Happy New Year and welcome back to the blog! With an unforgettable 2019 now in the rearview mirror we look ahead to 2020 and what’s to come. Goal setting is such a powerful motivator for me. This year, as I move to full-time blogger, freelancer, and fee-only advisor, it’s even more critical to map out my 2020 financial goals and make this transition a success.

Goal #1: Maintain Current Spending and Savings Rate

The promise I made to myself and my family is that this transition will have no negative financial impact to our lifestyle. That means maintaining our current spending on things like groceries, entertainment, kids’ activities, and travel. I also refuse to reduce or pause our current savings contributions, so we must maintain our savings rate.

Thankfully, I’ve diligently tracked my spending for the past decade and so I know how much we need to earn to hit our spending and savings goals. I’ve also tracked our business income for the past 10 years and have a good idea of what to forecast for 2020 income.

When I created our 2020 budget I used last year’s spending as a baseline and made sure to include our savings targets in the forecast.

While my estimates are conservative I do have a back-up plan in case our income does not meet these projections. We have a $35,000 emergency fund that can be tapped during slow earnings months. I don’t want to work any harder than I have to but I also have the option to increase my work output – like taking on more writing assignments from existing or new freelance clients.

This goal is highly linked to the remaining goals below:

Goal #2: Max Out RRSPs

I’ve maxed out all of my available RRSP room, but will have another $3,600 or so to contribute in 2020 (reduced thanks to the pension adjustment). I’ve set up automatic contributions of $300 per month to max out my RRSP for 2020. I invest 100 percent of my RRSP funds in Vanguard’s VEQT.

My wife has about $9,000 in available contribution room and she’ll likely max that out before the March 2nd RRSP deadline. My wife’s RRSP is invested in a Wealthsimple robo-advisor account.

Goal #3: Top-Up TFSA

Many of you know the story. I maxed out my TFSA from 2009-2011, then withdrew all the funds to top-up the downpayment on our new house. Then we bought a new car and paid it off over three years, which meant I did not have the funds available to contribute to my TFSA.

Now I’m in catch-up mode and have been contributing $1,000 per month ($12,000 per year) to my TFSA for the past two-and-a-half years. I aim to continue that plan throughout 2020 and beyond until I’m fully caught-up.

I invest 100 percent of my TFSA funds in Vanguard’s VEQT.

Goal #4: Max out RESPs

We’ll continue to max-out our kids’ RESP account – contributing $2,500 per child, per year to take advantage of the $500 per child education savings grant (CESG).

The kids’ RESP account is invested in TD e-Series funds (Canadian equity, U.S. equity, and International equity funds). My kids will turn 11 and 8 this year and so I plan to introduce a bond fund soon to start lowering the volatility of this portfolio.

Goal #5: Travel More

No longer limited by 22 vacation days I plan to increase our travel time to include three international trips and one Canadian trip in 2020. Two of those trips are already booked, with a week in Maui this February and three weeks in Italy in April. 

We’re also eying a potential return to Scotland this summer, plus a trip to the west coast in the late summer / early fall. 

Our flights to Maui and Italy, plus half of our accommodations were paid for last year (mostly with credit card rewards points). The remaining costs are included in our 2020 budget.

Goal #6: Work Less

I’ve had a side-hustle for as long as I can remember. When I started my career in hospitality, I joined every board and community organization I could get into to raise my profile and build my resume. That meant sacrificing a lot of personal time to volunteer and network.

Then I switched careers and had kids. I dropped most of the volunteering to spend more time at home with my family. But that’s also when I started this blog, and spending some of my evenings and weekends writing and eventually doing one-on-one financial planning.

I started burning out last year. So I made the bold decision to quit my job and focus on my online business full-time. I don’t want to fall into the same trap of overworking myself, but at the same time I want the business and our finances to flourish.

My goal is to spend no more than 25-30 hours per week working on my business. This includes writing articles here, for the Toronto Star, and at Young & Thrifty, plus working with clients in my fee-only financial planning practice, and promoting the brand.

