What seems like forever ago, back in January, I wrote down our personal finance and investing goals for 2011:
• Goal # 1 – Increase mortgage payments by $200 per month.
• Goal # 2 – Contribute $5,000 each to TFSAs.
• Goal # 3 – Optimize our RRSPs.
• Goal # 4 – Continue my full DRIP with Bank of Nova Scotia.
• Goal # 5 – Start my full DRIP with Fortis.
• Goal # 6 – Build up our emergency fund to $10,000.
In April, I provided you with an update on our goals – some good progress was made early actually. In July, I provided you with our summer update and the progress continued. This is my first year posting our goals in “black and white” for the world to see and scrutinize. I did this for two main reasons:
- Writing things down keeps me/us honest, I have a record of what we are trying to accomplish.
- Sharing our goals keep me/us accountable.
Let’s see how we’re doing so far with one more quarter to go!
Goal # 1 – Increase mortgage payments by $200 per month
I must be honest, we’re nailing this one! Since January 2011, we’ve maintained our monthly $200 extra payments on our mortgage and we have no intentions of stopping them. It’s exciting to use some online calculators to see what our mortgage, how much lower it will be, if we keep this up.
Goal # 2 – Contribute $5,000 each to TFSAs
Very early on this year, on the upside, I maxed out my TFSA contribution for 2011 – goal 50% complete. On the downside we were not able to do the same for my wife’s TFSA – goal 50% incomplete. Instead of maxing out both TFSAs we needed money for a major home renovation – a new roof. This project cost us thousands of dollars and we’re still feeling the pain on our line-of-credit (LOC). The good news: we have a lovely roof. The bad news: we have a massive LOC and only one TFSA maxed out. Unfortunately we won’t accomplish this entire goal this year.
Goal # 3 – Optimize our RRSPs
The dark days of holding a bunch of high-MER mutual funds are over, thanks to their help and to be honest, an attitude to stop wasting our money. We’re now using dirt-cheap ETFs in our RRSPs to help us reach our retirement dreams and getting market-returns because of it.
We tend to optimize our RRSPs, that is, we only contribute enough money to avoid paying any income taxes come tax season. If anything, we might get a tax return when using our income tax software. So far, we’re accomplishing this goal in 2011.
Goal # 4 – Continue my full Dividend Reinvestment Plan (DRIP) with Bank of Nova Scotia
Regarding Canadian banks, I figure if you can’t beat ‘em you I might as well own ‘em – and so I do. We already own a couple of Canadian banks and Bank of Nova Scotia (BNS) is another one I want a significant position in. This is a great company. You might already know I’m a big fan of DRIPping. At this point I don’t own enough BNS shares to run my synthetic DRIP yet so I’m running a full DRIP with the transfer agent to help me own more BNS shares, commission-free. This year, I’m contributing about $100 per month to this and so far, so good.
Goal # 5 – Start my full Dividend Reinvestment Plan (DRIP) with Fortis
Many months ago, I finally purchased some Fortis stock. Like Bank of Nova Scotia, I’ve been increasing my holdings in this Canadian dividend icon for months now although I’m not as aggressive with the Fortis optional cash purchases as I am with BNS. Why? Well, BNS has been much cheaper and fallen more in price this year when compared to Fortis.
Goal # 6 – Build up our emergency fund to $10,000
We’ve been in our house for 9 months now and it doesn’t feel like a new house anymore, it feels like home. To make it feel this way, we’ve decorated, bought new furniture and other accessories for the home. Those items came at a cost, I guess they always do! We’d save for a few weeks, make the home purchases on our credit cards, pay off the credit cards in full and then repeat the cycle. Our place looks so much better on the inside now but it also looks better on the outside as well, with our new roof. That expense was HUGE though. To pay for the roof we depleted our savings and we took out an unhealthy line of credit (LOC). We’ve never had one before and it’s annoying, scary and pricy. We like paying cash for stuff. We want to get rid of that LOC. While borrowing rates remain at record lows our focus is paying this guy off as fast as we can – trying to contribute at least $500 to it every month. That money means there is no chance we can build up our emergency fund to our target this year. Hopefully the LOC is only a short-term issue until the middle of 2012. We want it gone for good. I’ll keep you posted!
