December Update – 2012 personal finance and investing goals

Hard to believe how time flies…2012 is coming to an end.  Overall, it’s been a good year for my wife and I and we have many things to be thankful for.  First and foremost we have our human capital, which makes our financial capital easier to obtain.  My parents instilled in me “you don’t have much without your health” and there’s certainly some truth to that.

In January armed with our human capital, I laid out what I thought were some pretty aggressive saving and investing goals for the year ahead.  As 2012 comes to a close, let’s revisit our six personal finance and investing goals and then I’ll describe if we achieved any of them or where we fell down.

Here’s a recap of our 2012 goals:

• Goal # 1 – Pay off our LOC by end of February ($2,000).

• Goal # 2 – Starting in March 2012 (after the LOC is paid off) put $300/month as lump-sum payments on the mortgage for the rest of the calendar year ($3,000).

• Goal # 3 – Maximize both TFSAs before end of year ($10,000 in contributions).

• Goal # 4 – Grow our emergency fund by $3,000 (to $5,000) by the end of this year.

• Goal # 5 – Optimize RRSPs ($5,000 in contributions).

• Goal # 6 – Save $3,000 for a great trip in the fall/winter.

Here’s our update for December:

• Goal # 1 – Pay off our LOC by end of February ($2,000).

Back in February we slayed this financial dragon.    At 4% interest, our line of credit (LOC) borrowing costs were rather cheap and we took advantage of this by putting almost every available cent we could find to pay off this debt.  I hated having this debt.  Since paying it off we’ve kept it off and our LOC balance remains zero.

• Goal # 2 – Starting March 2012 (after line of credit is paid off), put $300/month lump sum payments on our mortgage.

This goal is no longer a work in progress.  From March through this month, we put $300 per month as lump sum payments on our mortgage.  These pre-payments have helped make a small dent in our mortgage, debt we hope to have killed off in about nine years.

• Goal # 3 – Maximize both TFSAs before end of year ($10,000 in contributions).

Earlier this year I maxed out my TFSA for 2012.  This fall, my wife’s TFSA was maxed out for 2012.  Another goal accomplished.

• Goal # 4 – Grow our emergency fund by $3,000 (to $5,000) by the end of this year.

I know not everyone agrees with having an emergency fund but it works for us.  In September, we achieved this goal.

• Goal # 5 – Optimize RRSPs ($5,000 in contributions).

You may have read about my practice of optimizing my RRSP instead of trying to maximize my contributions every year.  I do this primarily because I have competing priorities, here are a few:

• I need to focus on paying down my mortgage.
• I need to pay off my credit card expenses every month.
• I need to maximize the TFSA.

I also do this because while RRSPs are excellent, recall the RRSP is a tax-deferral tool and I’d rather have a more balanced approach.  Remember, tax-refunds are really borrowed government funds – if you manage to contribute $5,000 to an RRSP and your tax rate is 40%, your refund is $2,000.  That refund should be put to good use since some or all of it must be paid back at some point when you withdraw from your RRSP or collapse the account – hopefully in a lower tax bracket.  Instead of maxing my RRSP and forecasting what my tax rate will be a couple decades I prefer a balancing act that includes living for today, while paying off debt and investing for the future.  Based on December’s contributions, I’ve calculated we’ve contributed enough to our RRSPs in 2012 to avoid paying any additional income tax, come tax time in the spring of 2013; we’ve accomplished this goal.

• Goal # 6 – Save $3,000 for a great trip in the fall/winter.

While saving for our future is prudent this was by far our most exciting financial goal in 2012, saving for a great trip.  Our philosophy is to usually spend money on experiences not stuff, so travelling is where it’s at.  We’re looking forward to our vacation soon and although we wanted to save $3,000 before the end of the month for this trip, we didn’t quite make it.  We’re only $400 short of this goal as I write this post and I figure we should be able to find the funds before our trip by moderating expenses in the next few weeks.

So, that’s it for our saving and investing goals for 2012:  5/6.  We’re proud of these accomplishments and already looking forward to 2013 to see what new heights can be achieved.

How did your 2012 personal finance and investing goals work out?   Do you have any comments on our goals or where our priorities are?