A tentative schedule has me working Monday to Thursday from 8:30 a.m. to 11:30 a.m., taking an hour break for lunch, and working from 12:30 p.m. to 3:30 p.m. On Friday I’d work from 8:30 a.m. to 11:30 a.m. The goal is to be finished work when my kids get home from school.

My wife plays a major role in helping manage the work flow, as she handles all of the client emails, bookkeeping, and administration. That frees me up to do what I do best, which is write and plan.

Goal #7: No New Debt

This has been a goal for several years and one of the reasons why we can maintain such a high savings rate. We have no debt besides our mortgage. We’ve been car payment free for several years, and our cars are in great shape – there’s simply no need to upgrade them for the foreseeable future. 

We’re happy in our current home with no immediate plans for renovations. There’s simply no need to take on any new debt. 

This Week’s Recap:

On Tuesday I recapped the year with my 2019 net worth update. A 21 percent gain year-over-year has us on track to hit the $1M mark by the end of this year.

January typically brings an uptick in search traffic to the blog and this year is no different. Here’s what new visitors have been landing on:

• 3 Reasons To Take CPP at Age 60
• CPP Payments: How Much Will Your Receive From Canada Pension Plan?
• TFSA Contribution Limit and Overview

Over on Young & Thrifty I offered eight financial resolutions for the New Year.

Promo of the Week:

Also popular this week is my article explaining how to transfer your RRSP to Wealthsimple. It seems many of you are looking to reduce your investing fees and finally make the switch to low-cost investing through a robo-advisor.

Wealthsimple is Canada’s leading robo-advisor and Boomer & Echo readers get their first $10,000 managed free for one year when they open up a new Wealthsimple account.

Weekend Reading:

Our friends at Credit Card Genius looked at the best credit cards in Canada across 24 different categories to compile their list of best credit cards in Canada.

Travel expert Barry Choi answers some frequently asked questions about travel programs and credit card hacking.

The Atlantic’s Derek Thompson stops by The Compound to discuss how and why things go viral:

Morgan Housel says the amount of progress we’ve made during most of our lifetimes is both astounding and overlooked. 

From BuzzFeed News, tech’s biggest flops of the decade included failed Kickstarter projects, flammable gadgets, and investment bubbles.

This time of year is filled with economic predictions and forecasts. Forget it – here’s why stock market predictions are less than worthless.

Here are some more useful New Year’s resolutions for investors, from a behavioural scientist:

“Sticking to your principles and enjoying the long-term benefits of compounding sounds easy, but the behavioural realities of investment means that this is far from the case. Doing nothing requires a great deal of effort.”

PWL Capital’s Ben Felix takes down Dave Ramsey’s shockingly bad investment advice in his latest Common Sense Investing video:

David Aston explains why some people can put off savings until their 50s and still meet their retirement goals.

Rob Carrick highlights trends of the past decade that made investors smarter and richer, and how they can do the same in the 2020s.

A wild read about Canada’s lost loonie: A coin that was supposed to be much different than the one we know today, altered after a mysterious theft in 1986.

Finally, meet Kevin Kelley, the man who’s going to save your neighbourhood grocery store.

Have a great weekend, everyone!

I remember writing last year’s net worth recap and being disappointed that I didn’t reach my goal after the stock market tanked during the last three months of 2018. What a difference a year makes!

My investments were up 20+ percent this year. We also reached all of our 2019 financial goals, including maxing out my RRSP, contributing $12,000 to my TFSA (to catch up on unused room), maxing out the kids’ RESPs, not taking on any new debt, and keeping our epic trip to Scotland and Ireland affordable. 

The huge gains in the stock market boosted our overall assets to more than $1,000,000 and pushed us to within a hair of my 2019 net worth target of $830,000. Here’s how it all breaks down:

Net worth update: 2019 year-end review

A few questions that I often get asked after posting a net worth update:

Credit Cards & Banking

We funnel all of our purchases onto a couple of different rewards credit cards to earn points on our everyday spending.

