2021 Financial Goals

2021 Financial Goals

Another year, another round of goal setting!

Let’s get after it!

Financial goals – our power is in the “why”

For years on this site, I mean years, we’ve set financial goals to keep ourselves accountable.

2021 will be no exception…

Here are some recent major milestones including some significant learnings and changes by the decade below:

December 2020 goals – final update.

 

2010-2019: Financial reflections of the last decade

Our goals are becoming rather easy to set each year because our “whys” for saving and investing are crystal clear:

• We save money and invest our money to deliver future financial independence.
• We believe saving today, with some compounding power already on our side, will provide many financial options in the coming years.

Simple, but effective we think!

Is semi-retirement within reach?

Yes.

I mean, we have a ways to go for sure but with 2020 markets rebounding like they did (geez…nobody saw that coming – in a pandemic no less!), last year was yet another reminder to stay the course with our investing plan.

That investing plan is:

1. Keep savings automated – money is easily dedicated for investment purposes inside registered accounts.
2. Invest in mainly low-cost, diversified ETFs for diversification. This complements our basket of existing stocks. 
3. Do not interrupt the compounding work inside our portfolio.

The basic rule of compounding comes in four words: never interrupt it unnecessarily.

You can visit a very recent version of My Financial Independence Plan here.

My Financial Independence Plan

To realize that FI plan, we’re going to lift some content from it for 2021 financial goals. Here you go:

I can’t control our investment returns to ensure they are “within historical results” but I can control the following contributions and debt liabilities – so in 2021 we will:

1. Max out contributions to our Tax Free Savings Accounts (TFSAs).
2. Max out contributions to our Registered Retirement Savings Plans (RRSPs).
3. Continue to pay off our mortgage.
4. Initiate a larger emergency fund to start semi-retirement with.

 The “whys” behind these goals are clear to us:

Max out contributions to TFSAs – by investing in low-cost, diversified ETFs inside these accounts (along with our existing Canadian dividend paying stocks) we hope to gain both growth and diversification beyond Canada’s borders. I’ll share some of the purchases I made recently in some upcoming posts. 

I also played with some calculators recently on this account subject and it wouldn’t surprise me one bit, to know that some individual investors now have >$100,000 inside their TFSAs today (that’s TAX FRE MONEY folks!) if they have invested wisely inside account since account inception.

Should you keep investing inside the TFSA, even assuming the contribution room does not increase with inflation as the program should, you can see some tremendous wealth can be gained from this account alone with time.

Since inception, here are the annual and cumulative limits assuming no withdrawals over that period were made:

Year	TFSA Annual Limit	TFSA Cumulative Limit
2009	$5,000	$5,000
2010	$5,000	$10,000
2011	$5,000	$15,000
2012	$5,000	$20,000
2013	$5,500	$25,500
2014	$5,500	$31,000
2015	$10,000	$41,000
2016	$5,500	$46,500
2017	$5,500	$52,000
2018	$5,500	$57,500
2019	$6,000	$63,500
2020	$6,000	$69,500
2021	$6,000	$75,500

 

Conceivably, some couples might be well over $200,000 right now in combined TFSA assets. Doesn’t that just blow your mind??

Check out this free calculator and more on my handy Helpful Sites page.

Max out contributions to RRSPs – unlike years past, we’re making investments inside our RRSPs an explicit goal this year because we’re fortunate to have both RRSP accounts maxed out right now. When new RRSP contribution room comes our way (we’ll likely have enough saved up by March 2021 to contribute meaningful funds), we hope to be ready to contribute to that tax-deferred account as much as possible.

Even though we both have workplace pensions in our future (mine is defined benefit (DB), my wife’s is defined contribution (DC)), we believe having RRSPs full of investments will provide some of that desired financial flexibility we’ve been working hard towards for the last 20 years.

Continue to pay off mortgage – I think it goes without saying that this must occur but we’re also making some small lump-sum contributions to our mortgage a few times per year. We do that because, well, we can.

In the coming 3-4 years, without any mortgage debt, we’ll have financial options….

Initiate a larger emergency fund to start semi-retirement with. This goal may be controversial on the site by readership!  Bring it on 🙂  Ha.

For years, we’ve kept our emergency fund at this steady amount.

However, in the coming years, we’ll want to grow that fund. There are a couple of reasons for that:

1. As we age, $hit will happen. I know the last thing I want to do, as I get older, is go back into more debt if or when a major financial emergency hits.
2. A reminder to readership we are 100% equity investors. No bonds. No fixed income. No GICs. Nada. This means if the stock market goes down, in bunches, our portfolio value is likely to dive down with it. That said, I want to have some money on hand to invest when market calamity hits – eventually it will again. I’ve trained my investing brain to buy more stocks when they are on sale. You should too.

How much cash should you keep?

3. Our goal is to have ~1-years’ worth of basic living expenses “banked” for semi-retirement. I figure if we’re getting closer to working on our own terms, or at least making full-time work a decision point that we want to continue, then might as well be as financially ready as we can… #FIWOOT and not FIRE.

I prefer Financial Independence Work On Own Terms (FIWOOT) versus FIRE

“There is a close logical connection between the concept of a safety margin and the principle of diversification.” – Benjamin Graham

You got it Ben!

We have a plan in place to approach semi-retirement in the coming years. Of course, the future is far from certain. So, we’ll save some money and have some fun with what’s leftover throughout 2021.

I will keep you posted about any new milestones or changes – so you can tailor your own plan accordingly.

Thanks for reading and let me know what comments or questions you might have. Happy to answer them as best I can. I’ll update our progress as the year moves along. 

Mark