I publish my financial goals here every year to share my priorities with readers and to hold myself accountable to achieve them. The simple act of writing down your goals and reviewing them periodically can significantly increase your chance of success.

My 2019 financial goals were fairly straightforward. Here’s a recap, along with the progress or outcome to date:

1. Contribute to RRSPs – I’ve caught up on all my unused RRSP contribution room and, due to my pension adjustment, my RRSP deduction limit for 2019 was just $3,600. I set up automatic monthly contributions of $300 and I’m on track to max out the limit for this tax year. For my wife’s RRSP, which we moved to Wealthsimple, she contributed $10,000 in February (for 2018’s tax year), and we’ll plan on another $8,500 contribution in early 2020 to use up her remaining room.
2. Contribute to TFSAs – I’ve still got a long way to go before catching up on all my available TFSA contribution room. My goal was to put away $1,000 per month this year to help me close that gap. I’ve done exactly that, and should have my TFSA completely maxed out in a couple of years. 
3. Continue to max out RESPs – This is a goal we’ve had on auto-pilot for the past few years. I have set-up automatic monthly withdrawals of $416.66 to max out the education savings grant for our two children (10 and 7).
4. Don’t take on any new debt – All of the above goals were contingent on not taking on any new debt. We’ve paid off a car loan and line of credit in recent years, freeing up $1,500+ per month to put towards our savings goals. I’m pleased to say we haven’t had to borrow for anything this year and so we continue to pay down our last remaining debt (mortgage) while ramping up our other savings goals.
5. Create my own raise – My salary had been frozen for the previous five years. I’ve had to get creative to manufacture my own raise by using cash back websites, taking advantage of credit card offers, and selling used items online. While I continued to do those things in 2019, I also surprisingly received a 4 percent increase at work earlier this year after taking on some new duties.
6. Keep our trip under $12,000 – We went on an epic 32-day trip to Scotland and Ireland this summer. We kept our costs down by redeeming close to one million rewards points for travel. That included 5 free nights in Edinburgh and 5 free nights in Dublin through the Marriott Bonvoy rewards programs, and also free round-trip flights for four courtesy of Aeroplan miles (we paid less than $1,000 in fees and taxes). The bulk of our budget was spent on our Airbnb stays in Inverness and in Kilkenny, groceries and dining, and of course on entertainment and attractions. Altogether we spent around $10,500 out of pocket.

These financial goals were meant to get us closer to our financial freedom date, but also give us some ability to spend on things we enjoy such as travel. It obviously worked! We had an amazing trip and now all of us have caught the travel bug. We’ll be travelling more in 2020 than we ever have before.

Oh, and I quit my job a few weeks ago. My last day is December 6th. 

I’m already thinking carefully about next year’s financial goals and what we want to achieve. Obviously, growing my online business will be top of mind. And I’ve already mentioned travel. I’ll want to continue to max out our RRSPs, TFSAs, and RESPs. I’m also thinking about how I’ll spend my time, and how much will be allocated to work versus free time to spend with family. 

I’ll post my goals in the coming weeks, along with updates as I transition from salaried employee to full-time entrepreneur. 

This Week’s Recap:

I treaded into controversial territory in my latest post when I argued that Canadians have an income problem, not a debt problem. 

Thanks to PWL Capital’s Cameron Passmore and Ben Felix for giving me time to promote my fee-only financial planning service in their latest episode of the Rational Reminder podcast.

Erica Alini (Global News) took Preet Banerjee’s MoneyGaps financial planning software for a spin and explained how Canadians who cannot afford a comprehensive financial plan can get a money check-up.

I’ve been using the MoneyGaps platform to offer light advice and a check-up to Boomer & Echo readers for the low price of $199. If you’re interested in a financial check-up, or retirement readiness report, send me an email and ask me about MoneyGaps.

Promo of the Week:

We’re heading into Christmas shopping season and one thing we’ve enjoyed the past few years is getting the majority of our shopping done early and online. I mentioned we go through cash back websites such as Great Canadian Rebates and Ebates (now Rakuten) before we make an online purchase. It’s a great way to get anywhere from 2 – 10 percent cash back on spending you were going to do anyway. 

Become a member of Great Canadian Rebates and take advantage of online coupons and earn cash back rewards. GCR features over 400 merchants to satisfy all your shopping needs.

Ebates.ca (now Rakuten) pays you cash back every time you shop online, and it’s FREE to join. Sign up now and when you spend $25 you’ll earn a $5 cash back bonus.

Weekend Reading:

The Credit Card Genius site is back with their HUGE $1,000 cash Christmas giveaway. Head on over and enter for your chance to win.

Here’s a must-read from the Million Dollar Journey blog: The ultimate guide to safe withdrawal rates for Canadians. 

From the Toronto Star, five myths about the Canada Pension Plan debunked.

Former long-time Toronto Star columnist Ellen Roseman is back on the LowestRates.ca blog and she’s writing about insurance – personal finance’s blindspot.

An interesting piece on how the stress test is making it tougher to borrow later in life:

“because Joe had recently retired from his job as an inspector at a casino and Erin was a self-employed small business owner, they no longer qualified for financing under the mortgage stress test for federally regulated financial institutions.”

Your car loan payment may be way too high. Erica Alini from Global News explains what’s happening.

We’re all busy. This is how much time you should carve out of your schedule to look after your personal finances.

November is Financial Literacy Month and here’s a strongly worded piece by investor advocate Neil Gross on why Canada’s diluted ‘best interest’ rules might doom us to unaffordable old age. 

Dale Roberts from Cut The Crap Investing explains how to spot investment sharks who are looking to part you from your money.

