It’s safe to say that 2022 did not go according to plan. On a macro level we had stubbornly high inflation, rapidly rising interest rates, and falling stock and bond prices. Personally, we managed to execute our revenge travel plans with a week in Maui, three-and-a-half weeks in Italy, three-and-a-half weeks in the U.K, and eight nights in Paris. And, in the midst of all of this, we decided to build a new house.
I like to set financial goals before the start of each year so we can map out our spending and savings strategy and make sure we’re aligned with our longer-term vision. But plans can change and so it’s important to be flexible and course correct as needed.
At this time last year I fully intended tackle five goals:
- Finish catching up on my wife’s unused TFSA room ($37,500)
- Max out my annual TFSA room ($6,000)
- Invest excess profits in the corporate investing account (~$48,000)
- Max out RESP contributions ($5,000)
- Add an extra $6,500 into our travel budget
The year started off well enough. I contributed the $6,000 annual maximum to my TFSA and we added another $10,000 to my wife’s TFSA. We contributed $8,000 to our corporate investing account.
Then we went to visit a show home in a new community nearby our house. One thing led to another and we ended up signing a purchase agreement to buy a lot and build a new house.
Our course correction from there meant pausing contributions to my wife’s TFSA and in fact we ended up draining our TFSAs to use for the initial deposit and subsequent draw.
We also adjusted our expected contributions to the corporate investing account, from $48,000 down to $36,000, to build up a bigger cash reserve just in case.
Outside of that major change in plans, we managed to travel through most of April and July and still exceeded our business revenue expectations for the year. We also maxed out the kids’ RESP contributions for the year.
2023 Financial Goals
We don’t have a possession date for our new house yet but we’re targeting March 1st. We’ll also need to put our existing house up for sale (definitely not renting it out!) soon and try to thread the needle of selling it shortly after moving into our new house.
Whenever you’re going through a major life change, whether it’s buying a new house, going on parental leave, having a child, or even retiring, it’s okay to give yourself a grace period to adjust to your new situation. That might mean pausing automatic savings contributions for 3-6 months to make sure you’re still on solid financial footing.
On the other hand, as a planner I like dealing with certainty when it comes to my own finances. Unfortunately, we don’t have much certainty heading into 2023.
We don’t have a possession date. We don’t know when (or if) our existing house will sell, or for how much. We don’t know how much we’ll end up putting down on the new mortgage. We don’t know what the new interest rate will be on the new mortgage. We don’t know (exactly) how much we’ll end up spending on extras such as window coverings, landscaping, a new couch and TV, moving costs, and any “upgrades” over and above our housing allowances.
We also don’t know if we’ll travel next year. With the move and the extra expenses, it might be nice (and economical) to stay home for a year and enjoy our new surroundings.
Finally, we don’t know how much we’ll be able to save and invest next year.
With all of that in mind, here are our very simplified 2023 financial goals:
- Move into our new house
- Sell our existing house
- Set aside ~$50,000 from the house sale proceeds for window coverings, landscaping, and other “extras”
- New house is completely furnished, windows covered, yard landscaped in 2023. No “someday, maybes”
- Remaining proceeds from house sale go towards the new mortgage
- Max out RESP contributions ($5,000)
- Contribute $6,500 each to our TFSAs (late 2023)
- Invest excess profits in the corporate investing account (~$36,000)
- Maintain work-life balance – no increase in business revenue expectations
- Use accumulated travel points towards a one-week all-inclusive holiday somewhere sunny
Everything flows from the first two goals. We need to be in our new house and to sell our existing house before we can achieve any other personal goals. Everything else will remain on hold until we have certainty around the timing and financial implications of this move.
The past year has been unusual in a lot of ways. Next year will be much of the same until we settle into our new reality. For us, it’s the start of a new chapter in our lives.
We’ll get our feet under us again and make a plan for the next 10 years of our life. That will include paying down the new mortgage, filling up our TFSAs again, and building up our corporate investments. It will definitely include more travel.
A transition period like this is a great time to re-evaluate your annual financial goals and make sure they align with your long term vision. Know that it’s okay to pause your regular savings while you adjust to your new situation, or if you need to fund a one-time expense.
Assess the impact. What will the change mean for your long-term goals? You might need to work a year or two longer, or reduce your spending assumptions in retirement. Maybe it won’t impact your goals at all.
Readers: what are your financial goals for 2023? Any big changes from this year to next year?