2023 Financial Goals
“I think goals should never be easy, they should force you to work, even if they are uncomfortable at the time.” – Michael Phelps.
Ya, I’ve used this quote before and it’s a great one!
I’m never going to reach the swimming heights that Phelps did, but that doesn’t mean I/we cannot realize some objectives that are important to me/us which can be uncomfortable at times. Welcome to our 2023 financial goals. Read on!
Typical financial goals may lead to typcial results…
Some annual goals that I’ve seen on social media look like the following:
- Build an emergency fund.
- Save for retirement.
- Get out of debt.
I’ve always found that generic goals lead to generic results.
Over the years, we try and avoid general stuff – we like specifics!
Here are those details including a recap over the years about what we’ve tried to build to date and why.
Pre-2023 Financial Goals
In the early days of this site as we chronicled our financial independence journey, I was/we were striving to build an emergency fund. That was like our financial foundation.
Our reasons then, to build an emergency fund, still stick years later:
- It provides us with financial flexibility. For example, if something goes wrong with our 10-year+ old car, we can afford to fix without financial stress or incurring more borrowing costs.
- It keeps us out of debt. See point #1. A line of credit is a liability. If or rather when an emergency situation strikes, the last thing my wife and I want to do is to add-on more debt. In an emergency I’d rather focus on the emergency and get out of it.
- It keeps us in control. Further to using a LOC as an emergency fund, while not a bad idea, our bank determines our borrowing rates and payback criteria. Borrowing policies and procedures change. Crises can and will happen. I don’t want to be left holding any more bank debt than necessary.
- We will never be immune to those “what ifs” in life. $hit happens. No matter how stable things seem or how good our health may feel, we’re not immune to the realities of life. When the stuff hits the fan I know I have no predictive power in knowing how long we’ll be stuck in that crisis. Any crisis or emergency could last days, weeks or even months. Who knows what the future might bring. Having an emergency fund, in cold, hard cash, ready to use as needed, is a decent security blanket for us that will cover some expenses for a short period of time if something pops up.
We keep our emergency fund at $10k.
Your mileage may vary.
In more recent years, we’ve been re-assessing how much cash we should really keep assuming full-time work might stop in the coming years and part-time work will begin, with less income coming in.
Mind you, we believe we can start part-time work with less income coming in sooner than later once:
- All debt is gone – the mortgage is paid off in 18 more months (at the time of this post), and
- All saving for retirement is largely done. (I’ll come back to this point).
With #1 and #2 nearly done, work optional isn’t quite an option yet but part-time work absolutely is given we would be close to financial independence and can reasonably considering scaling back more – and intend to.
In a recent webinar with my partners at TD, I revisited our portfolio bucket approach for income generation while being defensive in semi-retirement including how much cash we intend to keep starting sometime in 2024:
Quick notes: The best approach for any one person or couple will depend on a host of factors that one My Own Advisor blogpost cannot include nor standardize.
Here is our thinking:
Bucket 1 is cash savings. It’s simply a large emergency fund we don’t have to use but it’s there if we need it.
Bucket 2 is earning income from dividend paying stocks. Income will be earned inside some key investment accounts (such as our non-registered account(s), TFSA(s), and RRSPs) to pay for semi-retirement living expenses. We will need to decide on the order of which we access these funds, and when, and how much!
Bucket 3 is earning income from equity ETFs. This income will come from mainly our RRSPs, as we intend to “live off dividends and distributions” and withdraw capital from our RRSPs/RRIFs as needed over time as we work part-time.
The purpose of having buckets is simple IMO but effective:
The Immediate (Short-Term) Bucket #1
Cash and other liquid investments are in the immediate, or short-term, bucket. These investments include cash or GICs or similar assets. You’ll fill this bucket with investments that are liquid – easy to access for spending without much tax complications. The goal of this bucket is not income – rather – to reduce investment risk.
So, entering part-time work, there is investment risk and income risk. We will hedge that risk by having our desired cash wedge in bucket #1 above in place before part-time work begins.
The Intermediate (Near-Term) Bucket #2
In a typical bucket strategy, this middle bucket is usually designed to cover expenses in the years 3-5 or maybe up to years 3-10 for your expenses. Money in the intermediate bucket should be expected to grow.
I intend to do that via owning dividend paying stocks.
