, we just renewed our mortgage a few weeks ago and locked it in for 5 years. I don’t think rates will go lower – I’m not convinced they even could, actually – and I don’t count on them staying this low for much longer. So I accepted the trade off of a slightly higher interest rate for the knowledge it won’t go any higher for a number of years. That’s not an aggressive approach but it’s good for us.
Ya, that’s my thesis as well Will. I cannot see me getting a 1.55% mortgage again! So, if I can lock into a fixed rate around 2% for the next 5-years as my final mortgage term that’s going to be very good all things considered I think.
Hope you are well!
“1. Kill debt more aggressively”.
Often an overlooked option. Too many fixate on saving, maximizing their RRSP and even a TFSA, when they don’t or can’t pay of the balance of their credit cards. Even a mortgage should be looked at closely, especially if one is investing in speculative stocks. One might say that their mortgage is only 3% to 5% and they can make much more with their investments, but if you are invested for capital appreciation, how has your portfolio faired recently?
I think with our TFSAs maxed and both RRSPs soon to be maxed (just need to work on my wife’s account in the coming 4-6 weeks) I think it only makes sense to start tackling the debt more. I already have a decent taxable account churning out dividends so might as well kill the debt and once debt-free, life and many more financial choices will open up. Hopefully, with x2 TFSAs and x2 RRSPs maxed out in the coming years, we could choose to live off that income if we wanted to live off that…
Otherwise, we could and likely will continue to work full-time or part-time and not yet touch any of the capital in the coming years.
The portfolio is definitely down but I remain invested and I’m confident we’ll still realize our goals even with a few dividend cuts.
Capital appreciation is always good when it actually happens!
Talk again soon,
With stocks being lower recently would you ever consider buying stocks in your cash account to move to your TFSA in January?
I would lock in a mortgage but I am a single person with less assets so I may be more risk averse than you and your wife are. I just took out an investment/car loan in the form of a mortgage that I l locked in for three years.
I might Beth. I do have some capital gains in my taxable account to tackle and I like to avoid incurring those but with stocks down, those gains are much lower so I might consider that. I’ve done that actually in the past; moved assets from taxable to TFSA to max that TFSA out for the year.
Thanks for your mortgage thoughts. I’m leaning on getting a fixed rate 5-year mortgage and by the end of that term, the mortgage would be dead. My reasoning is I don’t see rates much lower than today, likely going up post-COVID-19.