“That’s why knowing the right answer, and doing the right thing, are very different.” – Jason Zweig
In the book Your Money & Your Brain author Jason Zweig discusses the emerging field of “neuroeconomics” and shines a bright light on the many bad things our investing brains drive us to do, which make no logical sense but unfortunately make perfect emotional sense. For example, in theory Jason says “we all have clear and consistent goals”. In practice, Jason believes most of us can’t recite our financial goals and when we finally make them we find they are not realistic and we’ll need to change them. I suppose the beauty of this blog is whatever I write on this site I can hold myself accountable to it; good or bad. Here’s a recap of what we set out to do in January this year:
- Put $300 lump sum payments on our mortgage every month ($3,600)
- Make a healthy contribution to one TFSA ($8,000)
- Save for and take a great trip ($4,000)
- Do not incur any new debt ($0)
Here is our update on those goals…
Keep slaying the mortgage dragon
Although borrowing rates remain low I’m convinced paying off our 6-figure mortgage (while saving for retirement) is the right thing to do. In terms of meeting this goal in 2013, we’re doing well. As of October 1st we’ve made $3,500 in lump sum payments on our mortgage. I figure we can make another $500 payment before Christmas and exceed this goal.
Fatten up the TFSA
Earlier this year, I maxed out my TFSA and since then we’ve been focusing on my wife’s account. Her TFSA contribution room was carried forward from previous years and with some good savings habits, we’ve made up some significant ground. Earlier this month we reached this financial goal. Instead of keeping cash in the account earning next to nothing (if not a loser to inflation) I decided to buy some National Bank (NA) stock. The stock price has climbed almost 10% since our purchase.
Work hard, play hard
We love to travel and because of a savings plan that was initiated back in the early summer our trip is now fully funded. We have aspirations of travelling in 2014 as well so we need to start saving for that trip soon. As much as possible, we save for our trips in advance. If we don’t have the money in the bank we don’t travel.
Pay off debt and stay out it
We continue to have no debt other than our mortgage and a car payment, which is more than enough for us. This is also why we cannot afford to take on any new debt of any kind. The house should be paid off in another 8 years and the car will be paid off in another 3 years if things work out for us.
There are only two more months to complete our goals. Got any comments on our financial goals? How are your 2013 goals coming along?
I really like that you are focusing on your mortgage. We are doing the same, even though the interest rates are currently super low. With these low interest rates, it will take a lot less extra payments to fully pay off the mortgage. I also compare the interest savings, to what I would have to earn in after tax dollars. So a 3% interest savings on the mortgage would be equivalent to up to a 5% before tax return on an investment (interest income at the highest tax bracket) if held outside of a tax sheltered vehicle. We look at it as a good overall wealth building strategy.
Thanks Lindsay, I struggle with that actually, even with our high debt load. I’d rather invest…
But, as you say, it takes less money to pay off the mortgage right now. I hope we can kill this debt dragon in another 8 years. Any money not going on the mortgage, is going into RRSPs and TFSAs.
Good luck on your own journey!
Great job on your goals Mark! I really like what you wrote “If we don’t have the money in the bank we don’t travel.” The same can be said for:
If we don’t have the money in the bank we don’t buy that new car.
If we don’t have the money in the bank we don’t buy that TV.
If we don’t have the money in the bank we don’t buy that iPad.
My goals are still focused on slaying the mortgage dragon. Only a few more years to go!
You’re right, about the don’t have the money in the bank…
BTW – I owe you a review of your course don’t I this winter? 🙂
How quickly will the lump sum payments help you pay off your mortgage? We are looking at adding a similar amount to our mortgage each month. We have about $800/month extra to pay down the mortgage with, but I think we’ll end up splitting that money between extra retirement account padding, and the mortgage.
I figure the extra mortgage payments are reducing our mortgage by at least a year or so. Any money not going into the mortgage goes into investments. I figure the faster I can grow our retirement accounts…the better. Thanks for the comment Daisy.
Thanks!!! I enjoy reading post about people’s financial updates. Gives me ideas for myself.
Thanks Lee! I appreciate you stopping by my site and leaving a comment.
Good call on buying NA. I had my eye on it around the $72 level, but I ended up investing elsewhere with that money. Now I wish I had bought NA instead 🙁
Thanks! You win some, you lose some I guess. I still own TA stock. Not good.
BTW – I tried to leave a comment on your site but couldn’t…
Oh, do you remember what the problem was?
It sounds like you’re making great progress with your finances. The only improvement that jumps out at me right now is your next car. If you want to avoid having to make car payments on your next car, you need to start saving up for it now. This probably isn’t what you’d like to hear — you can always count on me to brighten up your day 🙂
Funny you mention that Michael, my wife was just talking to me about that. I think we’ll start saving for our next car in 2014. I hope to have enough cash to make a sizeable downpayment in spring 2016 for the next car. That will make my Mazda 16 years old.
Nothing wrong with your ideas and perspective Michael, it either validates or helps me change my thinking.
The ol’ car purchase is an interesting one. I bought my vehicle about 12 years ago with 4% financing on a 5 year loan… which was actually 4% in year 1, and 0% for years 2 through 5. Since inflation was running 3% a year, I figured I was getting a 11% discount on my year 5 payments. From what I can see, money can be found even cheaper now with lots of 0% financing deals on many cars. Some people say if you have cash in your pocket you can overcome that, but I’m not so sure. 0% is a great rate to borrow money at – I would take a 0% loan any day for a car purchase even if I had the cash. But it’s good to have cash flexibility in case you can’t get the terms you want on the vehicle you want, or if you buy a used car.
Yeah…the car purchase…another one needed in a few years…
We own a 2012 Kia and my car is a 2000 Mazda. That Mazda was paid for almost 8 years ago now.
The Kia is at 0% financing. I hope to do the same with my car in another 2.5 years. I hope my Mazda makes it to 2016. 🙂 We’ll probably try and save about $5K for the downpayment. I might also consider a used car.
Actually you are saving for the car if you’re maxing out the TFSAs. When the time comes you can decide to keep the TFSA money for retirement/long term, or you can use it for the car, or you can use some of the gains from the TFSA for the car. Until the TFSAs are maxed out there’s not much point in saving outside the TFSA for anything. Why pay tax for no reason?
The TFSA is probably also your big ticket house repair savings account, isn’t it? In 8 years your mortgage will be gone, but unfortunately your roof may also be gone, or your windows, or your furnace, or your shower….Still, houses are better than high-rise condos because you can defer a replacement with a minor repair until the budget can stretch. Getting zinged with a special charge at a condo can be budget devastating because you can’t delay payment.
Either way, it looks like your goals are clear and achievable!
Well, we’re going to start saving for our car in 2016, next year in 2014.
I don’t want to touch the TFSAs for that. I consider those retirement accounts. Hopefully in a few months, we’ll have both TFSAs fully maxed.
Actually, the emergency and savings fund is our big ticket house repair / savings account. We hope to have close to $10,000 in that account by summer 2014.
Thanks for the feedback, it’s always good to get some 2nd, 3rd, 4th and more opinions.
@Bet Crooks: Don’t scare Mark 🙂 I was going to wait for him to get going with saving for the next car before I mentioned saving for a new roof, windows, etc. You’re right that these savings can go into a TFSA if there is room, but if you do this, you can’t simultaneously count all the TFSA savings as retirement savings.
Well, we got the new roof. Check. Windows, ugh, you’re killing me Michael… 🙂