A Globe & Mail reader asked where to save next after maxing out her RRSP and TFSA while working and living in Canada’s Arctic.

As fundamental as market efficiency is to good financial decision-making, it is poorly understood by most investors. Ben Felix explains efficient capital markets in his latest Common Sense Investing video:

Here’s some straight-talk from Rob Carrick, who says owning a house doesn’t automatically give you an A+ grade in personal finance:

“Surveys about stress consistently show that money is one of the biggest worries people have right now. Somehow, people can’t make the connection between this stress and home ownership.”

Finally, here’s a post from T.E. Wealth’s Aaron Hector explaining how to increase your tax benefit for charitable donations.

Have a great weekend, everyone!

It’s not hard to find a report about the growing Canadian debt problem. Canadians owe $1.77 for every $1 they make. The average consumer owes $31,400 in installment and auto loans, while borrowing for credit cards and lines of credit average $18,500 per consumer. Finally, there are reports that nearly half of Canadians won’t be able to cover basic living expenses without taking on new debt.

Half of Canadians say they have less than $200 left over at the end of the month, after household bills and debt payments. Canadians’ household savings rate is an abysmal 1.7 percent.

Canadians have a major debt problem! All the warning signs are there. We’re overextended, borrowing to maintain our cost of living, and at risk of insolvency if a recession hits. It’s a crisis!

Our Affordability Problem

Not so fast. It looks to me like Canadians have an income problem, not a debt problem. Or, put a different way, Canadians have an affordability problem.

The median after-tax income for Canadian families is $71,700. Meanwhile, the average house price in Canada is $512,501. That’s an incredible 7x income! For reference, the typical rule of thumb for housing affordability is 2.5x income. That means Canadians should be buying homes worth $179,250.

The discrepancy is even more staggering in B.C. and Ontario:

It’s not just housing. Child care costs have risen faster than inflation in nearly two-thirds of cities since 2017. It’s often the single largest household expense after rent or a mortgage. The median cost of child care in Canada’s largest cities hovers around $1,000 per month, with parents in Toronto paying $1,675 per month. The exception is in Quebec, where a universal child care program has been in place for more than two decades (families pay $175 per month for child care in Montreal).

Transportation is the next largest expense for Canadians. On average, we owe $20,000 on our vehicles. The average price of a new vehicle has risen to $37,577. Today, it’s common to see auto loans stretched out over seven or eight years. That helps lower monthly payments slightly, but families are easily paying $500 per month or more on each vehicle (with many two-car families).

Beyond Frivolous Debt

All this to say, it’s no wonder Canadians are struggling to get by from month-to-month. We’re accessing cheap credit, in a lot of cases, to fund basic living expenses or cover emergencies. It’s not like we’re out there buying diamonds and furs.

Furthermore, Scott Terrio, insolvency expert at Hoyes Michalos, says it can be misleading to suggest Canadians are so close to insolvency. He says there is a lot of runway between when someone is in financial trouble and when they file a legal insolvency.

“One can be technically insolvent for months, even years, before they need to consider an actual filing. We regularly have clients tell us that they should have come in to see us 12-24 months earlier than they did. That’s because there are all sorts of ways to stave off a legal insolvency.”

Indeed, there’s only about 55,000 bankruptcies and 75,000 consumer proposals filed by Canadians every year.

“And there are 37 million Canadians, so you do the math,” says Terrio.

It’s An Income Problem

No, we have an income problem that is crippling our ability to save. I’ve seen it firsthand. As a young homeowner, who admittedly got in over his head as a first time buyer, I struggled to pay my mortgage, buy groceries, and service my student loan debt (another issue altogether for young Canadians).

I had a roommate kick-in $400 per month for a while, but when he moved out things went downhill in a hurry. I started using my credit card to cover basic living expenses, but got into real trouble when I maxed that out and had nowhere to turn.

While I did take out a consolidation loan to help manage my debt, the real savior was when I got a promotion at work that came with a $12,000/year salary increase. That extra income gave me the ability to make my consolidation loan payments on time, not have to dip back into credit, and start establishing a savings plan.

Earning extra income, either through a promotion, career change, or side hustle, has been part of my financial success ever since. Without it, I might still be stuck in a debt spiral – living paycheque-to-paycheque with no path to financial freedom.

But not everyone has the ability to earn extra income. Wage growth is barely keeping up with inflation and hasn’t for many years since the global financial crisis. Salaries have been frozen in many industries, especially in the public sector. It’s tough to get ahead when you can’t even count on an annual cost of living adjustment.

Side hustles require time and skill that not everyone has. So we’re left to cut costs at the margins and hope that our pets don’t get sick, our furnace survives another winter, and our tires can last another year. There’s no room for error.

Final thoughts

Reports about our growing debt-to-income ratio and consumer credit are concerning, but should be taken with a grain of salt. As Terrio says, half of Canadians are not on the brink of insolvency. The vast majority of us faithfully repay our mortgages and consider selling our house a last resort (but it is an option).

Personally, I have a higher than average debt to income ratio, simply because I still owe $200,000 on my mortgage. And I don’t have much money left over at the end of the month because I try to optimize my finances so that every dollar of income is allocated towards “something” rather than just sitting in my chequing account.

It’s easy to wag our fingers at indebted Canadians and suggest they quit buying lattes and avocado toast. But in many cases it’s not frivolous expenditures that are getting Canadians into trouble. It’s regular, day-to-day living expenses.

Trimming expenses won’t solve these inherent issues. They require major life decisions, such as taking on a second job, going back to school, moving away from a major city to a more affordable area, paying large child care costs for many years to ensure both parents can stay in the workforce, or getting by on one vehicle instead of two. Not easy decisions.