Dedicated readers/subscribers will know (despite incurring the odd dividend cut in my/our portfolio over the years!) we follow predominantly a dividend income investing path for the better part of 15 years now – and there is no intention of stopping this approach as semi-retirement draws near.
I see tangible, overall, rising dividend and distribution income from our portfolio as a hedge to support some retirement income needs.
You can see a bit of our ongoing dividend income journey on this standing page here and I will be updating my reporting approach in 2023 to be more clear about how dividends/dividend income factor into our plan.
The Long-Term (Multi-Year) Bucket #3
Long-term investments are those that mimic historical stock market returns – ideally measured in decades to recover from any near-term storms. These assets are intended to grow your nest egg.
For any multi-year or ideally multi-decade investing time horizon, you might want to consider plain vanilla ETFs or a diversified portfolio of stocks from Canada and the U.S.
How does this relate to our 2023 Financial Goals??
Let’s find out!
- Save for our 2024 TFSAs. This implies we’re going to try and save $13,000 this year – assuming contribution room in 2024 is another $6,500 per person – since we’ve already contributed to our TFSAs for 2023. I will share what I bought, and why, soon as well!
- Reduce our mortgage by $30,000 by the end of this year. By continuing to make our bi-weekly accelerated mortgage payments, and by making the odd lump sum payment, we believe we’ll make a sizeable dent this year to be close to killing off our mortgage in early 2024.
- Complete the “cash wedge” for semi-retirement. Remember bucket #1? Well, we’re not quite there yet but between the existing emergency fund and cash savings inside the corporation, I hope to save another $10k to complete this goal and have 1-years’ worth in cash savings by January 2024.
- Max out contributions to our RRSPs. Remember bucket #3? Well, to lower our taxable income this year AND earn tax-deferred growth inside our RRSPs, we need to max out these accounts as well. We’ve already started our automatic bill payments to Us Inc. (ha.) to flow savings each week to our RRSPs to try and max out those accounts. We hope to accomplish this goal by summer 2023. This might be the final year we can/we will max contributions let alone make any contributions to our RRSPs with part-time work on the horizon…so might as well seize it.
These are, aggressive goals for 2023 with only so much income flowing in and so much designed for saving and investing and debt payments.
But, it’s necessary…
Once all debt is gone, I’ve heard from other early retirees that “life begins” from them! Without debt, you no longer pay other people first. All income you make is largely yours to keep and spend as you wish or need. You avoid paying lots of interest charges. You don’t have to worry about interest rates rising that could impact your mortgage payments. There are lots of positives with debt going to $0 and we hope to experience that, finally, in early 2024.
For the most part, beyond 2023, we believe most of our saving and investing for retirement income purposes is done.
My math tells me/us that with our existing assets, because we have largely lived below our means for so long, we have enough saved for full-on retirement at the basic-level: all income (dividends, distributions and some crystalizing some capital gains over the coming decades) is enough to cover our key expenses.
We will have reached our crossover point in early 2024.
We will continue to work however, part-time for sure, since that income is essential to fund some “extras” in life and discretionary wants like travel and other activities…but the days of purposely saving for investment purposes; the absolute need to max out various investment accounts will be over.
Again, we will need to work, to earn some income, to fund various wants and extras in life for sure, but the days of needing full-time employment in our current roles at our current income will come to an end. Things could change but that’s where things are trending and have been trending for a long time now!
(Sorry, employer, we enjoy working with you and we hope to continue in a part-time capacity indeed but our time, our energy, and our other passions in life are far more important than full-time work.)
2023 Financial Goals Summary
I have no idea what companies will thrive or suffer in the years ahead but we do believe our collection of stocks, and low-cost ETFs, as a whole, will continue to generate meaningful and higher income over time to fund some life-changing stuff sometime in 2024.
We’re just not there – yet!
That said, it’s amazing what some long-term discipline via goal setting has done to date including opportunities that may be ahead.
There are other goals we have (including saving for some trips), and there are some personal fitness goals I’m trying to work through as well but I can save those updates for another day or some random thoughts over the coming year.
For the purposes of this post, we have four (4) key financial goals to accomplish for 2023. I hope we nail them. I will keep you updated if or when we do.
Have you set any goals for 2023 yet? If so, what are they? Share in a comment on the site. I read everything I get!
Assuming your expenses might be ~ $5,000 per month in retirmement, how much do you need?