Well, that’s my fall update of our personal finance and investing goals for 2011. To summarize, we’re on our way to accomplishing more than half of them but for a couple, we have no hope. Such is life I guess. We had great intentions, great expectations but falling short in a couple areas is not the end of the world – we’re doing well in other areas. I’m convinced we’re accomplishing many of our personal finance and investing goals because of this blog; writing them down, monitoring them and sharing the good, bad and downright awful with you.
It’s a journey and I hope you stay tuned for it!
What is your feedback on our progress?
How are you doing with your 2011 goals?
@MOA I’m glad that you haven’t abandoned RRSPs altogether. Keep up the good work, both with your personal finances and your blog. Yours is the blog that I follow most consistently. I enjoy your perspective and your willingness to share.
Geez, thanks Dale, I really appreciate that!
Comment anytime! 🙂
@My Own Advisor
I was aware of the fact they had significantly more Central American holdings than the others, and I wondered if this was a key factor. As long as the value is there I tend to gravitate towards Royal Bank just because of their stability as such a large bank. I was not aware in the DRIP advantage that BNS currently has! You’d think the others would have to match that as it places them at an obvious disadvantage.
@MUM,
I don’t blame you one bit for owning RY. I would like to own it too! The DRIP advantage is pretty nice. I hope to have 100 shares of BNS via my DRIP by end of year – Merry Christmas to me! 🙂
You did reasonably well on your goals. Unfortunately the roof kind of killed everything, but hopefully it will last a long time!
Thanks Mike. The open air shower in winter just wouldn’t do! 🙂
Good job on your goals MOA! Hubby and I used to have an 8 month emergency fund in place at the beginning of the year but I just couldn’t resist scooping up some cheap dividend stocks in the past few months so the emergency fund is now down to about 4 months’ worth of hubby’s net income.
We still have a HELOC that we owe money on but that money was used to invest in more dividend paying stocks (can you tell that I like dividend paying stocks?? 🙂 ) back in 2006-08 so the interest is a partial tax write-off. We’re pretty comfortable with not paying the HELOC off right away due to the tax write-off and also because the dividends that we’re receiving cover more than twice the interest cost of the HELOC. Even if interest rates start to go up, we can always turn the DRIP off and let the dividends pay for the HELOC.
I’d like to get the emergency fund built back up since we are in the first stages of building a new house and I’d like to be prepared for all of the unforeseen expenses that come along with a new construction.
Good luck with the rest of your goals!
P.S. We also own BNS :-).
@Calgary Girl,
Hey, thanks!
You’re talking my language, with buying the dividend-paying stocks!!
The HELOC we have is our roof debt but hopefully by April 2012 it will be gone!
I remember you from Canadian Money Forum, yes? I’m “Financial Cents” on that 🙂
OK back to you, I think you and hubby did a great thing by picking up some dividend-payers given those sweet divis are covering more than twice the HELOC interest cost. Very well done.
Seems like you’re a fan of DRIPping as well, awesome. I run those taps as much as I possibly can.
Congrats on building the new house! When is it going to be ready? It’s in Calgary I assume?
Thanks for the wishes on the rest of the goals. Do check in again! We can compare stocks holdings!
Are you not planning any future RRSP contribs?
Hey Dale,
Thanks for your comment and stopping by.
Yes, we are contributing to RRSPs, about $200 each per month but not planning on maximizing them. We tend to optimize our RRSPs instead since we are extremely fortunate to have pensions at work, so we only contribute enough to RRSPs to avoid paying any income tax come tax time. This way, we have more funds left over for the TFSA, pay-down debt and buying dividend-paying stocks.
I hope that helped answer your question?
Great job MOA! It sounds like you’re pretty well on track for most of your goals.
I’m with TWC on the emergency fund. I have a $5k credit card that I pay off every month, and I just use it for daily purchases and pay it off every month. Obviously, I don’t spend a lot of money, so it’s very easy to pay it off. With that credit and a few grand in the bank, I feel pretty solid if something comes up. I don’t think it’s necessary to have thousands of unused dollars in the bank collecting dust. But again, this will depend a lot on personal circumstances.