Our go-to card is the now discontinued Capital One Aspire Travel World Elite MasterCard. We have a grandfathered version that pays 2 percent back on every purchase and comes with a 10,000-point bonus each year.

Our secondary card is the American Express Cobalt Card, which we use at non-Costco grocery stores and on dining and liquor. Finally, we look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers.

We each have no-fee chequing accounts at Tangerine, which we use for bill payments, email money transfers, and the odd debit purchase.

The rest of our banking is done at TD, including our mortgage, line of credit, and investments.

Pension

Each month I contribute roughly 13 percent of my salary to a defined benefit pension plan that my employer also matches. The amount listed above is the commuted value of the pension if I were to leave the plan today. <–Update: I quit my job at the end of the year and I’m just awaiting the final valuation of the plan before determining whether I’ll keep it in the pension or take the commuted value and invest it in a LIRA.

RRSP / RESP

The right way to calculate net worth is to use the same formula consistently over time to help track and achieve your financial goals.

My preferred method is to list the current value of my RRSP and RESP plans rather than discounting their future value to account for taxes and distributions.

I consider a net worth statement to be a snapshot of your current financial picture, so when it comes time to draw from my RRSP and distribute the RESP to my kids, net worth will decrease accordingly.

Principal Residence

We bought our home in 2011 for $425,000 and developed our basement a few years later, increasing its value to $450,000. The next year I bumped up the market value by 2 percent (which is still less than its city-assessed value), but the local real estate market has since flattened – with nothing selling in our price range – and so I’ve left the value at $459,000 for the past three years.

Final thoughts and a look to 2020

I’ve had a long-standing goal to reach a net worth of $1M by the end of 2020. I’ll need another 20 percent increase in net worth to get there.

One minor wrench in the plan is that I quit my full-time job, and so I’ll be relying entirely on income from this blog, freelance writing, and my financial planning service. 

I don’t see this as a problem so much as an opportunity. Both my salary and career trajectory had stagnated in the public sector, and the next four years of budget cuts look to be brutal. Meanwhile, my side business was growing by leaps and bounds.

Online income surpassed my full-time salary in 2018 and increased by another 30 percent in 2019. And that was with me dedicating just 12-15 hours a week to my online business. Imagine if I put another 10-15 hours a week into it? 

That’s the plan, anyway. If successful, we’ll be able to meet our savings goals, accelerate our mortgage payments, and travel more than ever before. I’m looking forward to the challenge ahead, and to hit that $1M net worth milestone!

How did this year go for you? Did the rising stock market drive your net worth higher? Let me know in the comments below.

How well did your investments perform in 2019? Investment performance is critical to achieving your retirement goals, yet it’s one of the most misunderstood concepts in personal finance. Why? Because we need to put our performance into proper context. In other words, we need to compare our returns to an appropriate benchmark.

Investment managers are quick to celebrate strong returns during bull markets, and just as quick to come up with excuses for poor returns when markets fall. What’s important, particularly for those investing in stocks or actively managed mutual funds, is how your returns fared against “the market”.

The easiest way to see how well your portfolio performed is ‘benchmark it’ against an appropriate index, such as the TSX or S&P 500, or some combination of stock markets. You can’t actually invest in the index, so you need to compare your portfolio to an index fund.

Blackrock’s iShares has a robust list of index-tracking products and does a great job keeping its performance up-to-date.

Select the fund or funds that best matches your portfolio. For example, if you wanted to compare to the S&P 500 then select the fund XUS, click on the ‘performance’ tab, and find the YTD or calendar year performance (depending on when you do the calculation).

Now let’s say you’re invested in one of Canada’s largest mutual funds – RBC’s Balanced Fund. As of Nov 30, this fund has returned 13.3 percent. An appropriate comparison for this fund would be XBAL – the iShares asset allocation ETF representing the classic 60/40 balanced portfolio.