As far as my goals go, I got rid of my car and cut expenses much further than I had planned for. I’m definitely on pace to save more than 50% of my net income, but unfortunately I am not on pace for my $1,200 in total dividends for 2011 goal. Can’t win them all!
Best of luck for the rest of the year Mark!
@Mantra,
We’re trying! Yeah, the emergency fund; I know folks have various takes on that but having one works for us. We feel better having one. I have a post planned for why we want an emergency fund. We always used to have one before the roof repair, now we don’t and I don’t like that very much.
I continue to be impressed with your savings rate, more than 50% of net income is VERY good! Total dividends of $1,200 is really getting up there as well. Great stuff!
Just out of curiosity how would you rank the banks in terms of investments going forward? I have to think that TD and RB have the greatest growth prospects going forward. Any specific reasoning on BNS or just figure that it offers the best value right now?
@MUM,
I like BNS over TD and RY, because it has more international exposure. While that seems a bit riskier, in some respects, it is more diversified. BNS has some serious roots in Latin America, a space that neither TD or RY occupy very much. RY has significant holdings in the U.K., TD is getting bigger and bigger south of the 49th. All three, are pretty good companies to own IMO. Another reason why I own BNS, before the other two, it has a full DRIP that offers 2% share discounts. TD nor RY offer that. I need to wait until TD tanks in price before I can afford it. BNS seems farily valued right now, trading close to its 52-week low.
Any particular banks you’re fond of?
Great job MOA!
A fantastic set of goals, and I commend you for having such an organized approach to handling your finances. It’s not hard to tell you’ve got a well-structured approach on your path to financial independence.
It’s great to see that you’re placing your mortgage among the highest on your list in tackling. In many cases, I tend to place the utmost importance on paying it down faster, more so than any other objectives, but I really like the mixed approach that both you and Echo are employing. It’s a balanced approach that also allows you to keep things interesting from an investment standpoint, and plan for long-term appreciation with you dividend-stocks, investments within your TFSAs & RRSPs, as well as compounding through DRIPs. A well thought out plan IMO.
Like you, I place a high emphasis on TFSA contributions.
Given your DB pension, I think you are definitely going the correct route by maximizing TFSAs and as you mention, optimize your RRSPs as best as possible.
With regards to emergency funds, I think it is a highly subjective topic with regards to what is the best course of action in terms of parking money to side in the advent of emergencies. If I’m not mistaken, I believe Mike Holman believes strongly in having a large chunk of change held for emergencies.
From a personal standpoint, call me David Chilton-esque but I have a dedicated line of credit that I never use (key word ‘never’) that is in place exclusively for such occasions. I realize that many people may argue that lines of credit are like giant credit cards, but if one uses them responsibly, they are a sound option to rely on IMO.
Admittedly, in my case, I also have the money to back up the emergency should I be forced to offload some of my investment dollars, but I would avoid this at all costs. Also, being mortgage free tends to give a sigh of relief and clears the air so to speak; ultimately, I believe everybody’s situation is unique, so it’s important to assess your own financial house when deciding on emergency funds. In a lot of cases, I think it can make sense.
Great post! Happy Thanksgiving Day! 🙂
@TWC,
Wow, detailed comment once again, thanks very much!
Yeah, I’m very proud of our balanced approach. I think it’s working for us. Too much emphasis on one area, for example debt payments, and we’ll suffer in another (delay on building a diversified dividend portfolio). Mortgage debt is definitely high on the list regardless!
Given our DB pension, I think we’re making the smart move with the TFSAs as well – thanks for the positive reinforcement!
You’re right, Mike Holman believes strongly in having a large chunk of change held for emergencies. I prefer to hold less than Mike, probably because I’d rather be invested than have thousands tucked away for a rainy day but having something saved, for us, is much better than nothing. Emergency funds tend to be that touchy subject that folks are rarely on the fence about. Either you have ’em, or you don’t but it certainly depends on your comfort level. I think I need to be more comfortable than most?
Your comment about “being mortgage free” gave me a smile: I’m working on it and I’ll get there with you someday. 😉