XBAL returned 15 percent over the same period, meaning the RBC fund has underperformed by 1.7 percent. That shouldn’t come as a surprise – since we know by now that fees are a large driver of future returns. The RBC Balanced Fund comes with a MER of 2.16 percent, while iShares XBAL comes with a MER of just 0.20 percent.

Asset allocation ETFs make it easy for investors to compare their managed investment portfolios and determine whether they’d be better off investing in index ETFs.

So while your stock picks or mutual funds might have returned a healthy 15 percent this year, you might be surprised to learn the Canadian market is up 21.4 percent (FTSE Canadian All Cap Index) and the S&P 500 is up 29 percent. It’s all about context.

Here’s how my own investments performed in 2019 (personal rate of return):

I used to be a stock picker, more specifically Canadian dividend paying stocks. Even though I switched to indexing in 2015 I still like to compare my portfolio against my former strategy. That’s best represented by iShares CDZ – the Canadian Dividend Aristocrats ETF.

Since 2014, CDZ has a compound annual growth rate of 7.04 percent, compared to my portfolio’s compound annual growth rate of 9.29 percent over the same period. To be fair, CDZ will most likely outperform my portfolio this year (it’s up 26.61 percent as of this writing).

Do you compare use benchmarking to compare your investment returns? How did your portfolio perform this year?

This Week’s Recap:

I hope you enjoyed the Christmas break. We’re still in that vortex known as the week between Christmas and New Years – when nobody knows what day it is and nobody cares!

I did manage one post this week – how to make saving a priority.

From the archives: Past performance and your investing returns.

I’m currently reading Superfans by Smart Passive Income blogger Pat Flynn. In the book he suggests coming up with a name for your followers. Which one do you prefer:

• The Financially Ok Boomers
• Echo and the Moneymen
• Echomaniacs

Promo of the Week:

Did you know that 56 percent of Canadian adults don’t have a legal will?

Now you can create a legal online will in 20 minutes for as little as $99 with Willful Wills. Read my full Willful Wills review here.

Weekend Reading:

There’s still time to check out these awesome credit card offers, sign-up bonuses, and deals for December.

Travel expert Barry Choi reviews the best credit cards with travel insurance. One of interest for those over the age of 65 is National Bank’s World Elite MasterCard, which provides 15 days of coverage.

Dale Roberts looks into Canada’s largest mutual fund from RBC and says it’s not so bad.

I love reading personal finance updates and the end of the decade brought us plenty of ‘decade in review’ recaps. Here’s an interesting one from Maria at Handful of Thoughts.

Mark Seed at My Own Advisor updated his 2019 financial goals.

She taught more than 2,000 women how to invest, and always gives beginners the same 5 steps.

Millionnaire Teacher Andrew Hallam compares value and growth stocks in a piece called, Why your fast & furious stocks might be putting you at risk:

“Too many investors, unfortunately, chase past performance. In many cases, they’re breaking sound investment rules to stockpile money in America’s fastest growing stocks. But when their racetrack turns to ice or those tires decide to burst, these are the drivers who will pay the highest price.”

And here’s PWL Capital’s Ben Felix with another Common Sense Investing video, this one looking at investing with leverage:

The Globe and Mail’s Tim Cestnick explains how to get the most out of 2019’s tax changes.

Michael James on Money reviews a book by former U.S. Secretary of the Treasury, Timothy F. Geithner called Stress Test.

Dumbwealth, a recent new find, published some incredible tales of the working poor in Canada.

According to the Wall Street Journal, some dealerships are dressing up borrowers’ car-loan applications with fake, inflated incomes (might need a subscription to read, but try incognito mode).

Also in the WSJ, why concert tickets are so expensive – with average ticket prices increasing 55 percent in the past decade (subscription).

Finally, why nearly all accused money launderers in Canada get their charges dropped. 

Have a great weekend, everyone!